When Taiwan’s President-elect Lai Ching-te takes the country’s reins in May, he will inherit the onerous task of planning for the defence of the island against China’s plans to invade it and unify Taiwan with it – but with an intensity and urgency that his predecessors did not face. President Xi Jinping has repeatedly asserted that unification is China’s “core interest” and it is increasingly seen as likely that he will make an attempt before 2027, the 100th anniversary of the People’s Liberation Army. China extensively used coercive diplomatic, military and economic tools to influence the election result.
While Lai needs to address economic stagnation, growing generational divide, income inequality, housing price rise, ageing of the population of his island of 23 million people, uppermost in his mind will be how to counter China’s invasion plans, diplomatic isolation efforts, and economic coercion.
China has become a strategic uncertainty for many countries. Lai especially needs to address China’s ferocious military drills around Taiwan, including live-fire exercises, naval deployments and air incursions.
China’s diplomatic isolation of Taiwan seems to be working, with the latter now recognised by only 12 countries. Nauru switched recognition from Taiwan to China on January 15. “Chequebook diplomacy” threatens to raze through Taiwan’s economic and cultural arrangements with 59 countries. One scenario Taipei faces is of China-imposed trade restrictions and boycotts on not only Taiwanese but also global companies to weaken Taiwan’s economy and break its ties with other countries.
China has extensively used “three warfares” (media, legal and psychological) and explored “non-peaceful” means of subjugating Taiwan over more than a decade now. China’s Party-State media and online platforms disseminate pro-China narratives, demonise Taiwan’s leadership, and influence public opinion in Taiwan and abroad. Beijing has also cultivated “pro-unification” constituencies in Taiwan by offering lucrative business deals, jobs and other incentives.
Maintaining economic growth will be an uphill task for Lai. Last year, Taiwan’s GDP was estimated at $790 billion, and it seems unable to maintain the estimated 4% growth rate due to significant decline in exports, particularly in the technology sector, exacerbated by supply chain disruptions, the Ukraine and West Asian conflicts. China’s invasion plans could destroy Taiwan’s economy, specifically in the hi-tech sectors. The global cost of a conflict in the Taiwan Straits is estimated by Bloomberg at over $10 trillion!
While Taiwan maintains a dominant position in the semiconductor foundry industry, producing over 90% of advanced chips globally and with TSMC alone enjoying a 53% share of the global foundry business, it needs to further diversify rapidly into start-ups, AI and 5G telecom sectors. Lai also has to address the emerging geopolitical risks and the need to retain and expand talent, diversify and expand domestic and external markets.
Most crucially, Lai will have to beef up the military to counter China’s invasion plans. Taiwan did increase its defence budget sharply to $24 billion last year to modernise equipment, enhance training and extend compulsory military service from four to eight months, prepare for asymmetric warfare, enhance mobile air defence systems, anti-ship missiles and cyberwarfare capabilities. Yet, the China challenge is formidable.
China’s $17 trillion GDP, third-largest military with an estimated $300 billion in defence allocations apart, it has more than a million foreign companies, with those from Japan, South Korea, Singapore, the US, and Germany constituting 60% of them, the economic interdependencies due to which enhance China’s power. These include over 77,000 US companies, 87,000 Japanese and 80,000 Taiwanese companies that ironically propel China’s rise, including its military through dual-use technologies.
With such a behemoth ranged against him, it’ll be a herculean task for Lai to cobble up diplomatic partnerships, intensify military reforms, diversify exports, and secure its semiconductor industry. Apart from traditional partners like the US, it has to look for new economic, technological and security partners.
Apart from Japan and Australia, Lai could approach India, which is also tied down with China in Ladakh for the past three years. India and Taiwan have missed several chances before to explore mutually beneficial ties. Both are constrained by Beijing’s intense coercive diplomatic and military postures. Taiwan has its ‘New Southbound Policy’ and India has its ‘Act East Policy’ but the twain has never met. It’s time it did. Lai should take note that India gave one of its highest civilian awards to Foxconn chief Liu Young last week.