The world simply can’t afford the catastrophe of a mainland attack on Taiwan
- As tensions rise in the Taiwan Strait, analysts predict a global economic and political disaster in case of an attack, disrupting trade and ruining economies
- The possibility of forced reunification remains slim for now but to make sure, moderate voices in the ears of Beijing and Washington are needed urgently
For more than three decades, I have engaged in public discussions and think-tank brainstorms on a prickly question: will Beijing attack Taiwan? The conclusions were the same: however fiercely Beijing huffs and puffs, the consequences would be so politically and economically catastrophic that China’s leaders would never take the risk.
The short answer is yes, though I strongly believe China does not intend to resort to force.
Hass said in a podcast: “Taiwan is not a problem with an American solution. Neither side of the Taiwan Strait seeks our mediation or our imposition of a solution on them.” Further, Bush noted, “it’s the US position that this should be resolved by the two parties themselves”, peacefully and “with the assent of the people of Taiwan”.
To the hotheads in the US and Taiwan, the authors remind us that most Taiwanese remain pragmatic, quoting a poll that shows just 6.4 per cent believe Taiwan should seek independence now, while only 7.1 per cent favour reunification – and a commanding 60.4 per cent saying the status quo should be maintained. It seems, like Deng Xiaoping, they will wait for the “wisdom of future generations” to resolve the problem.
The economic consequences would be even more devastating. The Rhodium Group said “the scale of economic activity at risk of disruption from a conflict in the Taiwan Strait is immense”, that “disruptions would be felt immediately and would be difficult to reverse”.
The impact on China would be direct and huge. More than 42 per cent of Taiwan’s exports flow to the mainland, mostly microchips destined for manufactured goods intended for export. Mainland exporters account for 22 per cent of Taiwan’s imports.
Taiwanese companies have invested US$194 billion in over 44,000 projects on the mainland, many of which are at immediate risk in the event of an attack. Whatever their political differences, these are economies joined at the hip.
Rhodium considers a long list of disastrous economic consequences, ranging from the suspension of trade finance (disrupting over US$270 billion in trade) to a global sell-off of Chinese securities (foreigners hold more than US$1 trillion in onshore bonds and US$775 billion in offshore US-listed equities) and collateral damage for countries across the globe. For example, 14 per cent of Vietnam’s exports rely on components imported from China.
An attack would also immobilise the estimated 240 container ships that daily cross the South China Sea into and out of Shanghai, Dalian and Tianjin, and the 1 million barrels of oil that pass the Taiwan Strait every day. As British former diplomat Charles Parton wrote in the Financial Times, an attack “would reduce Beijing’s exports by trillions” of dollars, with appalling implications for companies and consumers across the world.
Parton insists the mainland is extremely unlikely to attack Taiwan. “But if it did,” he said, “it would be a global economic and political disaster.”
We have had enough disasters over the past three years to last a lifetime. Moderate voices in the ear of Beijing and Washington are needed, quietly and now.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades