The Van Trump Report

Why Wall Street is Watching Taiwan… What You Need to Know

A military conflict is brewing between China and Taiwan and it could ultimately embroil not just all of Asia but also the U.S. and other global powers. In fact, the Chinese recently released a propaganda video that depicted a mock military attack on a target resembling a U.S. Air Force base in Guam. See the video HERE. They made it using clips from some Hollywood blockbusters, too…it is over-the-top crazy. But scary to many world leaders and worth taking notice.

These and other actions have raised alarms with some China watchers around the world that fear Xi is preparing to bring Taiwan under its control, by force if necessary. In its annual work report this year, the Chinese government removed the word “peaceful” from long-standing references to “reunification” with Taiwan. The video, which officials have since taken offline, is seen by some as a warning to the U.S. against attempting to interfere militarily with China-Taiwan affairs.

Keep in mind, there has been an economic shift and trend change with President Trump applying trade pressure, where China’s rising production costs are making them no longer the cheapest place in the world to manufacture. On the flip side, a lot of Taiwanese companies are trying to remain very cost-conscious, but the U.S.-China trade war has made many Taiwanese firms look for ways to get the “Made in China” label off their products. The Chinese Communist Party views Taiwan not just as a major crack in its territorial integrity, but now also as an ideological threat. Let’s also not forget, back in March, President Trump signed into law the TAIPEI Act, which supports strengthened U.S. ties with Taiwan and calls for the U.S. to alter its engagement with countries that have downgraded their relationship with Taiwan.

For those not familiar, Taiwan is an island off the coast of China that exists in a strange limbo. It operates as an independent democracy but most global nations, including the U.S., go out of their way to avoid recognizing it as a sovereign state. That’s because China claims Taiwan as its territory and historically has refused to maintain diplomatic ties with any country that recognizes it as an independent nation. Taiwan was formed following the end of the Chinese civil war in 1949, when the defeated Nationalist government fled China’s new Communist leaders. Despite Taiwan’s precarious position in the global pecking order, with very few formal diplomatic ties, the pseudo-nation has managed to become one of Asia’s most important economies.

Xi has not hidden his desire to bring Taiwan back under China rule, saying last year that unification is an “inevitable requirement for the historical rejuvenation of the Chinese nation.” And Xi sees himself as the guy that will reunify all of China’s lost kingdom, something analysts say already began with Hong Kong being swept back under tighter Chinese rule. In fact, experts say Xi has likely been emboldened by the fact that China faced few repercussions for its harsh crackdowns in Hong Kong, including alleged human rights violations.  

Recently, China has stepped up military activities near Taiwan, sending warplanes across the unofficial maritime boundary and holding drills and regular air force missions close to the Pratas Islands. The Pratas, the closest Taiwan-controlled territory to Hong Kong, have become a new flashpoint since anti-government protests that have been ongoing in Hong Kong since last year. Taiwan has intercepted at least one boat close to the Pratas that carried people fleeing from Hong Kong. Some Taiwanese officials have expressed concerns that China could seize the Pratas, a move that could lead to a larger military conflict involving all of Asia, possibly even the U.S. and other global powers. Earlier this month, after Taiwanese President Tsai Ing-wen called for peaceful dialogue, China released video footage showing a large-scale military exercise simulating an invasion of Taiwan.

Officials in the U.S. have taken notice of China’s increased aggression. The Trump Administration has increased arms sales to Taiwan in recent years, announcing just this month three advanced weaponry sales. Reuters reported that notifications for the sale of other weapons systems, including large, sophisticated aerial drones, land-based Harpoon anti-ship missiles, and underwater mines to deter amphibious landings are expected soon. This summer, the White House announced it was establishing an official economic dialogue with Taiwan, possibly paving the way toward a free-trade agreement. These and other moves by the U.S. have, not surprisingly, angered China.    

None of this necessarily means a Chinese invasion of Taiwan is inevitable or that the U.S. would even get involved if that were to happen. There is no doubt that Taiwan would have a tough time defending itself against China, whose defense budget is 25 times the size of Taiwan’s. But China is known for its saber-rattling tactics in the region. U.S. military experts say Beijing’s increased military activity seem designed to both test Taiwan and underscore that the island belongs to China.

Some also question whether the U.S. would actually be willing to get involved in a conflict between China and Taiwan. America has always implied that it would help defend Taiwan but there is no formal alliance. The U.S. does have a formal alliance with Japan, whose outer islands would be exposed in a military conflict. Right now, the experts mostly agree that an outright assault on China’s part would be extremely risky and that, for now, Xi is just trying to sow instability in the region.

At the same time, there are worries that, with the whole world distracted by the Covid-19 pandemic and the U.S. in the middle of a major election, China may see this as a perfect opportunity to really flex its muscle. Nearly all analysts agree that Taiwan will be one of the most pressing security issues facing whoever ends up controlling the White House next month. (Sources: The Atlantic, Axios, South China Morning Post, The Economist, Reuters)

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