Warnings about Taiwanese vulnerabilities facing Beijing surface

As China’s impressive naval and air weapons engage in a new game of intimidation around Taiwan, the prestigious Foundation for Defense of Democracies (FDD) warns of the different ways in which Beijing could weaken or even defeat Taiwan. The foundation’s recent report highlights such potentials and recommends that Washington and Taipei prepare to push back against the many ways in which Beijing could sow economic and social disruption. Undoubtedly, none of these prospects are new to either the Americans or the Taiwanese and, in any case, a Chinese takeover is much more complicated and risky for China than this report or many seem to think. media comments on the subject.

Besides the obvious vulnerability implied by the estimated 1.0 million Taiwanese who live and work in China, the report highlights how Taiwanese vulnerabilities lie in the inevitable connectivity implicit in today’s digital economy and finance. Every point of connectivity, the authors insist, could serve as a means of Chinese coercion. These connectivity points provide Beijing with the opportunity to spread disinformation among the island’s population, which would erode public trust and make it difficult, if not impossible, for the Taipei government to resist any incursions from China, military nature or by other means. The report highlights how cyberattacks on critical infrastructure as well as Taiwanese trade and financial agreements could further harm the island’s economy and society. Tariffs, boycotts, blockades, short selling of Taiwan stocks, freezing of cross-Strait bank transfers, cutting of fiber optic cables and disruption of energy supplies are also available to Beijing.

Whether intentionally or by chance, Taiwan’s government and business community have already taken steps to reduce many of these vulnerabilities. At the forefront of this phenomenon are the impressive steps taken by Taiwanese companies to reduce their trade relations with mainland China. Although China remains Taiwan’s largest trading partner, its share of Taiwan’s trade has declined steadily since 2021. That year, Chinese sales to Taiwan and Chinese purchases from Taiwanese producers amounted to the equivalent of $208.4 billion, or about a quarter of the island’s total trade. . By 2023, the latest period for which complete data exists, that amount had fallen by almost 20% to around $166 billion, or just over a fifth of Taiwan’s total trade. In contrast, Taiwan’s total trade with Southeast Asia increased from $117.5 billion in 2021 to $134.6 billion in 2022, a gain of nearly 10% in a single year. Taiwan’s dependence on China for exports has also declined. Even including Hong Kong, recent figures show it is lower than at any time since 2018. Most of the difference has gone to Southeast Asia.

Taiwan has also redirected investment flows. The island’s business community has been reducing its financial flows to China since 2010. In 2023, these flows have fallen by almost 40% compared to the previous year. At the equivalent of $4.17 billion, last year they represented less than a third of the 2018 level. difference in the flow, then some went to Southeast Asia, including Singapore, Vietnam, Indonesia, Malaysia and Thailand. These countries now receive around 40% of Taiwanese investment flows, a proportion that exceeds flows to China.

Furthermore, China might be hesitant to take too heavy-handed an approach, given the sophisticated economic relationships Taiwan’s powerful tech sector has with the developed West and Japan. One of the great attractions of Taiwan is certainly the power and wealth implicit in these ties. Thanks to them, the island’s technology companies customize their semiconductors and other technologies in accordance with their buyers. Any form of Chinese aggression on the island – military or otherwise – would have the effect of dissolving these relations and depriving Beijing of the immense wealth the island currently enjoys. It is difficult to imagine, for example, that the People’s Liberation Army (PLO) would engage in such negotiations or that Western companies would negotiate in this way with the Chinese military. Most of the value of Taiwanese technology would simply disappear.

Beijing is certainly aware of this potential problem. Perhaps he cares little about these matters. President Xi Jinping has certainly in the past abandoned the economy in favor of political considerations. But it is yet another additional cost that Beijing must take into account before acting in any way on Taiwan. Meanwhile, Taiwan is clearly reducing at least some of the vulnerabilities discussed by the FDD.