Why Taiwan Is the Biggest Risk for a U.S.-China Clash

Wealthy, democratic and strategically located off the Chinese coast, Taiwan has long been the most volatile issue between the U.S. and China. From Cold War skirmishes to China’s economic opening, both sides have avoided war by leaving unsettled the question of who actually owns the island. That balance is getting harder to maintain as Chinese President Xi Jinping amasses more power to pursue what he views as his country’s lost territory. Standing in the way are the U.S. Pacific Fleet and Taiwanese voters, who have twice elected a leader who rejects the claim that both sides are part of “One China.” The dispute has reopened the Taiwan debate in Washington, raising the stakes for U.S. President Joe Biden’s efforts to counter China without sliding into a war.

1. Why is Taiwan so important?

Empires have jockeyed over Taiwan for centuries, with occupations by the Spanish, Dutch and China’s Qing Dynasty. The Qing’s loss of Taiwan to the Japanese after a humiliating military defeat in 1895 made “reunification” a rallying cry for generations of Chinese up to and including Xi’s Communist Party. To the U.S. and Japan, Taiwan is a vital link in the “First Island Chain” that they rely on to contain China and protect trade routes. The island has thrived under American protection to become a critical supplier of semiconductors and other high-tech goods. Today, it’s also among Asia’s most vibrant democracies, a rejoinder to Communist Party arguments that Western political structures are incompatible with Chinese culture.

Why Taiwan Is the Biggest Risk for a U.S.-China Clash

2. Why is the island in dispute?

The fight dates to the Chinese Civil War in 1949, when American ally Chiang Kai-shek and his Nationalists abandoned the mainland to Mao Zedong’s Communists. The U.S. backed Chiang as China’s rightful leader until former President Richard Nixon sought to establish ties with Beijing in the 1970s. The result was the “One China policy,” in which Washington recognized the People’s Republic as the “sole legal government of China,” without clarifying its position on Taiwan’s sovereignty. China agreed to tolerate informal U.S. relations with Taipei, including arms sales under certain conditions, but has since affirmed the right to take Taiwan by force to prevent its independence. That wasn’t a problem under former Taiwanese President Ma Ying-jeou, a Nationalist who engaged Beijing in a series of negotiations culminating with an unprecedented meeting with Xi in November 2015.

Taiwan by the numbers
  • Population: 23.5 million
  • Gross domestic product: $665 billion
  • Share of exports to China: 44%
  • Distance from mainland: 130 kilometers (80 miles)

3. Why are tensions rising again?

Taiwanese President Tsai Ing-wen’s election in January 2016 upended Beijing’s plans for reconciliation with the Nationalists. Tsai, whose Democratic Progressive Party was founded on the promise of independence, refused to accept Ma’s position that both sides belong to “One China.” Beijing responded by cutting off communication, curbing travel and resuming efforts to lure away Taiwan’s few remaining diplomatic partners. Beijing has also withdrawn its support for Taipei’s participation in global bodies such as the World Health Assembly and pressured airlines, retailers and other multinationals to revise policies that treat Taiwan as a country. More recently, the People’s Liberation Army has stepped up exercises around the island, including “encirclement patrols” and incursions into Taiwan’s air defense identification zone.

4. Where could the dispute lead?

A U.S.-China clash over Taiwan has re-emerged on recent lists of the biggest geopolitical risks. While the two nuclear-armed powers have lots of incentives to avoid war, China’s rapid military rise together with U.S. policy surprises under former President Donald Trump raised the risk of miscalculation. China fired “carrier killer” missiles into the South China Sea in August, in an apparent warning that its military could threaten the ships Washington has long relied on to project power. China’s red lines are also unclear: One senior Chinese diplomat said in 2017 that a visit by an American warship could be grounds for an attack. While the U.S. no longer has a clear obligation to defend Taiwan, failure to come to the aid of such an important ally could deal a crippling blow to America’s international standing.

Why Taiwan Is the Biggest Risk for a U.S.-China Clash

5. How has the U.S. responded?

Eager to pressure China, Trump oversaw a dramatic expansion of ties with Taipei. After a protocol-shattering phone call with Tsai after winning election in 2016, Trump went on to approve the first fighter jet sale in three decades and the most senior visit by a U.S. cabinet official since Washington switched ties to Beijing. China hawks in Congress passed legislation encouraging diplomatic exchanges “at all levels” with Taiwan and requiring the Pentagon to help assess the island’s defense needs. Former Secretary of State Michael Pompeo, meanwhile, opened a trade dialogue with Taipei and lifted rules that restricted interactions with Taiwanese diplomats.

6. What does China want?

Although the Communist Party has never ruled Taiwan, it views control over the island as essential to completing its goal of reversing China’s “century of humiliation” by colonial powers. Beijing argues that Japan surrendered Taiwan to “China” after World War II and blames the current dispute on the DPP’s refusal to accept that. Xi has shown an increased willingness to assert such sovereignty claims from Hong Kong to the South China Sea to the Himalayan Plateau. Securing Taiwan would make Beijing an even more formidable Pacific power. Problem is, Taiwan residents themselves are becoming more skeptical of the idea. Only 8% of Taiwanese favor unification at some point, compared with 26% who favor eventual independence, according to a November 2020 survey. Almost 60% would prefer to keep the status quo indefinitely or otherwise delay the decision.

Why Taiwan Is the Biggest Risk for a U.S.-China Clash

7. Where does Biden stand?

It remains to be seen. As a former senator and vice president, Biden was a longtime defender of “strategic ambiguity” toward Taiwan. He struck a more hawkish tone during the presidential campaign, vowing to work with allies to mount a more coordinated defense of human rights and democratic gains. The U.S. State Department pledged its “rock-solid” commitment to Taipei after China flew strategic bombers into its air defense identification zone days after Biden’s inauguration. Still, the administration’s reponse was measured, reaffirming existing agreements with China and urging Beijing “to engage meaningful dialogue with Taiwan’s democratically elected representatives.”

The Reference Shelf

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.