Insights on China's new policies, reform initiatives and economic data brought to you from Lead Analyst Jens Presthus
24 May 2022
The war in Ukraine through the eyes of Beijing, and what it all means for Taiwan
Key takeaways
Reunification with Taiwan is a key element of President Xi Jinping’s “rejuvenation of the Chinese nation”. Xi has given the party until 2049 to complete this mission.
The impact of US sanctions and Russian failures in Ukraine on thinking in Beijing about Taiwan have likely been overstated. While action is being taken to mitigate the impact of sanctions, Beijing is not changing its course.
Xi’s goal of reunification with Taiwan does not pose the same threat to the US and NATO as President Vladimir Putin’s ambitions of a “greater Russian empire”. Incentives to defend Taipei are also eroding as the US and EU seek to strengthen their semiconductor manufacturing capabilities. These plans are likely being welcomed in Beijing.
The great rejuvenation of the Chinese nation
Xi has given mainland China until 2049 to reunify with Taiwan. In his 2017 speech at the 19th Party Congress, Xi directly tied the “rejuvenation of the Chinese nation” with Taiwan reunification – stating that the former cannot be completed without the latter. In doing so, he also clarified that his goal is for mainland China to reunify with Taiwan before 2049, which is when the “rejuvenation” is due to be completed. At the time, he also emphasised his wish for peaceful reunification. Now, with the end of “one country, two systems” in Hong Kong and the subsequent marginalisation of pro-mainland policymakers and business owners in Taipei, this now seems like an unrealistic scenario.
There has been an uptick in foreign affairs related publications ahead of the 20th Party Congress this autumn, focusing on the “rejuvenation of the Chinese nation”. The Central Party Literature Press published the first and second volumes of diplomatic speeches by Xi on May 11th. The party’s Foreign Policy Chief, Yang Jiechi, had an essay on the implementation of “Xi Jinping Thought on Diplomacy” published in the People’s Daily on May 16th. On the same day, the party’s flagship policy journal, Qiushi, released an article on the “achievements of national security in the new era”. The common thread: a focus on the “rejuvenation of the Chinese nation”. At the same time, party officials are more frequently discussing what they describe as “changes unseen in a century” – referring to changes in the global order, including a weakened US, that they believe Beijing can and should take advantage of.
It is not by accident that Xi has launched new global initiatives since the start of the pandemic and after Russia’s invasion of Ukraine. The global development initiative was introduced during UNGA in 2021 and the global security initiative during the BOAO Forum for Asia in April 2022. The latter was again brought up on May 19th when Xi addressed a BRICS gathering and his Foreign Minister, Wang Yi, proposed to expand the bloc. It is also not by accident that Chinese military activity around Taiwan has increased during the same period. While it remains unclear when Beijing will move on Taiwan, it is clearly attempting to create a new global order that is less likely to move against Beijing for pursuing its own interests. The issues of rejuvenation and reunification will undoubtedly feature heavily when Xi addresses the party leadership this autumn. This time, however, his tone might be very different than it was in 2017.
Lessons from Ukraine
Beijing is likely taking note of what is happening in Ukraine, but it is not changing its course because of it. Much has been said about recalibrations in Beijing following Russia’s failure to seize Kyiv, the imposition of harsh sanctions on Moscow and western military support for Ukraine. The thinking has often been that these events have forced Beijing to reconsider an invasion of Taiwan. While it can be easy to draw such conclusions, it is not necessarily so that European, American, and Chinese thinkers agree on what is rational and irrational behaviour. Policymakers will have different priorities that shape their actions. After all, no one believed Putin would invade Ukraine because of the damage it would inflict on his own country. Moreover, few see the benefit of Beijing’s zero covid policy. It is also important to note that Chinese officials were fully aware of the tools at the US’ disposal before they were deployed – the threat of asset freezes was for instance an important topic of debate in Beijing during the height of the Trump presidency.
Anti-sanctions preparation in Beijing points to future action on Taiwan. There is little Beijing can do to defend itself against financial sanctions in the short to medium term - the RMB is not about to displace the USD and Beijing will remain dependent on buying USD-backed assets as long as it continues to run enormous trade surpluses. Still, it is significant that the country’s policymakers recently called in bankers to discuss how they theoretically could defend themselves against US sanctions. If the Chinese leadership was not thinking about doing something that could trigger asset freezes or China being kicked out of SWIFT, they would not need to discuss these issues or tell senior cadres to sell their overseas assets. Economic planners at the National Development and Reform Commission would also not be drawing up strategies for how China can strengthen its internal market dynamics and make the Chinese economy less reliant on commercial relations with the outside world.
Chinese policymakers hope and believe that anti-sanctions tools would never need to be deployed. While significant damage would be done to the Chinese economy should the US impose Russia-style sanctions, Beijing also knows that this would inflict a great deal of pain on the US itself. Beijing has likely also noted how the EU has been unable to effectively ban imports of Russian energy because of the implications it would have at home. This, combined with Beijing absorbing Hong Kong without facing any real consequences, and the knowledge that supplying weapons to Taiwan is not as easy as supplying weapons to Ukraine, has likely strengthened the notion in Beijing that the US and its allies remain big on words but lacking in action. Already prior to Putin’s invasion of Ukraine, Washington stressed that it would not seek direct confrontation with a nuclear armed Russia, as this could lead to World War III. And while President Joe Biden has said the US would defend Taiwan militarily, he has not specified how.
American and European incentives to defend Taiwan
NATO, the EU and greater Russia versus greater China. A senior Chinese diplomat recently noted when discussing the Russian invasion of Ukraine that the Taiwan issue cannot be compared to Ukraine. While he of course referred to Taiwan – in his view – already being a part of China, it is also an important distinction when thinking about how Washington, Brussels, Berlin and Paris would respond to a Chinese invasion of Taiwan. In the same way as Putin has a grand vision of creating a “greater Russian empire” – akin to the old Soviet Union – Xi also has a vision of reclaiming lost territory. The difference, however, is that Xi’s plans do not include absorbing countries that are both EU and NATO member states. While Russia’s invasion of Ukraine, given knowledge about Putin’s aspirations, poses a direct threat to NATO, a Chinese invasion of Taiwan would not. It is not unlikely that this line of thinking has led Beijing to believe that the US and its allies would temper their response accordingly.
American alliance building and NATO’s newfound interest in the Indo-Pacific have not gone unnoticed in Beijing. Neither has the launch of the Indo-Pacific Economic Framework for Prosperity and the US state department’s decision to remove wording on its website that push back against Taiwanese independence and support for the one-China policy. This has, perhaps unsurprisingly, strengthened the position of those in the Chinese military and foreign affairs establishments who want to act on Taiwan sooner rather than later – before defending Taipei becomes of direct strategic importance for NATO.
Western dependence on Taiwanese semiconductors is currently of great strategic importance, but this reliance will not last forever. The US and EU have over the last couple of years announced strategies that aim to greatly reduce their dependency on semiconductors made in Taiwan. The EU plans to reach a 20% global market share in advanced semiconductors by 2030. Washington has not announced a similar target, but the US-based Semiconductor Industry Association has argued that it would be possible to become self-sufficient by 2030 if the government allocates more than $400 bn in subsidies and incentives. Even if these targets may not be met, policymakers in Beijing are likely to welcome the focus in Washington and Brussels on semiconductor self-sufficiency. After all, if they succeed, it would remove an important incentive for defending Taiwan.
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