The basic problem
The essence of the future Taiwan crisis is, of course, that the People’s Republic of China, the ‘big’ China, wants to get back its 23 million unfaithful children and their island, and the unfaithful islanders don’t want that. Between the Chinese People’s Liberation Army and its goal lies not only the 180-kilometer-wide Taiwan Strait, but a relatively well-prepared, though currently not the best, form of Taiwan’s military system and, in principle, a U.S. security guarantee.
China, President Xi is not joking or bluffing, but looking forward to a good opportunity. One of the key drivers of China’s force development is preparing for the successful implementation of the Taiwan invasion, which is progressing at a rapid pace. For a long time, China spoke the language of beets and sticks at the same time, opened its economy and market to Taiwan, promised Taiwan friendly, friendly tourism and ever closer official ties to encourage rapprochement,
while the threat never disappeared for a moment.
Taiwan’s domestic politics have been extremely divided over relations for a decade, but the language of the balance sheet has slowly tipped over, and with the 2019 Hong Kong crisis and the pandemic, support for a formal declaration of independence in Taiwan reached an unprecedented level last year. while support for reunification is barely 13 percent. And not much can be expected in Beijing from generations who have grown up in recent years or decades, and the situation in this respect is similar to the Hong Kong problems of the comrades who led the empire. Today, Taiwan’s national identity has emerged, and the greater policy-making force has not been much in this world for the past two hundred years. In 1991, 17 percent of Taiwan’s population testified that they were Taiwanese because of their national affiliation and rejected Chinese identity, a proportion that rose to 60 percent in a 2017 survey, and 83 percent feel the same way in the latest survey. The possibility of a peaceful “solution” has been wiped out for at least decades.
The possibility of a military solution is closer than ever
The empire also reacted immediately to the now seemingly extreme change in the political situation, and in 2020, in the information noise provided by the epidemic, there was an astonishing increase in military pressure on Taiwan. Threatening exercises, with increasingly contingent, air-violations imitating an attack, pub-style, harsh threats, seek to grind the morale of both the population and the Taiwanese armed forces. Due to the Chinese Air Force’s harassing operations, the Taiwanese air defense system has been essentially in continuous combat readiness for months, and in the event of a violation of the “halfway line” of the Taiwan Strait, Taiwanese Air Force stand-by fighters take off. The game isn’t cheap either financially, Taiwan’s defense ministry said in 2020 alone, this fun generated $ 1.2 billion in additional spending in the defense budget.
According to the Taiwan General Staff, an invasion of China is merely a function of a bloody, simple assessment of the situation. They believe that, as the Chinese designers estimate, they have enough firepower, a power generation capability that more or less guarantees the implementation of an invasion with tolerable losses,
they will add it the next day.
According to the Taiwan General Staff, if this is to be judged in the context of previous operational concepts, this point will not come for at least another five years, but the development and mass regularization of strike robotic aircraft will, in their view, shed new light on the problem. Azerbaijan’s successful attack on Armenia last fall, prepared and coordinated by the Turkish armed forces, was reportedly given a lot of attention and caused serious concern in Taiwan. The widespread use of robotic aircraft there could make scenarios in which the Taiwanese armed forces could lose a significant portion of their ability to resist even before boarding the first Chinese Marine ship.
Taiwan’s political and military leadership is doing what it can and for the time being United States nor did he remain a debtor by declaring his commitment. President Joe Biden was invited to join the diplomatic representative of Taiwan, who has not been officially recognized as a state – this has never happened before. Among the first speeches of the new administration “rock solid”He called security cooperation between the U.S. and Taiwan. Hours after the simulated Chinese airstrike, which was followed by the capture of the invading force by Taiwanese fighter jets following the inauguration of Biden, the US State Department publicly instructed China to warn of the consequences of harassment of its “neighbors and allies” VII. one of the battle groups in the fleet, led by aircraft carrier Theodore Roosevelt. Subsequently, General Lloyd J. Austin, the office of the new U.S. Secretary of Defense, issued a statement that the new head of the Department of Defense had first called NATO Headquarters, then the British Secretary of Defense, by telephone, and immediately followed by a call to Japan, the South Korean and Australian counterparts.
U.S.-Chinese military tensions may have never been so obvious.
A special additive: the chips
While our world has become completely unthinkable and inoperable without networked computers and thus chips in terms of the geographical distribution of production capacities, a rather perverted concentration has emerged. The world’s chip manufacturing is focused on Taiwan and South Korea – and even among these two, Taiwan is the most important player, especially when it comes to contract manufacturing, i.e. the production of chips developed by others. In this segment, a giant company called Taiwan Semiconductor alone covers 55 percent of the world market. And its ability to produce the smallest, most advanced chips makes it essentially an indispensable player in this new “strategic raw material” for the world economy, even regardless of volume.
Natural market disruptions in chip supply can also cause significant waves, so let’s think about what would happen.
if the consequences of a military conflict in the chip market were to be reckoned with.
Clearly, a conflict over the threshold of war on those few hundred square kilometers would essentially be a vise brake on the world economy, even if it were not a direct U.S.-China armed conflict. But you don’t have to get this far, a global economic disaster may just be enough if Chinese planes penetrate even further into Taiwan’s airspace and a missile is launched sooner or later, or if, like robotic aircraft, Taiwan’s air defenses are destroyed. This would almost certainly lead to a drop in the price of chips, a senseless stockpiling of reserves, induction of countless punitive measures in all directions, China would stop US exports of rare earths, and the most strained priced products in the capital markets would be a clear panic.
And if the crisis escalated even “only” to a naval blockade – in which the US and Taiwanese political leadership would have to decide whether to use a weapon to break the blockade or tolerate it for as long as it can tolerate, threaten, bluff, punish it by other means. nerve-wracking days and weeks, it is almost certain that even without launching a single rocket, a single robotic aircraft, panic would be the lord of organized markets and the economy in general.
The conclusion is that there is no conclusion because it cannot be, this is a genre feature of emergency bird roaring. If there is a serious, realistic threat around us that we have been living with for a long time, then in vain it will become more and more dangerous from month to month, we will be unable to respond to it in time and merit. We are confident that we will only have as much trouble out of it as in previous decades, that is, almost nothing. It has little effect on anyone, the President of the United States, for example, has no way of deciding whether or not there should be such a crisis, if President Xi chooses to be, he will be. Under conditions of heightened military tension, faults and accidents can trigger unstoppable chain reactions.
It is only certain that if it strikes in any form, it will strike as much as it would strike from a clear sky, despite all its obviousness, all its signs.
To weight the exposures of a carefully managed portfolio, it is not possible to know more than it is not known whether it will happen in the foreseeable future. But many times knowing this is just enough to make good decisions.
This article reflects the views of the author and does not necessarily reflect the views of the Portfolio Editorial Board.
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The Portfolio Opinion section, On The Other Hand, has been launched. We wrote about the column here, and the published articles can be read here.
Cover image: I-Hwa Cheng / Bloomberg via Getty Images
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