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Part 1 | The Korean War’s Lesson for Taiwan

Part 1 | The Korean War’s Lesson for Taiwan | ANALYSIS | Scoop.it

The Wall Street Journal

Paul Wolfowitz | American Enterprise Institute and deputy defense secretary (2001-05).

‘A Chinese invasion of Taiwan would present the greatest threat to global peace in a generation.’

‘A Chinese invasion of Taiwan would present the greatest threat to global peace in a generation.’

‘The U.S. would confront an agonizing dilemma:’

  • ‘risk an armed clash between two nuclear superpowers or abandon a free people to communist tyranny.’

‘But there’s an alternative—deter the threat by committing to oppose it, by force if necessary.’

‘Deterrence rests on a paradox:’

  • ‘The best way to prevent war is to threaten war.’

‘Since 1979, when the U.S. normalized relations with Beijing and Congress enacted the Taiwan Relations Act, Washington’s relations with Taipei have been based on ambiguity.’

  • ‘Yet an unambiguous deterrence commitment would be fully consistent with the longstanding U.S. position that differences between Taiwan and the mainland need to be resolved peacefully, without the use or threat of force and with no unilateral declaration of Taiwanese independence.’

‘We can’t know how Mr. Xi would react to a credible red line (or to the failure to draw one).’

  • ‘Historical analogies are always imprecise; the Korean scenario was complex, and Taiwan’s situation differs from both Korea and Berlin [discussed below].’
  • ‘And there’s no denying that such an approach entails significant risks. ‘

‘But continued ambiguity in the face of Mr. Xi’s escalating rhetoric and provocative movements by his armed forces in the Taiwan Strait presents the greater risk of a confrontation as dangerous as the Cuban Missile Crisis. ‘

  • That leaves us with the credible threat of military force as the best hope of avoiding war.
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Part 2 | The Korean War’s Lesson for Taiwan

Part 2 | The Korean War’s Lesson for Taiwan | ANALYSIS | Scoop.it

The Wall Street Journal

Paul Wolfowitz | American Enterprise Institute and deputy defense secretary (2001-05).

‘The Korean War was preventable if the U.S. had made clear beforehand that it would forcefully oppose North Korean aggression.’

‘The history of the 20th century illustrates what successful deterrence can accomplish.’

  • ‘Deterrence enabled West Berlin to survive as a free city despite a political status even more ambiguous than Taiwan’s and a truly indefensible military position.’

‘Cold War history also illustrates a corollary: A failure of resolve can invite catastrophe.’

  • ‘The Korean War was preventable if the U.S. had made clear beforehand that it would forcefully oppose North Korean aggression.’

‘Soviet documents released in 1995 reveal that North Korea’s first dictator, Kim Il-Sung, visited Stalin in March 1949 and proposed invading South Korea.’

  • ‘Stalin, concerned that American troops “will interfere in case of hostilities,” rejected the idea.’

‘But by 1950, U.S. combat forces had left Korea based on the stated belief of the Joint Chiefs of Staff that “Korea is of little strategic value” and a commitment to use military force in Korea would be “ill-advised and impracticable.” ’

  • ‘Gen. Douglas MacArthur endorsed that view publicly in a March 1949 interview, as did Secretary of State Dean Acheson in a January 1950 speech.’

‘But Moscow’s thinking changed after China fell to the Communist Party in October 1949.’

  • ‘According to the documents, that demonstrated to the Soviets the “weakness of Asian reactionaries” and their American “mentors,” who “left China” without daring “to challenge the new Chinese authorities.” ’

‘Stalin invited Kim back to Moscow to discuss a possible invasion.’

  • ‘A summary of those discussions—which historian Kathryn Weathersby calls “the clearest expression that we have about Stalin’s reasoning” on the invasion—shows that even after America’s withdrawal, his primary concern remained that an attack might prompt a U.S. intervention and drag the Soviets into a direct conflict.’
  • ‘Since “the U.S.S.R. was not ready to get involved in Korean affairs directly, especially if the Americans did venture to send troops to Korea,” the documents said, Stalin required Kim to get Mao’s approval.’
  • ‘With the additional reassurance from Soviet intelligence that the “prevailing mood” in the U.S. was “not to interfere,” Stalin unleashed Kim Il-Sung on South Korea and started a horrible war.’

‘Stalin’s spies weren’t wrong in their assessment of the American “mood.” ’

  • ‘Before the invasion,S. political and military leaders didn’t want to defend South Korea and considered an invasion unlikely.’
  • ‘But a surprise attack by seven well-equipped North Korean divisions advancing rapidly down the peninsula changed both the strategic and political calculus.’
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China Saves the World!

Greetings!

 

In today’s issue:

China Saves The World!

  • China Growth Limits Global Economic Damage from Pandemic, IMF Says
  • IMF: 'World Economic Outlook, October 2020: A Long and Difficult Ascent'
  • IMF: 'Global Financial Stability Report: Bridge to Recovery'

China, Trump, & Biden: The View from The U.S., The View from China

  • ‘This Is A Guy Who Is A Thug’: How US Elite Became Hawks on Xi’s China 
  • China Braced for Lose-Lose Scenario As US Election Fuels Unease

Shifting Supply Chains: Focus on Taiwan

  • Taiwan Manufacturing Leaving China
  • Supply Chain Snapshot: Moving Industrial Clusters Out Of China

 

 

Whether you love him or hate, Trump gets full marks for making China a front-burner issue.

  • There is a lot of truth in Representative Mike Gallager’s statement: "Until the president stood up to Beijing, many people in Washington had assumed China was unstoppable." 

So, as the Financial Times puts it:

  • ‘Regardless of which candidate wins the election, the leader taking office in January will preside over a radically different US-China relationship than eight years ago, when Mr Biden and Mr Xi were both vice-presidents — or even four years ago.’ 

The problem is that sentiment shifted so quickly to ‘China is bad’ that those who want to bring some nuance into the discussion are often derided as Panda Huggers and dismissed or shouted down.

  • This means that whether Trump or Biden wins, the scope for China policy debate and responses will be narrow – and that leads to bad outcomes regardless of who is president.

Then, of course, there is China. The Financial Times asks: ‘Who would China vote for in next month’s US presidential election?’

  • The answer: ‘It would choose neither.’

Why? The Chinese who are quoted in the FT article essentially say:

  • China expects that Mr. Trump in a second term would continue to confront China, but he would do it alone.
  • Biden, if elected, would work to reinvigorate traditional alliances to confront China together.

Comparing these I have a tough time understanding why China would choose neither.

  • Trump has certainly proven his ability to bash China, but his actions have been chaotic and ineffective with a few notable exceptions.
  • He has also reducedS. influence in international organizations, and China is filling the void.
  • And because of his dissing of our allies, he leaves American standing pretty much alone against China.

Should a President Biden reverse these, it would seem to me that China would have a more difficult time all around.

 

  • In addition, as Yu Jie, a senior fellow at Chatham House, points out:

“A Trump victory would be dreadful for US-China relations but something of a gift for Mr Xi politically.’

  • “The more the US demonises China, the more that Chinese citizens — even those who dislike Xi’s leadership — would rally behind him.”
  • “And within the [Communist] party, anyone who dared to criticise Xi would be accused of kowtowing to foreign aggressors and thus effectively silenced.”
  • “Continuous China bashing from the Trump administration would completely eliminate the pro-US and less conservative voices within the Chinese political establishment.”

So I would think if Xi Jinping could cast a vote, he would be a MAGA guy.

 

Also in this issue, summaries of two recent IMF reports. The upshot regarding China:

  • ‘Except for China, where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging market and developing economies is projected to remain below 2019 levels even next year.’
  • But ‘IMF Chief Economist Gita Gopinath said China was pulling up the global numbers, and without China “cumulative growth for 2020 and 2021 is negative.” ’

BTW beyond anything about China these two reports provide excellent analyses of the global macro situation.

  • And they are well worth reading carefully.

 

Finally, so much of the focus on foreign businesses leaving China – or not leaving - is on the U.S., the EU, and Japan.

  • But Taiwan businesses, which help power China’s economy and supply tech companies like Apple, are also leaving.

With government encouragement: ‘Taiwan has been one of the biggest beneficiaries of America’s growing wariness about doing business in China.’

  • ‘The Taiwanese government, long concerned about the country’s economic overdependence on China, has grabbed the opportunity and has offered subsidies for Taiwanese companies that bring some operations back home.’
  • This is upsetting the Chinese government and adding tension to already tense situation.

Also here a snapshot of what’s happening highlights attorney Nick Chen.

  • Decades ago, Nick guided 100s of Taiwanese companies to the Suzhou industrial cluster.

Now he is returning ‘to the China-based industrial parks which he helped fill up more than 30 years ago — to convince companies to build additional production facilities in new countries.’

  • ‘ “I will replicate those industrial clusters elsewhere,” he says.’

Note: ‘Mr Chen believes northern Mexico’s time has come.’

 

Go deeper into these issues - Browse the posts below.

To read the original article, click the title.

Let me know what you think. And please forward the China Macro Reporter to your friends and colleagues.

All the best,

Malcolm 

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China Economy

China Economy | ANALYSIS | Scoop.it

CreditSuisse

‘Chinese industrial production momentum has declined from an extremely high level.’

  • ‘Industrial production growth should remain positive as the labor market heals and business confidence improves.’
  • ‘However, policy stimulus has started to fade, and will weigh on growth in the next quarter.’
  • ‘Growth could reaccelerate powerfully once vaccines are widely available, possibly in the spring.’

‘Industrial production growth has averaged 0.4% in the past four months, consistent with the trend from recent years but much slower than the pace observed during the reopening phase in March and May.’

  • ‘At the aggregate level, economic slack has diminished: industrial production and electricity output have returned to pre-COVID highs, corroborated by robust PMI surveys and trade volumes.’

‘Despite a steadier growth rate, the recovery has become more balanced in recent months, thanks to effective controls over the spread of the virus.’

  • ‘Sentiment among private manufacturing businesses has improved and capex accelerated in August.’
  • ‘Discretionary consumer spending also reached an x month high.’
  • ‘These two sectors lagged in the earlier phases of the recovery, and there is still considerable room for them to catch up in the coming quarters.’

‘A broader economic recovery will rely on a continuously healing labor market.’

  • ‘More workers have returned to their posts as service sector activity has broadened.
  • ‘The latest survey from the central bank shows continued improvements in job finding prospects in Q3.’
  • ‘Vaccine approvals by the end of the year would help further.’
  • ‘Even if rollout is limited at first, they depict a more predictable future and reinforce the public's confidence: long-term investment can be deployed and further layoffs can be avoided.’

‘Despite successes in preventing contagion and developing vaccines, China faces a fundamental economic challenge.’

  • ‘The economy can no longer persistently grow at a high rate without incurring substantial economic, social, and environmental costs.’
  • ‘In recent years, policymakers have actively directed their reform efforts to ensure resources flow to more sustainable activities.’
  • ‘The pandemic disrupted the process, but normalization should allow it to resume.

‘Two sectors that have led the early stage of the recovery, and defending economic growth receive a lower policy priority for now.’

  1. ‘Real Estate. Credit policy has become tighter, particularly in the real estate sector. New regulatory restrictions have been issued to codify constraints on builders' ability to borrow.’
  2. ‘Infrastructure. Fiscal stimulus in infrastructure investment will have run its course later this year.’

‘As a result of the opposing forces described above, the Chinese industrial sector should continue expanding, but likely at a lower rate than the average of recent years.’

  • ‘A more organic growth reacceleration will likely happen once winter season has passed and vaccines start to get rolled out.’
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China braced for lose-lose scenario as US election fuels unease

China braced for lose-lose scenario as US election fuels unease | ANALYSIS | Scoop.it

Financial Times

James Kynge | FT

‘So ultimately, the question of whether Beijing would vote for Biden or Trump is easy to answer. It would choose neither.’
‘Who would China vote for in next month’s US presidential election?’

  • ‘In China’s eyes, the choice between Mr Trump and Joe Biden, his Democratic party challenger, is stark.’

‘Mr Trump is expected to continue his hawkish policies towards Beijing, but the former vice-president’s inclination towards multilateralism raises the potential for greater co-operation with China, several analysts said.’

  • ‘ “Biden will have more platforms or channels to negotiate with China and we may see a less intense world,” said Wang Huiyao, an adviser to China’s state council or cabinet.’
  • ‘ “For President Trump, I believe he will continue to be surrounded by very hawkish advisers on China and stimulate more negative policies and proposals on China,” added Mr Wang, who is also president of the Center for China and Globalization, a think-tank.’
  • ‘Mr Wang said Mr Biden would reassert US leadership in the western world, bringing the US back into the Paris climate accord, the World Health Organization and possibly some international trade agreements as well.’

‘But any accommodation towards China from a Biden administration would be shortlived, said Chen Zhiwu, a professor at Hong Kong University.’

  • ‘Mr Chen agreed that Mr Biden would probably adopt a traditional American multilateral approach to foreign policy — in contrast to Mr Trump’s unilateral, “America First” agenda.’
  • ‘ “This difference in style would apply to and affect the US-China relationship,” said Mr Chen, who is also director of the Asia Global Institute, a think-tank.’
  • ‘ “As a result, a Biden administration may make life easier for China in the first year or two, as it will take him some time to undo some of the changes made by the Trump administration, but it may present a tougher challenge to China in the longer-term,” Mr Chen added.’

‘The reason behind such foreboding is that one of the stated intentions behind Mr Biden’s multilateralism is to counter China.’

  • ‘Mr Biden put it like this: “When we join together with fellow democracies, our strength more than doubles. China can’t afford to ignore more than half the global economy. That gives us substantial leverage to shape the rules of the road on everything from the environment to labour, trade, technology and transparency, so they continue to reflect democratic interests and values.” ’

‘Yu Jie, a senior fellow at Chatham House, a UK think-tank, thinks the prospects for US-China relations are bleak whoever wins.’

  • ‘ “Neither Biden nor Trump will run a ‘China-friendly’ policy after claiming victory,” Ms Yu said.’
  • ‘ “Yes, there are differences in style but less so in policy areas in terms of curbing China’s rise and in the overall direction of travel on Sino-US relations,” she said.’

‘Given this, some analysts think that four more years of Mr Trump might actually be preferred by the leadership of Xi Jinping, China’s president.’

  • ‘ “A Trump victory would be dreadful for US-China relations but something of a gift for Mr Xi politically,” said Ms Yu.’
  • ‘ “The more the US demonises China, the more that Chinese citizens — even those who dislike Xi’s leadership — would rally behind him.” ’
  • ‘ “And within the [Communist] party, anyone who dared to criticise Xi would be accused of kowtowing to foreign aggressors and thus effectively silenced.” ’
  • ‘Ms Yu added: “Continuous China bashing from the Trump administration would completely eliminate the pro-US and less conservative voices within the Chinese political establishment.” ’

‘Steve Tsang, director of the Soas China Institute in London, said: “Since Trump became president, he has done more than anyone, including Xi, toward making China great again and thus delivered what Xi wanted to achieve for China globally.” ’

  • ‘He added: “The balance of power in the world has swung more into China’s favour under Trump.” ’

‘So ultimately, the question of whether Beijing would vote for Biden or Trump is easy to answer. It would choose neither.’

 
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Taiwan Manufacturing Leaving China

Taiwan Manufacturing Leaving China | ANALYSIS | Scoop.it

Financial Times

“My assumption is that Taiwan should become the co-ordinating centre in the global supply chain.”

‘Taiwan has been one of the biggest beneficiaries of America’s growing wariness about doing business in China.’

  • ‘The Taiwanese government, long concerned about the country’s economic overdependence on China, has grabbed the opportunity and has offered subsidies for Taiwanese companies that bring some operations back home.’

‘Under that initiative, Taipei has registered more than NT$1.12tn ($39bn) in investment commitments over the past two years.’

  • ‘Manufacturers of telecom networking gear, servers and integrated circuits have been among the largest projects committed.’

‘Taiwanese companies, among the earliest and largest investors in China, began to adjust their manufacturing set-up as early as 15 years ago when labour started becoming scarce in the coastal regions where most foreign investment is concentrated.’

  • ‘Footwear, accessories, toy and furniture manufacturers began moving to countries in south-east Asia such as Vietnam and Cambodia more than a decade ago.’

‘Over the past few years, Taiwanese companies have been selling manufacturing assets in China to Chinese competitors at an increasing pace. Those deals include:’

  • ‘the recent acquisition of a China-based plant of smartphone case maker Casetek by Chinese company Lens for NT$43.3bn,’
  • ‘the sale of two China plants of Taiwan iPhone supplier Wistron to China’s Luxshare, and’
  • ‘the transfer of China assets of Apple earphone maker Merry to Luxshare. “Luxshare has become a mini-Foxconn.’

‘A lot of this activity is happening because of the reshuffling of the supply chain,” says CY Huang, a Taiwanese investment banker and adviser on a number of deals which have contributed to disentangling global supply chains from China.’

  • ‘ “These companies are all suppliers of Apple, and Apple is now separating its supply chain for China and non-China.” ’

‘Mr Huang believes even Foxconn, the $178bn Taiwanese company which makes the iPhone and just about every other tech gadget and which has a workforce of close to 1m in China, might at some point have to sell its massive China-based assembly plants.’

  • ‘ “In the future, Apple wants to delegate supplying of the China market to Chinese suppliers. The other markets in the world can be handled by Taiwanese suppliers,” he says.’
  • In any case, ‘Foxconn says it expects manufacturing to fragment into a China supply chain and several others for the rest of the world.

‘From the US to Japan to Europe to Australia, governments are pondering how to bring production of crucial items such as personal protective equipment and pharmaceuticals back home. That pressure is already forcing a shift in manufacturing orders.’

  • ‘Wistron Medical Technology, a subsidiary of the Taiwanese contract electronics manufacturer, says it so far handles 70 per cent of its production out of its factory in the Chinese city of Chongqing and only the remaining 30 per cent out of Taiwan.’
  • ‘ “But for our largest order, which is from the US government, we have already been notified that the next batch can no longer come out of China,” says Brian Chuang, vice-president.’
  • ‘ “That shift will push China-based production under 50 per cent in our overall manufacturing balance.” ’

‘Mr Huang, the Taiwanese investment banker, last month launched an initiative called Re!Chain aimed at helping Taiwanese companies reinvent themselves amid the rapid change.’

  • ‘He is bringing together enterprises including Fair Friend Group, the world’s third-largest machine tool maker, WPG, the world’s largest integrated circuit distributor, and Teco, Taiwan’s largest automation provider.’

‘Instead of offering cheap manufacturing services in China, he expects them to manage smart global supply chains with the help of automation, AI and blockchain.’

  • ‘ “My assumption is that Taiwan should become the co-ordinating centre in the global supply chain,” he says.’
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‘This is a guy who is a thug’: how US elite became hawks on Xi’s China 

‘This is a guy who is a thug’: how US elite became hawks on Xi’s China  | ANALYSIS | Scoop.it

The Financial Times

Demetri Sevastopulo | FT

“This is more complicated than the old cold war.”

‘One of the main reasons for the escalation in the rivalry between the US and China over the past few years — which some now see as the start of a new cold war — has been the surge in scepticism about Beijing across America’s political elite.’

‘In late 2017, the Trump administration signalled it would take a tougher approach when it described China as a “revisionist power” in its first national security review.’

  • ‘Few in Washington
  • ‘ “That was a huge shift in mentality that has tremendous bipartisan support,” says HR McMaster, who was Mr Trump’s national security adviser at the time.’

‘Evan Medeiros, a former Obama administration White House Asia adviser, acknowledges that the label simply reflected the new reality in Washington.’

  • ‘ “When the Trump administration framed the US-China relationship in terms of strategic competition, many Americans were there already. They just hadn’t given it a name,” says Mr Medeiros, who is a critic of how Mr Trump has handled China.’
  • ‘ “Trump opened the floodgates and people said it’s time to call a spade a spade.” ’
  • ‘ “American elite and popular opinion has fundamentally changed. We have moved from balancing co-operation and competition, to competition and confrontation,” he adds.’ 

‘This means that regardless of which candidate wins the election, the leader taking office in January will preside over a radically different US-China relationship than eight years ago, when Mr Biden and Mr Xi were both vice-presidents — or even four years ago.’ 

  • ‘ “There is an existential competition between two countries with fundamentally different visions,” says Mike Gallagher, a Wisconsin Republican lawmaker and China hawk.’
  • ‘ “This is more complicated than the old cold war.” ’

‘Now, after four turbulent years of relations during the Trump administration, there are very few subscribers to the theory that engagement with China will lead the country to become more liberal.’

  • ‘ “The responsible stakeholder era, which was a bipartisan approach, is over,” says Derek Chollet, a former Obama administration Pentagon and National Security Council official.’

‘There is also much less trust in Mr Xi.’

  • ‘In 2015 he stood in the White House Rose Garden and promised Mr Obama that China would not militarise the artificial islands it was building in the South China Sea — but then proceeded to do exactly that at a fast pace.’
  • ‘More recently, the US has turned up the heat on China over its detention of an estimated 1m Uighur Muslims in Xinjiang region.’

‘Across the political elite, there is consensus that large parts of the technology sector should be off-limits for Chinese investment because of its potential for military or espionage use.’

  • ‘When the Trump administration strong-armed allies to cancel contracts with Chinese telecoms equipment maker Huawei earlier this year — a form of pressure that would have been unthinkable a few years ago — there was little disagreement in Washington, even if some Democrats believe the Trump administration has pushed the idea of economic ‘decoupling’ too aggressively.’

‘One senior Trump administration official says that until the president had stood up to Beijing, many people in Washington had assumed China was unstoppable and that US rhetoric and policy had developed a “defeatist smell”.’

  • ‘ “You had senior US officials parroting Chinese Communist party jargon about a new type of great power relations that would allow for win-win solutions, by which they apparently meant China would win twice,” the official says.’

‘Some in the national security community fear this could lead to a Biden administration making too many compromises.’

  • ‘ “I don’t think anyone thinks we’re going to turn the clock back, even with a Biden administration,” says Mr McMaster.’
  • ‘ “But I am afraid that some Biden advisers will say we have to give on some things to get help from China on environmental issues.” ’

‘Mike Gallagher says there was a danger that Mr Biden would fall for the Chinese approach of dangling co-operation on climate as a “holistic bargaining chip” to get the US to take a softer approach on other issues.’

  • ‘ “If Biden tries to go back to the status quo and take a more accommodative approach, he’s going to get mugged by reality.” ’

‘Whether the superpower sparring escalates under whichever candidate wins will not just be a result of how these debates play out in Washington — it will also depend on how Beijing responds.’

  • ‘Some American officials believe the Chinese government recognises it has pushed too far and helped produce a backlash in Washington.’

‘Susan Shirk, chair of the 21st Century China Center at the University of California San Diego, says the key is Mr Xi himself. While she is critical of the Trump administration, she also levels blame at the Chinese president.’

  • ‘ “The Chinese side brought a lot of it on themselves. I don’t think this is just dreamt up out of the forehead of McMaster or Matt Pottinger,” says Ms Shirk, referring to the current deputy national security adviser and China hawk.’
  • ‘ “If the door is a little bit open, does Xi have the good sense to walk through?” ’
  • ‘ “I’m always looking for evidence of restraint and flexibility . . . but mostly I see rigidity.” ’
  • ‘“He has a very poor understanding of the west.” ’
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‘This is a guy who is a thug’: how US elite became hawks on Xi’s China 

‘This is a guy who is a thug’: how US elite became hawks on Xi’s China  | ANALYSIS | Scoop.it

The Financial Times

Demetri Sevastopulo | FT

“This is more complicated than the old cold war.”

‘One of the main reasons for the escalation in the rivalry between the US and China over the past few years — which some now see as the start of a new cold war — has been the surge in scepticism about Beijing across America’s political elite.’

‘In late 2017, the Trump administration signalled it would take a tougher approach when it described China as a “revisionist power” in its first national security review.’

  • ‘Few in Washington
  • ‘ “That was a huge shift in mentality that has tremendous bipartisan support,” says HR McMaster, who was Mr Trump’s national security adviser at the time.’

‘Evan Medeiros, a former Obama administration White House Asia adviser, acknowledges that the label simply reflected the new reality in Washington.’

  • ‘ “When the Trump administration framed the US-China relationship in terms of strategic competition, many Americans were there already. They just hadn’t given it a name,” says Mr Medeiros, who is a critic of how Mr Trump has handled China.’
  • ‘ “Trump opened the floodgates and people said it’s time to call a spade a spade.” ’
  • ‘ “American elite and popular opinion has fundamentally changed. We have moved from balancing co-operation and competition, to competition and confrontation,” he adds.’ 

‘This means that regardless of which candidate wins the election, the leader taking office in January will preside over a radically different US-China relationship than eight years ago, when Mr Biden and Mr Xi were both vice-presidents — or even four years ago.’ 

  • ‘ “There is an existential competition between two countries with fundamentally different visions,” says Mike Gallagher, a Wisconsin Republican lawmaker and China hawk.’
  • ‘ “This is more complicated than the old cold war.” ’

‘Now, after four turbulent years of relations during the Trump administration, there are very few subscribers to the theory that engagement with China will lead the country to become more liberal.’

  • ‘ “The responsible stakeholder era, which was a bipartisan approach, is over,” says Derek Chollet, a former Obama administration Pentagon and National Security Council official.’

‘There is also much less trust in Mr Xi.’

  • ‘In 2015 he stood in the White House Rose Garden and promised Mr Obama that China would not militarise the artificial islands it was building in the South China Sea — but then proceeded to do exactly that at a fast pace.’
  • ‘More recently, the US has turned up the heat on China over its detention of an estimated 1m Uighur Muslims in Xinjiang region.’

‘Across the political elite, there is consensus that large parts of the technology sector should be off-limits for Chinese investment because of its potential for military or espionage use.’

  • ‘When the Trump administration strong-armed allies to cancel contracts with Chinese telecoms equipment maker Huawei earlier this year — a form of pressure that would have been unthinkable a few years ago — there was little disagreement in Washington, even if some Democrats believe the Trump administration has pushed the idea of economic ‘decoupling’ too aggressively.’

‘One senior Trump administration official says that until the president had stood up to Beijing, many people in Washington had assumed China was unstoppable and that US rhetoric and policy had developed a “defeatist smell”.’

  • ‘ “You had senior US officials parroting Chinese Communist party jargon about a new type of great power relations that would allow for win-win solutions, by which they apparently meant China would win twice,” the official says.’

‘Some in the national security community fear this could lead to a Biden administration making too many compromises.’

  • ‘ “I don’t think anyone thinks we’re going to turn the clock back, even with a Biden administration,” says Mr McMaster.’
  • ‘ “But I am afraid that some Biden advisers will say we have to give on some things to get help from China on environmental issues.” ’

‘Mike Gallagher says there was a danger that Mr Biden would fall for the Chinese approach of dangling co-operation on climate as a “holistic bargaining chip” to get the US to take a softer approach on other issues.’

  • ‘ “If Biden tries to go back to the status quo and take a more accommodative approach, he’s going to get mugged by reality.” ’

‘Whether the superpower sparring escalates under whichever candidate wins will not just be a result of how these debates play out in Washington — it will also depend on how Beijing responds.’

  • ‘Some American officials believe the Chinese government recognises it has pushed too far and helped produce a backlash in Washington.’

‘Susan Shirk, chair of the 21st Century China Center at the University of California San Diego, says the key is Mr Xi himself. While she is critical of the Trump administration, she also levels blame at the Chinese president.’

  • ‘ “The Chinese side brought a lot of it on themselves. I don’t think this is just dreamt up out of the forehead of McMaster or Matt Pottinger,” says Ms Shirk, referring to the current deputy national security adviser and China hawk.’
  • ‘ “If the door is a little bit open, does Xi have the good sense to walk through?” ’
  • ‘ “I’m always looking for evidence of restraint and flexibility . . . but mostly I see rigidity.” ’
  • ‘“He has a very poor understanding of the west.” ’
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The great uncoupling: one supply chain for China, one for everywhere else | Financial Times

The great uncoupling: one supply chain for China, one for everywhere else | Financial Times | ANALYSIS | Scoop.it

The Financial Times

“I will replicate those industrial clusters elsewhere.”

‘Earlier this year, four dozen lawyers, accountants and bankers from all over Latin America piled into a conference room in an office tower on Miami Waterfront.’

  • ‘They listened spellbound as Nicholas Chen, an energetic lawyer who had come all the way from Taiwan, told them about an exodus of manufacturing from China that could make them rich.’
  • ‘ “The tsunami waters are flowing outward now,” Mr Chen said to the assembled audience.’

‘Pointing to the US trade war with China, he said many companies were having second thoughts about maintaining operations in the Asian country.’

  • ‘ “Huge numbers of China-located companies are shifting their purchase orders, manufacturing capacities and operations out of China,” he claimed.’
  • ‘ “This can become your El Dorado!” — a reference to the mythical gold treasure that drove generations of explorers to Latin America.’

 ‘Mr Chen knows how to make a good pitch.’

  • ‘Starting in the early 1990s, the Chinese American lawyer helped hundreds of companies from Taiwan, a hub of manufacturing for electronics and other industries, to set up shop in Suzhou — a city just outside Shanghai in Jiangsu province.’

 ‘The influx made Suzhou one of the largest clusters of Taiwanese manufacturing in China, with more than 11,000 companies and cumulative investment of more than $30bn as of 2018.’

  • ‘They were part of a force that transformed China into an export machine supplying the whole world — until now.’
  • ‘Those same supply chains are now at the centre of a tug-of-war that has huge implications for the future of the global economy and for geopolitics.’

‘Mr Chen is now planning to return to the China-based industrial parks which he helped fill up more than 30 years ago — to convince companies to build additional production facilities in new countries.’

  • ‘ “I will replicate those industrial clusters elsewhere,” he says.’

‘Mr Chen believes northern Mexico’s time has come.’

  • ‘ “It was still cheaper to manufacture in China 10 years ago than in maquiladoras,” he recalls, in a reference to Mexico’s export processing factories.’

‘According to him, industrial park managers from Nuevo Leon, a Mexican state bordering Texas, used to try to convince him to bring over companies from China, but could never match the cost structure that China offered.’

  • ‘ “Now I’m telling them that you still can’t come up with that number, but you don’t have to, because they have had the trade war, cost increases and Covid, so their number changed. Do you still want to talk now?” ’
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Happy Double Ten Day!

Greetings!

 

In today’s issue:

Happy Double Ten Day!

  • October 10: Republic of China National Day
  • Taiwan President Tsai Vows to Defend Taiwan, Calls for Dialogue With China
  • Taiwan Could Do With An Actual National Day

Strait Shooting: Defending Taiwan Is Growing Costlier And Deadlier

The National Security Law's Chilling Effect on Hong Kong

China & America Due For A Rebranding

  • Views of Both US and China Largely Negative Across Advanced Economies in 2020
  • Unfavorable Views of China Reach Historic Highs in Many Countries 

 

 

Happy Double Ten Day!

  • October 10 (10-10, or ‘Double Ten’) is Taiwan’s National Day.
  • Or more accurately the National Day of the Republic of China, as Taiwan is officially known, since ‘October 10’ refers to the Wuchang Uprising on October 10, 1911, which led to the founding of the ROC.

When the ROC government fled to Taiwan in 1949 after its defeat by the Chinese Communists, it brought the National Day with them.

  • And today this highlights the tension between that history and those who affirm their Taiwan identity.

A recent editorial in the Taiwan News notes:

  • ‘Double Ten — like so many other things in Taiwan — was forced onto the people by the KMT [the Kuomingtang, the Nationalist Party that long controlled the ROC before it became a democracy] in an attempt to erase Taiwanese identity.’
  • ‘Just a few other examples include the Republic of China name, the ROC national anthem, the ROC flag, the coerced use of Mandarin, and the learning of Chinese over Taiwanese history.’
  • ‘Despite all these efforts, the Taiwanese persevered and built the country into the fully functioning democracy it is today.’

To us in the West, this is sounding like a lot of inside baseball.

  • In fact I found scant coverage of Taiwan’s National Day in the western media.

And that represents a dangerous neglect.

  • How Taiwan politics goes so goes to some significant degree the chances of war between China and Taiwan.

Though the West may be pretty ho-hum about Taiwan politics, you can be sure that Xi Jinping is watching every machination.

  • Any move toward, say, declaring Taiwan’s independence (as the editorial writer seems to be implicitly calling for), could persuade him that the time to attack and ‘reunify’ is now.

That of course would force the U.S. to abandon its policy of ‘strategic ambiguity’ for real and decide if it will go to war with China to defend Taiwan.

  • If it doesn’t, America cedes a democratic ally to China and with it the confidence of its other Asian allies.
  • If it does, it’s in for a heck of fight. But as The Economist states so pointedly, ‘The question is whether America has the stomach for this.’

So as Taiwan President Tsai Ing-wen addressed the nation on October 10, she must have had somewhere in her mind the thought that ‘Whew, we made it through another year.’

  • And no little trepidation about the year to come.

Bottom line: To understand the risk of conflict in the Taiwan Strait, understand Taiwan politics.

 

Also today an update on the impact of Hong Kong’s National Security Law.

  • Only around 30 people have been charged under the law in its first eight months.

But as MERICS points out:

  • ‘Across the board, the chilling effect of the National Security Law on criticism, academic debates, civil rights advocacy, and international engagement is already clearly visible.’ 

 

Finally, two reports from the Pew Research Center.

  • Early on in the pandemic there was much handwringing about how China would take advantage of its early recovery to expand its soft power through unselfish assistance to other countries still suffering from the disease.

Turns out those fears were misplaced.

  • Through supplying defective equipment, carrying out Wolf Warrior diplomacy, becoming more assertive in Hong Kong, the South China Sea, and the Sino-Indian border, and on and on, China quickly blotted its international copybook.

Pew polling found that, as a result:

  • ‘Views of China have grown more negative in recent years across many advanced economies.’
  • ‘Unfavorable opinion has soared over the past year, a new 14-country Pew Research Center survey shows.’
  • ‘Today, a majority in each of the surveyed countries has an unfavorable opinion of China.’

Not unexpectedly, the U.S. doesn’t fair much better:

  • ‘On most measures included in the survey, people are even more critical of the U.S. than of China – though more still have favorable opinions of the U.S.’

Looks as though each nation is in need of some serious rebranding.

Go deeper into these issues - Browse the posts below.

To read the original article, click the title.

Let me know what you think. And please forward the China Macro Reporter to your friends and colleagues.

All the best,

Malcolm 

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Taiwan president calls for 'meaningful dialogue' with China 

Taiwan president calls for 'meaningful dialogue' with China  | ANALYSIS | Scoop.it

Reuters

‘Speaking at National Day celebrations, Taiwan President Tsai Ing-wen described the situation in the Taiwan Strait as “quite tense.” ’

  • ‘This, along with disputes in the South China Sea, a China-India border conflict and China’s crackdown in Hong Kong, showed democracy and peace in the region were facing big challenges, she said.’

‘Tsai said she was committed to maintaining stability in the Taiwan Strait, but that this was the responsibility of both sides.’

  • ‘Still, she has made strengthening Taiwan’s armed forces a priority, and said she would keep pushing this, upholding the principle of neither seeking war nor fearing it.’
  • ‘ “Our commitment to our sovereignty and democratic values will not change, but we will also maintain strategic flexibility and be responsive to changes,” she said.’
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Taiwan could do with an actual national day

Taiwan could do with an actual national day | ANALYSIS | Scoop.it

Taiwan News

‘Double Ten — like so many other things in Taiwan — was forced onto the people by the KMT in an attempt to erase Taiwanese identity.’

‘Double Ten, as it is commonly referred to, commemorates the start of the Wuchang Uprising in China on Oct. 10, 1911, which led to the end of the Qing Dynasty (1636–1912) and the establishment of the Republic of China (ROC) on Jan. 1, 1912.’

  • ‘The Chinese Nationalist Party, also known as the Kuomintang (KMT), was around in 1912, but did not become the sole ruling party in China until Oct. 10, 1919.’
  • ‘The KMT ruled the country until the Chinese Civil War broke out between the nationalists and the Chinese Communist Party (CCP), which saw on-again, off-again fighting from 1927 to 1949.’
  • ‘The KMT was eventually defeated by the CCP in 1949 and fled to Taiwan.’

‘However, when it comes to Taiwan history, what was happening in 1911? Not the Wuchang Uprising.’

  • ‘In 1911, that would put Taiwan smack dab in the Japanese occupation, which lasted from 1895 to 1945.’

‘Double Ten — like so many other things in Taiwan — was forced onto the people by the KMT in an attempt to erase Taiwanese identity.’

  • ‘Just a few other examples include the Republic of China name, the ROC national anthem, the ROC flag, the coerced use of Mandarin, and the learning of Chinese over Taiwanese history.’

‘Despite all these efforts, the Taiwanese persevered and built the country into the fully functioning democracy it is today.’

  • ‘But in order for Taiwan to continue to grow as a free, open, and inclusive society, it’s time for us to finally put to rest all this Republic of China nonsense and the baggage that comes with it like Double Ten.’
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國慶日 (中華民國) - 维基百科,自由的百科全书

國慶日 (中華民國)

清 宣統三年 八月十九(時為 農曆 辛亥 年),即 公元1911年10月10日,革命黨人發動 武昌起義,並且成為清朝末年以來第一個成功的 共和 革命起事。武昌起義成功後,各省陸續響應革命運動宣布脫離清朝獨立,至 陽曆12月時,全中國 22個省中已有13個省由革命黨人掌握。經過籌備與 選舉後, 獨立各省在 南京組成 中華民國臨時政府;1912年 1月1日, 孫文在 南京就任第一任 中華民國臨時大總統,並於 隔日宣布 改元民國、改採陽曆 曆法 ,定公元1912年為中華民國元年。這些象徵著中華民國的正式建立。

‘Republic of China National Day (also known as Double Ten Day)

‘The 1911 The Wuchang Uprising was launched on October 10th.’

‘Within two months after the incident, revolutionary actions in various parts of China succeeded one after another and finally succeeded in overthrowing the Qing Dynasty.’

‘Since the government of the Republic of China moved to Taiwan in 1949 following its defeat by the China Communists, celebrations have been held every year on October 10th.’ 

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Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center

Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center | ANALYSIS | Scoop.it

‘Disapproval of how China has handled the COVID-19 pandemic also colors people’s confidence in Chinese President Xi Jinping.’

  • ‘A median of 78% say they have not too much or no confidence in him to do the right thing regarding world affairs, including at least seven-in-ten in every country surveyed.’
  • ‘This lack of confidence in Xi is at historic highs in every country for which trend data is available except Japan and Spain.’

‘In most countries, the percent saying they have not too much or no confidence in him has grown by double digits since last year.’

  • ‘For example, in the Netherlands, whereas around half distrusted Xi last year, today 70% say the same – up 17 percentage points.’

‘But, even as concerns about Xi rise, in most countries, more have faith in President Xi than in President Trump.’

  • ‘For example, in Germany, 78% say they have no confidence in Xi – but 89% say the same of Trump.’

‘Still, while Xi’s global image is somewhat better than Trump’s, it nonetheless is significantly worse than several of the other world leaders asked about, including German Chancellor Angela Merkel, French President Emmanuel Macron and UK Prime Minister Boris Johnson.’

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Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center

Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center | ANALYSIS | Scoop.it

‘The rise in unfavorable views comes amid widespread criticism over how China has handled the coronavirus pandemic.’

‘Only the U.S. receives more negative evaluations from the surveyed publics, with a median of 84% saying the U.S. has handled the coronavirus outbreak poorly.’

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Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center

Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center | ANALYSIS | Scoop.it

‘The rise in unfavorable views comes amid widespread criticism over how China has handled the coronavirus pandemic.’

‘Only the U.S. receives more negative evaluations from the surveyed publics, with a median of 84% saying the U.S. has handled the coronavirus outbreak poorly.’

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Views of both US and China largely negative across advanced economies in 2020

Views of both US and China largely negative across advanced economies in 2020 | ANALYSIS | Scoop.it
More see China as the world’s leading economic power than the U.S. In every European country surveyed, a plurality or majority say China is the top economy in the world. Only in South Korea, Japan and the U.S. itself do more people name the U.S. Across Europe, these ratings are largely unchanged since 2019 despite the major changes in the global economy brought on by the coronavirus pandemic. Western Europeans have generally considered China’s economy to be the strongest worldwide in recent years, even while people in Central and Eastern Europe, Latin America, Africa and the Middle East – none of which were surveyed this year – have often named the U.S.
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Views of both US and China largely negative across advanced economies in 2020

Views of both US and China largely negative across advanced economies in 2020 | ANALYSIS | Scoop.it

‘4. More see China as the world’s leading economic power than the U.S.’ 

‘In every European country surveyed, a plurality or majority say China is the top economy in the world.’

  • ‘Only in South Korea, Japan and the U.S. itself do more people name the U.S.’

‘Across Europe, these ratings are largely unchanged since 2019 despite the major changes in the global economy brought on by the coronavirus pandemic.’

  • ‘Western Europeans have generally considered China’s economy to be the strongest worldwide in recent years, even while people in Central and Eastern Europe, Latin America, Africa and the Middle East – none of which were surveyed this year– have often named the U.S.’’
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Views of both US and China largely negative across advanced economies in 2020

Views of both US and China largely negative across advanced economies in 2020 | ANALYSIS | Scoop.it

3. Few have confidence in either country’s president – but across much of Western Europe, more have confidence in China’s Xi Jinping.

Across 14 countries surveyed, including the U.S., a median of 19% say they have confidence in President Xi, and a median of 17% say the same of President Donald Trump.

  • No more than three-in-ten in any country but the U.S. say they have confidence in either one of the leaders (in the U.S., 43% have confidence in Trump, though partisans differ widely in their assessments).
  • In six countries, similarly low numbers of people express confidence in either leader.

But in six Western European countries where the ratings of the two leaders differ, Xi tends to come out on top.

  • For example, in Belgium, 22% say they have confidence in Xi while only 9% say the same of Trump. Only in Japan and the U.S. itself do more people have confidence in Trump than Xi.
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Views of both US and China largely negative across advanced economies in 2020

Views of both US and China largely negative across advanced economies in 2020 | ANALYSIS | Scoop.it

‘2. Most people rate China more positively than the U.S. in its handling of the coronavirus pandemic.’ 

‘Across the 14 countries surveyed, few praise China’s response to COVID-19, with a median of 37% saying it has done a good job dealing with the outbreak.’

  • ‘But, in all countries except Japan and the U.S. itself, people are much more complimentary of China’s response than that of the U.S.’
  • ‘In Japan, fewer than one-in-five praise either country.’

‘The gap is largest in Italy, where 51% say China has done a good job compared with 18% who say the same of the U.S., a difference of 33 percentage points.’

  • ‘Gaps of around 30 points exist across most of the Western European countries surveyed.’
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Views of both US and China largely negative across advanced economies in 2020

Views of both US and China largely negative across advanced economies in 2020 | ANALYSIS | Scoop.it

Pew Research Center

‘Negative views of the United States and China have soared in many countries over the past year.’

  • ‘In most of 14 advanced economies surveyed between June and August 2020, unfavorable views of both countries are at or near historic highs in Pew Research Center’s decade or more of polling on the issue.’

‘Few in the countries surveyed have confidence in the leader of either the U.S. or China.’

‘On most measures included in the survey, people are even more critical of the U.S. than of China – though more still have favorable opinions of the U.S.’

‘Here are four key findings comparing the two countries’ global image.’

‘1. Most people have unfavorable views of both China and the U.S. – but more see the U.S. favorably. 

‘A majority of people in every country surveyed have a negative view of China.

  • ‘Outside the U.S., South Korea and Japan, the same is true of the United States.’

‘But, in most countries surveyed, views of the U.S. are more favorable than views of China.’

  • ‘In South Korea and Japan – two formal allies of the U.S. that neighbor China – this gap is more than 30 percentage points.’
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Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center

Unfavorable Views of China Reach Historic Highs in Many Countries | Pew Research Center | ANALYSIS | Scoop.it

Disapproval of how China has handled the COVID-19 pandemic also colors people’s confidence in Chinese President Xi Jinping.

  • A median of 78% say they have not too much or no confidence in him to do the right thing regarding world affairs, including at least seven-in-ten in every country surveyed.
  • This lack of confidence in Xi is at historic highs in every country for which trend data is available except Japan and Spain.
  • In most countries, the percent saying they have not too much or no confidence in him has grown by double digits since last year.
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Unfavorable Views of China Reach Historic Highs in Many Countries

Unfavorable Views of China Reach Historic Highs in Many Countries | ANALYSIS | Scoop.it

Pew Research Center

‘Unfavorable opinion of China has soared over the past year.’

‘Views of China have grown more negative in recent years across many advanced economies.’

  • ‘Unfavorable opinion has soared over the past year, a new 14-country Pew Research Center survey shows.’

‘Today, a majority in each of the surveyed countries has an unfavorable opinion of China.’

  • ‘And in Australia, the United Kingdom, Germany, the Netherlands, Sweden, the United States, South Korea, Spain and Canada, negative views have reached their highest points since the Center began polling on this topic more than a decade ago.’

‘Negative views of China increased most in Australia, where 81% now say they see the country unfavorably, up 24 percentage points since last year.’

  • ‘In the UK, around three-quarters now see the country in a negative light – up 19 points.’
  • ‘And, in the U.S., negative views of China have increased nearly 20 percentage points since President Donald Trump took office, rising 13 points since just last year.’
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Unfavorable Views of China Reach Historic Highs in Many Countries 

Unfavorable Views of China Reach Historic Highs in Many Countries  | ANALYSIS | Scoop.it

Pew Research Center

‘Unfavorable opinion of China has soared over the past year.’

‘Views of China have grown more negative in recent years across many advanced economies.’

  • ‘Unfavorable opinion has soared over the past year, a new 14-country Pew Research Center survey shows.’

‘Today, a majority in each of the surveyed countries has an unfavorable opinion of China.’

  • ‘And in Australia, the United Kingdom, Germany, the Netherlands, Sweden, the United States, South Korea, Spain and Canada, negative views have reached their highest points since the Center began polling on this topic more than a decade ago.’

‘Negative views of China increased most in Australia, where 81% now say they see the country unfavorably, up 24 percentage points since last year.’

  • ‘In the UK, around three-quarters now see the country in a negative light – up 19 points.’
  • ‘And, in the U.S., negative views of China have increased nearly 20 percentage points since President Donald Trump took office, rising 13 points since just last year.’
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Strait shooting - Defending Taiwan is growing costlier and deadlier | Asia

Strait shooting - Defending Taiwan is growing costlier and deadlier | Asia | ANALYSIS | Scoop.it

The Economist

‘The question is whether America has the stomach for this.’

‘A vital question is therefore whether Americans would defend Taiwan, for the sake of a distant country whose defence spending has fallen steadily as a share of GDP over two decades.’

  • ‘America does not have a formal alliance with Taiwan.’
  • ‘But it sells the island weapons—$13bn-worth over the past four years—and has long implied that it would help repel an invasion if Taiwan had not provoked one.’

‘Yet the same trend that imperils Taiwan in the first place—China’s growing military power—also raises the price of American involvement.’

  • ‘In wargames set five or more years in the future, “the United States starts losing people and hardware in the theatre very quickly,” says David Ochmanek of the RANDCorporation, a think-tank.’
  • ‘ “Surface combatants tend to stay far from the fight, forward air bases get heavily attacked and we’re unable to project power sufficiently into the battlespace to defeat the invasion.” ’

‘In another wargame conducted earlier this year, the Centre for a New American Security (cnas), another think-tank, assumed that Taiwan would fight tenaciously and that America would have access to weapons still under development.’

  • Under those rosier circumstances, the island survives—at least after ten notional days of combat—but even then only at huge cost.’
  • ‘The seas around Taiwan would look “like no-man’s-land at the Somme”, notes Christopher Dougherty of CNAS.’

‘American losses in the CNAS wargame amount to a hundred or so aircraft, dozens of ships and perhaps a couple of carriers.

  • ‘ “An aircraft-carrier has 5,000 people on it,” says Mr Murray. “That’s 100 voters in every state of our union. That’s a lot of funerals.” ’

‘Escalation might go even further.’

  • ‘The fact that Chinese nuclear missiles can now reach any American city raises the stakes dramatically.’
  • ‘ “When the bullets really start flying,” says Michael Hunzeker of George Mason University, “the American people, most of whom can’t find Taiwan on a map, will be hard-pressed to say, ‘No, I’m really willing to trade Los Angeles for Taipei.’ ”

‘The question is whether America has the stomach for this.’

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