The Spectator: The devastating cost of a Chinese invasion of Taiwan

A Chinese jet fighter flies close to Taiwan (Credit: Getty images)

The next twelve months will be dominated by elections, with polls expected in at least 64 countries. Of these, there are only a few that really matter in geopolitical terms. The US elections of course, especially if won by an isolationist Donald Trump (assuming he is allowed to run). India’s parliamentary elections in April will help steer the course of a superpower for the future. And in Europe, the rise of populist parties may well change the direction of the EU in the years to come. But perhaps the most consequential one has just happened this weekend, in Taiwan, where William Lai has just been elected president.

There is significant potential danger associated with what happens following Lai’s election. In the past he has been known as an advocate for Taiwanese independence: this is a redline that Beijing has said that, if crossed, would lead to assertive action being taken against what it considers to be a ‘renegade province’. If Lai does indeed move the 2/5 island towards independence, then whatever China does next – perhaps a blockade or even a full invasion – couldwell be hard pushed-back upon by the US, Japan, and their allies. A regional conflict might easily erupt.

Even though president Lai has now promised not to seek independence forTaiwan, the fact that he has done so previously means that Beijing doesn’t likeor trust him. He is banned from visiting the mainland, and starting from such alow base of trust means that it is easier for any decisions he makes regarding thestatus of Taiwan to be misinterpreted, and potentially escalated.

One of the main reasons that a move towards Taiwanese independence is such arisk is because of the stance of China’s president Xi Jinping. He has oftenclaimed that the ‘rejuvenation of China’, which he has staked his legacy on, willonly be completed once reunification with Taiwan has been achieved. If theisland secedes then it would be a significant blow to the credibility of not only Xi, but of the entire ChineseCommunist Party. As the CCP has shown over the years, it has scant tolerance for anyone that threatens its rule.

Indeed, the CCP has repeatedly threatened action against thoseseeking Taiwanese independence. In the run up to this election, forexample, the Chinese defence ministry said that its military would‘take all necessary measures to resolutely smash ‘Taiwanindependence’ separatist plots in any form’. In the aftermath of Lai’selection, a Chinese State Council official said that ‘Taiwan is China’sTaiwan’ and that the result ‘cannot stop the general trend that themotherland will eventually be unified and will inevitably be unified’.It is worth noting that only 17 per cent of Taiwanese wantunification, according to polls, with 60 per cent wanting to sever tieswith China.

Washington is fully aware that this cross-strait mismatch inambitions could lead to conflict. Economically it would bedevastating. Research by Bloomberg has revealed the price tag ofChinese aggression against Taiwan, either through invasion orblockade. If the island was cut offfrom international trade then theimpact could be $10 trillion (£8 trillion), or about 10 per cent of theworld economy. This catastrophe would be caused mainly by the disruption to semiconductors, which would seefactories of all types – from cars to phones to laptops – stalled across the world. By comparison, the World Bankestimates that Covid wiped 3.1 per cent offworld GDP, and the Global Financial Crisis 1.4 per cent. Even WorldWar 2 only led to a drop of 8.1 per cent at its nadir, according to some estimates.

The effects would not just be economic. Western military technology, which relies heavily on Taiwanese chips,would find itself heavily compromised. On the other hand, Beijing – if it was in control of Taiwan’s chip factories (or‘fabs’ as they are known) – would have easier access to the technology its military requires.

Then there is the threat to western ideals. According to the Germany-based Democracy Matrix, Taiwan is one ofonly two ‘working democracies’ in Asia, along with Japan. President Lai’s victory speech made clear the importance of this to the island. ‘Between democracy and authoritarianism, we stand on the side of democracy,’ he said. ‘TheRepublic of China, Taiwan, will continue to walk side by side with democracies around the world’. If the island’sdemocracy were to be snuffed out then this would put further pressure on the West’s championing of its preferredpolitical system, one that is being actively challenged by China and Russia.

All of this considered, the fate of Taiwan has become a totem for China-US tensions. If China were to reunify withthe island in the face of western opposition, then it would deliver a severe blow to the US’s credibility as a militaryand political ally. Countries like South Korea, Thailand, and the Philippines, all US treaty allies, would likelyreassess their relationship with America and align more with China, given that it would now be the major force inthe region. It could also lead to nuclear proliferation in Asia and elsewhere as governments lose trust in American protection.

The only way to reduce the probability of this cataclysm is through deterrence. Beijing needs to understand thatreunification would come at a cost so high that it would be more damaging than advantageous, especially for theCCP’s rule. The US, UK, and their allies should beef up their support for Taiwan, politically, economically, andpotentially militarily. At the same time, the western allies need to ensure that president Lai does not rock the statusquo boat, and so encourage Beijing’s hawks.

The UK has made it clear that it does not support a change in Taiwan’s status, as has the US and other allies. But thisrequires working with both sides of the Taiwan Strait to keep the peace. The cost of failure could be not only thebiggest economic shock the world has ever seen, but a hammer-blow to the waning dominance of American andwestern world leadership.