China’s ever-growing military might makes the possibility of armed conflict over Taiwan the biggest geopolitical risk facing investors.
That declaration will strike many as alarmist. To be clear, we are not saying that an increasingly assertive China has made its mind up to bring about reunification with the self-ruled island by force. An amphibious invasion is the most hazardous of military operations. Success is not assured.
What we are saying is that China’s current strategy of attrition through endless provocative incursions into Taiwan’s air defence zone and naval exercises in the waters around the island heightens the risk of an accident or unintended manoeuvre that could easily escalate, especially if the US is dragged in.
Recall the long, tense stand-off that followed the collision between a US spy plane and a Chinese fighter jet off Hainan island in 2001. Thankfully, a military confrontation was avoided then. Next time we might not be so lucky.
To see why the risk of conflict over Taiwan is rising, it is instructive to take stock of the remarkable build-up in China’s military power.
On a single day this year, April 25, China commissioned three main battle warships, including a nuclear-powered ballistic missile submarine, a large destroyer and the country’s largest amphibious assault ship that can carry around 30 helicopters and hundreds of troops.
Xi Jinping, who regards the recovery of Taiwan as indispensable for the realisation of his China Dream of national rejuvenation, was on hand for the occasion and will surely have reflected with satisfaction on how China’s armed forces have been transformed within a generation.
Back in 1995, when President Bill Clinton dispatched two US carrier battle groups to deter China from intimidating Taiwan ahead of the island’s elections, the People’s Liberation Army (PLA) was unable even to detect the deployment of the ships, let alone turn them away.
That humiliating episode was a wake-up call. A rapid modernisation ensued, and China is now in the front rank of nations that can project military power.
China now has 300 naval vessels, more than the US. Its air force boasts advanced fighters, fleets of drones and heavy bombers capable of delivering nuclear weapons.
Overall, China recognises that it has some way to go before it can regard itself as a peer competitor with the US military. In some areas, however, the PLA now has the upper hand. Its suite of hypersonic missiles that travel at several times the speed of sound jeopardises not only US aircraft carriers in the western Pacific but also military bases such as Guam.
So how does the Chinese Communist Party intend to flex this military muscle?
Beijing’s goal for some time has been to displace the US as hegemon in the western Pacific, which China regards as its natural sphere of influence. To that end, it wants to take control of the seas out to the so-called first island chain, which runs down from Japan through the Philippines and Taiwan. It then wants control of the waters out to the second island chain, which includes Guam.
The Party has already created facts in its favour in the South China Sea by militarising disputed reefs and shoals. Ejecting China from them will now be difficult if not impossible. Crucially, rapid military modernisation has also put the forcible reunification of Taiwan within reach.
While the island’s armed forces are no match for the PLA, a protracted, contested invasion would carry immense political risk for the CCP.
But successive Chinese leaders have made it clear that they will not allow Taiwan to postpone reunification indefinitely.
Admiral John Aquilino, nominated to become commander of the US Indo-Pacific Command, said in March 2021 that China could make good on its threat to invade Taiwan in the next few years.
The crucial question is whether Washington would come to Taiwan’s aid if China tried to carry out what Aquilino described as its “No 1 priority”.
US administrations, both Republican and Democratic, have maintained a policy down the years of strategic ambiguity in order to keep China guessing. Going to war would have incalculable consequences. But if Washington sat on its hands and China took the island, the entire balance of power in the Asia-Pacific region would be overturned and America’s global standing would be severely damaged.
Taiwan, then, is a pawn in a much greater political power struggle between the US and China. Like relative economic size, diplomatic clout and soft power, military strength is one of the myriad facets of that geopolitical contest.