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 TENSIONS IN THE TAIWAN STRAIT 

OVERVIEW

Tensions in the Taiwan Strait rose to unprecedented levels following the visit of the then-United States (US) Speaker of the House of Representatives Nancy Pelosi to Taipei on 2-3 August 2022. Beijing responded by commencing live fire war games and encircling the self-governing island in a show of strength – marking a Fourth Strait Crisis in all but name. Officials from other foreign governments - including from the United Kingdom (UK), Japan, South Korea and Lithuania - have continued visiting since then, prompting recriminations from Beijing and further military activities, including repeated incursions by the People's Liberation Army (PLA) of the median line in the Taiwan Strait.

 

In this report, we delve deeper into recent developments in the escalation of tensions between China and Taiwan, the domestic and international forces driving changes in cross-Strait relations as well as its regional and global consequences.

 

As an economically vital region for the production of semiconductor chips (SCCs) – a key component in the development of advanced weapons and essential electronic devices ranging from smartphones, electric vehicles to refrigerators – we will also take a look at the geopolitical and security complexities that is shaping the intensifying global battle for advanced semiconductor chips.   

TIMELINE

 

27 DECEMBER 2022

President Tsai Ing-wen unveils armed forces structure adjustment plan and an extension to the island's mandatory military service

24 DECEMBER 2022

PLA begins staging military drills near Taiwan, deploying a record 71 aircraft including fighter jets and drones, 43 of which crosses the median line - Beijing's largest ever incursion

23 DECEMBER 2022

President Joe Biden signs the US National Defense Authorization Act (NDAA) which includes up to US$10bln in increased security assistance and fast-tracked weapons procurement for Taipei

19 NOVEMBER 2022

Taiwanese Asia-Pacific Economic Cooperation (APEC) Representative meets with Chinese President Xi Jinping in first high-level interaction since August on the sidelines of the APEC Summit in Bangkok, Thailand

22 OCTOBER 2022

Chinese President Xi Jinping secures a third term as CCP General Secretary, appoints loyalists to the Politburo Standing Committee

Taiwan Semiconductor Manufacturing Company Limited (TSMC) suspends production of advanced silicon for Chinese start-up Biren Tech

20 OCTOBER 2022

In light of announced US export controls, Beijing summons major semiconductor chip firms for emergency talks

19 OCTOBER 2022

Taiwan holds live fire military drills simulating a Chinese invasion in Penghu county

US-Taiwan Business Council unveils plans between Washington and Taipei to jointly produce weapons to speed up arms transfers to the island

16 OCTOBER 2022

20th National Congress of the Chinese Communist Party commences, with Chinese President Xi Jinping affirming Beijing's right to take Taiwan by force

07 OCTOBER 2022

US Department of Commerce imposes export controls on semiconductor chips targeting Beijing's development of advanced technologies

28 SEPTEMBER 2022

During a visit to Japan, US Vice President Kamala Harris condemns "disturbing actions by China" and pledges to deepen "unofficial ties" with Taipei

18 SEPTEMBER 2022

US President Joe Biden affirms US commitment, pledging US forces to defend Taiwan in the event of Chinese invasion

07 SEPTEMBER 2022

Taipei conducts military drills in Pingtung county to demonstrate improved response capabilities

Washington bars US tech firms from receiving government funding from developing facilities in China for 10 years

06 SEPTEMBER 2022

President Tsai Ing-wen touts improved combat abilities of Taipei's military following unprecedented responses to the frequency of PLA military drills

01 SEPTEMBER 2022

Taipei shoots down unidentified drone over Shiyu Islet in the Kinmen Islands, around 10 km east of the Chinese city of Xiamen, Fujian province

21 AUGUST 2022

Taipei proposes record high US$144bln defence budget, a 14.9 per cent increase, which includes funding for new fighter jets and other 'special funds' for the Defence Ministry

18 AUGUST 2022

Formal trade talks under the US-Taiwan Initiative on 21st Century Trade begins

61 PLA aircraft enter Taiwan's ADIZ and six naval vessels cross the median line

17 AUGUST 2022

21 PLA aircraft and five naval vessels enter Taiwan's ADIZ and cross the median line

16 AUGUST 2022

17 PLA aircraft and five naval vessels enter Taiwan's ADIZ and cross the median line

15 AUGUST 2022

Indiana State Governor Eric Holcomb arrives in Taipei, touting 'democracy chips' in meeting with President Tsai Ing-wen

PLA conducts fresh live fire drills around Taiwan

 

12 AUGUST 2022

Beijing sanctions Lithuanian Lithuanian Deputy Minister for Transport and Communications over Taipei visit

10 PLA aircraft enter Taiwan's ADIZ

09 AUGUST 2022

Taiwan holds live fire artillery drills simulating a Chinese invasion in Pingtung county involving hundreds of soldiers and 40 howitzers

US President Joe Biden signs the CHIPS and Science Act into law

08 AUGUST 2022

Continued daily incursions by PLA aircraft into Taiwan's ADIZ

07 AUGUST 2022

Lithuanian Deputy Minister for Transport and Communications Agne Vaiciukeviciute arrives in Taipei for a five-day visit

04 AUGUST 2022

PLA targets Matsu, Quqiu, Dongyi with rockets and flies two drones around Kinmen Island. 11 ballistic missiles launched into waters off north-east and south-west coasts of Taiwan. By 4 August, 68 PLA aircraft enters Taiwan's ADIZ and a further 13 of its navy vessels crosses the median line

03 AUGUST 2022

Nancy Pelosi meets with Taiwanese President Tsai Ing-wen at the Presidential Office Building in Taipei

In response, the PLA launches unprecedented live fire military drills in six zones encircling Taiwan

02 AUGUST 2022

Nancy Pelosi arrives in Taipei along with a delegation of Democratic lawmakers to show US' "unwavering commitment to supporting Taiwan's vibrant democracy"

Beijing retaliates by suspending imports on a raft of Taiwanese goods

09 - 26 JULY 2022

Repeated incursions by People's Liberation Army (PLA) aircraft into Taiwan's Air Defence Identification Zone (ADIZ) amid speculation of an impending visit by the then-US Speaker of the House of Representatives Nancy Pelosi to Taipei

THE VIEW FROM BEIJING

The 20th National Congress of the Chinese Communist Party (CCP) held between 16-22 October 2022 in Beijing saw President Xi Jinping secure an unprecedented third term as General Secretary following a historic accruement of power that saw him become the most powerful Chinese leader since Mao Zedong.  

 

Xi broke decades of long-held party leadership practices, including by appointing no significant rival or clear successor within the new composition of the powerful Politburo Standing Committee (PBSC).

Instead, he stacked the PBSC with his allies and loyalists - ensuring no real challenge to his position and policy priorities for years, if not for decades to come. The implications of this consolidation of power cannot be overstated as it will likely lead to an even more belligerent Beijing as Xi is now unencumbered by the restraints from the CCP structure previously imposed on his predecessors. 

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Source: REUTERS/Thomas Peter

POLITBURO STANDING COMMITTEE

L-R: Ding Xuexiang - Li Xi - Xi Jinping - Li Qiang - Zhao Leji - Wang Huning - Cai Qi

Beijing views Taiwan as an inalienable part of China, viewing the current administration in Taipei as separatists governing a rogue province. At the CCP Congress, President Xi declared his preference for peaceful reunification but also stressed Beijing's right to the use of force in reuniting Taiwan with the mainland - affirming its long-held policy of so-called strategic composure and historic patience over the Taiwan question. President Xi further warned against "interference by outside forces", recognising the internationalisation of the Taiwan question in recent years as it increasingly becomes an economically important and geopolitically vital region for the US, its allies and many other countries around the world.

 

In the past three years or so, Beijing has markedly ramped up its military, diplomatic and economic pressure on the self-governing island, including through near-daily PLA air force and naval missions in the air and waters surrounding Taiwan. Chinese violations of the median line – the de facto border between mainland China and Taiwan – have become increasingly normalised. Even without Pelosi’s provocative visit, Beijing’s increasingly militarised belligerence over cross-Strait relations has ushered in a new normal and could fuel a cycle of provocative and destablising acts that increase the risk of accidental conflict and war in the Taiwan Strait.

We will continue to strive for peaceful reunification with the greatest sincerity and the upmost effort, but we will never promise to renounce the use of force, and we reserve the option of taking all necessary measures.

President Xi Jinping
20th Party Congress Work Report, 16 October 2022

Following a meeting with US President Joe Biden on the sidelines of the G20 Summit in November 2022 – their first meeting after Pelosi’s Taipei visit – Xi stated that the issue of Taiwan is the "first red line" that must not be crossed in US-China relations. The Taiwan question has long been believed to be central to Xi’s political identity, who will likely see its reunification with the mainland as a major intended legacy of his limitless presidency. While the ramifications of such a scenario remains difficult to imagine, developments prompted by Russia’s invasion of Ukraine in February 2022 has given renewed awareness and interest to the possibility of conflict in the Taiwan Strait.

THE VIEW FROM TAIPEI

Much has been said about President Xi Jinping and the CCP's intentions regarding Taiwan in light of Beijing's increasing clout and assertiveness in the region and in global affairs. However, internal political dynamics within the self-governing island is relatively under covered and no less interesting. It also plays a crucial role in how Beijing views its broader relations and future with Taipei. 

Source: AFP/Daniel Shih

Political leanings and preferences over the issue of cross-Strait relations in the island are largely sorted into two main political coalitions; the pan-Blue coalition and the pan-Green coalition. The pan-Blue coalition, led by the island's traditional governing party and current opposition Kuomintang (KMT), traditionally favours warmer ties with Beijing and seeks to uphold the status quo – despite widely differing and ambiguous interpretations with Beijing over what is considered 'One China'. On the other hand, the pan-Green coalition, led by the ruling Democratic Progressive Party (DPP), generally favours advancing a separate Taiwanese identity, greater self-determination and closer relations with the US, Japan and its democratic allies. 

Source: Brookings

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Tsai Ing-wen

Taiwan is governed by President Tsai Ing-wen who successfully led the DPP to victory at the 2016 and 2020 presidential elections, becoming the island's first female leader. She has built a resolute reputation in standing up to Beijing, particularly as the CCP becomes increasingly assertive over the governance of the Hong Kong Special Administrative Region (SAR) and in its projection of power across the Asia Pacific region.

Beijing severed formal communication channels with Taipei following Tsai Ing-wen's election victory as the CCP considered her and the DPP to hold separatist intentions. Since then, Beijing has embarked on an intense economic and diplomatic campaign – including imposing a raft of trade restrictions on Taiwanese products and doling out financial support to Taipei's remaining allies – to isolate the island and limit its international clout.

On 26 November 2022, President Tsai resigned as Chair of the DPP after the party suffered record losses in local elections and saw the opposition KMT win a landslide victory. This came after Tsai framed the election as a referendum on her defence of the island against Beijing’s increasing belligerence following Pelosi's August 2022 visit. Since then, Tsai has embarked on a military reform package intended to bolster the island's defence capabilities by overhauling the military structure, developing indigenous defence equipment, and extending the mandatory military service from four months to one year. Tsai contextualised her standing up to Beijing within a global battle between democracies and authoritarianism, making overtures to countries ranging from Germany and Czechia to Ukraine and Paraguay. Tsai also deftly used the island's dominance in the advanced semiconductor chip industry to project its economic and geopolitical importance in a world that is growing ever more reliant on the manufacture of such chips. 

 

At the November 2022 local elections, KMT candidate Chiang Wan-an – a great-grandson of revolutionary and former president Chiang Kai-shek – won the bellwether Taipei mayoral race. The post is largely seen as a stepping stone to the presidency with three former mayors including former president Chen Shui-bian – the island's first president from the DPP whose victory ended 55 years of continuous KMT rule – holding the office before directly elected as president. A successful KMT mayoralty under a mayor with a storied personal history no less, is expected to advantage the pan-Blue coalition as it prepares to field a candidate for the upcoming presidential election in early 2024.

I want to make clear to the Beijing authorities that armed confrontation is absolutely not an option for our two sides. Only by respecting the commitment of the Taiwanese people to our sovereignty, democracy, and freedom, can there be a foundation for resuming constructive interaction across the Taiwan Strait.

President Tsai Ing-wen
2022 National Day Address, 10 October 2022

 

On 15 January, Vice President William Lai Ching-te was elected as the new Chair of the DPP to succeed Tsai. As Chair, he is widely expected to be nominated by the DPP as its presidential candidate in 2024. Like Tsai, Lai’s staunch support for a separate Taiwanese identity and sovereignty has long infuriated Beijing. If Lai is able to extend the DPP’s rule into an unprecedented third presidential term, it is almost certain that cross-Strait relations will deteriorate even further with Beijing likely to escalate its diplomatic and military pressure campaign against the island.

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William Lai Ching-te

US ROLE IN
CROSS-STRAIT RELATIONS

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1955 - 1979

Since 1955, Washington was obligated to defend Taiwan under the 1955 Sino-American Mutual Defence Treaty (SAMDT), which in retrospect, proved to be an effective deterrence mechanism as China's military capabilities at the time were no match for the US, with the mere threat of US intervention enough to prevent a Chinese military takeover of the island. 

 

In 1979, President Jimmy Carter established official relations with Beijing, effectively ending US diplomatic recognition of Taipei, the SAMDT and subsequently began the US policy of strategic ambiguity regarding the political status of Taiwan.

From 1979, the US refrained from committing itself to the military defence of Taiwan, even under the 1979 Taiwan Relations Act (TRA), which called on Washington to “provide Taiwan with arms of a defensive character and shall maintain the capacity of the US to resist any resort to force or other forms of coercion that would jeopardise the security, or social or economic system, of the people of Taiwan”. Essentially, the US committed itself to selling its arms to Taiwan but did not commit to sending its own military forces. From a deterrence point of view, it proved effective as it allowed even independence-leaning figures in Taipei to not declare de jure independence, knowing that they had carte blanche US military support.

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1982

In 1982, President Ronald Reagan adopted the Six Assurances - foreign policy principles in relation to its relationship with Taiwan - which importantly included a pledge not to modify the 1979 TRA. Among the other assurances was a pledge not to set a date for ending arms sales to Taipei as well as a commitment not to exert pressure on Taipei to enter negotiations with Beijing. The Six Assurances are continuously asserted as the cornerstones of US-Taiwan relations. 

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2018

Source: Gage Skidmore

In 2018, President Donald Trump signed the Taiwan Travel Act (TTA), allowing for high-level US officials to visit the island and vice versa - marking a notable advancement in US-Taiwan relations, albeit remaining below full diplomatic status. In July 2019, Taiwanese President Tsai Ing-wen utilised the TTA to travel freely to the US as well as to Caribbean countries that maintain official diplomatic relations with Taiwan. Prior to the TTA, the island's leaders could only meet local US state officials while transiting to its Caribbean, Central and South American allies. It was also the TTA which later paved the way for Nancy Pelosi visit Taiwan in August 2022 - becoming the highest-ranking US government official to visit the island in 25 years.

2022 - Present

Pelosi is a longtime critic of Beijing's human rights record, championing causes such as Tibet and Hong Kong SAR. During a meeting with Tsai at the Presidential Office Building in Taipei, Pelosi affirmed that “America’s determination to preserve democracy, here in Taiwan and around the world, remains ironclad” adding that the US will “not abandon Taiwan”. Pelosi's trip deteriorated the US-China bilateral relationship which many considered at the time to be at a nadir.

 

President Biden reportedly cautioned Pelosi against the trip, with US military officials concerned about how Beijing would respond. Nonetheless, in the aftermath, Biden repeatedly asserted that the US would indeed commit to defend Taiwan, including by sending its forces, in the event of a Chinese invasion - providing real clarity on the issue. While the White House later affirmed that US policy has not changed, the entire episode demonstrated both the perils and value of Washington's strategic ambiguity over the Taiwan question.

VIEWS FROM THE ASIA PACIFIC

 

Heightened tensions in the Taiwan Strait have important ramifications across the Asia Pacific region.

A change in the status quo risks widespread harm to the global economic environment and triggering an even broader conflict that could span continents. The possibility of conflict has spurred defence spending into record highs, motivated the signing of landmark security pacts, realigned economic priorities, disrupted whole industries, healed bilateral rifts and damaged others.

In this section, we look at the impact of heightened tensions in the Taiwan Strait on five select countries in the region; Australia, Japan, Philippines, Solomon Islands and South Korea. 

CHIP WARS

US EXPORT CONTROLS

  • On 7 October 2022 the US Department of Commerce’s Bureau of Industry and Security (BIS) announced four new key export control policies on semiconductor chips (SCCs), related tools and technology and artificial intelligence-related technology to China, citing the protection of national security and foreign policy interests.

  • The new export controls build on the CHIPS and Science Act passed by the US Congress on 9 August, demonstrating the US’s focus on retaining control over the global semiconductor technology supply chain.

  • The export restrictions also banned the sale of electronic design automation (EDA) software used to design cutting-edge SCCs as well as SCCs made anywhere in the world using US technology and machinery.

  • The foreign direct product rule, first introduced during the Trump administration, seeks to prevent any firms from providing services to any Chinese chip design companies from manufacturing their chips on US (leading) EDA software and on US-built equipment that is currently an essential part of every semiconductor manufacturing operation.

US CHIPS & SCIENCE ACT

  • The CHIPS and Science Act committed the US government to investing US$52.7bln for US semiconductor research, development, manufacturing and workforce development.

  • US$39bln in manufacturing incentives, including US$2bln for the legacy chips used in automobiles and defence systems, US$14.2bln in research and development and workforce development and US$500m to provide for international information communications technology security and semiconductor supply chain activities.

CHINA

  • The October restrictions sought to prevent China from obtaining SCCs, the ability to manufacture advance SCCs, essential chip manufacturing tools and equipment, developing and maintaining supercomputers and additionally prohibit “US persons” from supporting Chinese firms manufacturing advanced chips.

  • The export controls appear to be a licence requirement but are de facto a ban targeting very specific chips. The performance threshold requires that the chip be both a powerful parallel processor (300 tera operations per second or higher) and have a fast internet connect speed (600gb per second or higher).

  • Washington is attempting to control specific chips designed to be networked together in data centres or supercomputing facilities that train and run large artificial intelligence models. The prima facie goal of the export restrictions is to limit Chinese military capability development. 

SOUTH KOREA

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  • South Korea remains the world’s largest memory chip producer, with local firms Samsung and SK Hynix together controlling around 70 per cent of the global Dram market and over half of the Nand flash market.

  • South Korean Trade Minister Ahn Duk-geun acknowledged disagreements between Seoul and Washington over the US’s October export restrictions on the transfer of cutting-edge manufacturing capabilities to facilities in China.

  • There are growing concerns over national industry competitiveness and the country’s role in the global supply chain as Korean chipmakers look to the US following US incentives including US$52bln in grants outlined in the CHIPS and Science Act.

  • President Yoon Suk-yeol emphasised the importance of the semiconductor industry when he stated that they “determine the fate of the South Korean economy”, and promised greater backing for the industry.

  • Two key bills dubbed the K-Chips Act which purport to bolster the industry remain pending in parliament.

REUNIFICATION SCENARIOS

 
  • The balance of power was historically tipped in the US's favour 

  • Due to its superior military capabilities, Washington's 1979 policy of strategic ambiguity was a sufficient deterrent to prevent China from reunifying Taiwan by force

  • The balance of power is now tipping towards China as it has spent the past 20 years building up its military to match those of the US's military

  • The PLA was constructed and trained with capabilities necessary to defeat US forces within the First Island Chain, centering around Taiwan itself

Shift in the balance of power

  • In 2021 the US military simulated a classified Taiwan-centric wargame with China as the 'mock enemy' - the US military was defeated in the simulation

  • US war tactics concerning the defence of Taiwan failed to modernise in line with the rapid development of the PLA

  • Military force to coerce and pressure Taipei into accepting Beijing's political demands

  • PLA cyber attacks and air strikes to destroy key targets such as the Taiwan's Air Force, major command and control facilities and antiship cruise missile capability, paralysing the government and island

High stakes diplomacy

  • Military force to be below threshold that would risk democratic nations' involvement through supplying economic, military and humanitarian assistance as seen in the invasion of Ukraine

  • Information, naval and air blockade against Taiwan by the PLA would serve as a longer-term strategy for Beijing

  • Power to escalate or de-escalate tensions in Beijing's hands while having a key position of military advantage 

  • Combination of naval and air measures, electronic interference, fibre-optic cable severing, cyber intrusions by China would be a sufficient blockade to politically and economically isolate Taiwan

  • Supported by a misinformation, disinformation and malinformation (MDM) campaign to divide external governments likely to support Taipei

Blockade

  • Unlikely to be the first reunification attempt by China as the immediate economic consequences would be global and China's recently sustained economic downturn following zero-COVID-19 policies has weakened its economy

  • Washington is less prepared than Beijing to engage in a war of attrition over Taiwan

  • The fear alone that China could intercept supplies to and from Taiwan sufficient to pressure Taipei to accept Beijing's political demands

Exclusion zones

  • The risk of this reunification scenario occurring increases with the balance of power tipped in China's favour

  • Periodic interruptions by China to air and maritime traffic, isolating Taiwan demonstrating rapid assertions of control over maritime and air access to the island

  • Less economically detrimental than a full-scale blockade to China and worldwide

  • Difference to blockade - no intention to limit cargo or supplies but demonstrate sufficient coercive leverage over Taiwan

  • Pressure Taipei to surrender to Beijing's political demands, avoiding military conflict with the US and other allies 

  • Beijing may take Taiwan's small outlying Pratas Island 320 km off mainland China's coast (MCC); Kinmen and Matsu islands a few km off MCC; or Penghu in the Taiwan Strait

Going for the small fish

  • This is unlikely as it would trigger a worldwide unification of support behind Taiwan 

  • Beijing would take military control of Taiwan's air and sea borders by screening incoming traffic 

Forcing the US's hand

  • Taipei's domestic governance would not be immediately affected, however it would lack control over its foreign affairs

  • They could regard anything such as US military aid as a violation of Chinese sovereignty and seize any imports 

  • The onus of starting a war would be on Washington 

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