Why China Won’t Back Off Taiwan

Welcome to Foreign Policy’s China Brief.

The highlights this week: Chinese President Xi Jinping and Taiwanese President Tsai Ing-wen each deliver a speech after Beijing’s recent incursions, India’s media reports more tensions on its disputed border with China, and Beijing subtly adjusts its COVID-19 containment policy.

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Both Taiwanese President Tsai Ing-wen and Chinese President Xi Jinping gave speeches over the weekend, following a series of intrusions into Taiwan’s air defense identification zone (ADIZ) by a record number of Chinese warplanes. While Xi talked of “peaceful reunification,” Tsai stressed Taiwan’s international support and determination not to give in to Chinese threats.

The statements officially marked Oct. 10, which commemorates the founding of the nationalist Republic of China—not to be confused with the communist People’s Republic of China—in an uprising in 1911.

After the communists gained control of mainland China in 1949, the Republic of China’s leadership fled to Taiwan. Technically, Taiwan remains the Republic of China, although the term is increasingly unpopular among young Taiwanese. Abandoning the name would prompt action from Beijing, which views any disavowal of Taiwan’s Chinese heritage as a move toward independence.

Taiwan has a long history of both independence and colonization. Many Taiwanese see themselves as inheritors of multiple traditions and describe the Kuomintang’s nationalist forces as invaders who created a right-wing dictatorship that was eventually overthrown by popular action. But even symbolic moves, such as removing the English phrase “Republic of China” from Taiwanese passports, attract vitriol from China. The Kuomintang party, the modern descendant of the Nationalists, is also now the more conservative and pro-China party.

Xi’s speech avoided military rhetoric and spoke of “peaceful reunification”—language long used by Beijing—while maintaining ultimate authority. But the term rings false to Taiwanese, especially given that China has broken its promises to Hong Kongers. Taiwanese support for annexation by China is at record lows of around 13 percent, and an increasing number of residents, especially young people, are calling for a formal declaration of independence.

But even as Xi spoke of the legacy of Sun Yat-sen, the founder of the Republic of China, Sun’s house in Hong Kong was barricaded and patrolled by police. Hong Kongers were threatened with arrest under the Beijing-imposed national security law if they celebrated Oct. 10. Despite Xi’s avoidance of militant language, Chinese newspapers ran detailed descriptions of how Taiwan would supposedly be crushed in the event of war.

Meanwhile, Tsai’s speech emphasized increasing political oppression in both China and Hong Kong, “shifting away from the path of reform and development.” She also highlighted Taiwan’s willingness to defend itself but also to engage in talks as equals. The perceived insolence prompted a harsh reaction from Beijing, where the idea that Taiwan is anything other than a subordinate is politically taboo. Polling shows that Taiwanese are worried but not panicked about Beijing’s growing military threat.

Until speech in China becomes freer, concessions to Taiwan remain risky for anyone to endorse, and that is ultimately one of the biggest barriers to any attempt to defuse tensions. On the other hand, Chinese officials rarely have anything to lose by spouting jingoism. For example, Victor Gao, former Chinese leader Deng Xiaoping’s interpreter, called for ethnic cleansing of any Taiwanese with Japanese heritage if China retakes the island in an interview last week. Gao was once treated as a reputable interlocutor in U.S.-China relations.

The Chinese government appears to be engaging in a state-backed campaign to promote the slogan, “keep the island, rid of its people,” as analyst Kevin Slaten documented earlier last year. As the Chinese Communist Party leans more heavily on ethno-nationalist sentiments, the frequency of that rhetoric toward Taiwan rises, with Taiwanese people categorized as a dangerous other. As that push grows, Beijing’s risk tolerance for a potentially catastrophic invasion of Taiwan may be growing too.

More trouble on the frontier. Indian media reports dozens of Chinese soldiers were detained after intruding into territory claimed by India along the disputed mountain border between the countries. China has denied the claims but said “routine patrols” were obstructed. The dispute comes after talks intended to defuse tensions broke down. (A fight between Indian and Chinese forces in another disputed area in June 2020 killed at least 20 soldiers.)

China has also reasserted its long-standing claim to most of the Indian state of Arunachal Pradesh. In the Himalayas, it’s difficult to discern which side of the border one is on. The more Beijing and New Delhi emphasize their claims, the more regular patrols they send out, and the more likely they are to blunder into situations the other side deems trespassing.

But the upcoming winter is likely to somewhat cool tensions along the border—literally. No one wants to patrol too far in freezing weather.

COVID-19 testing for all. In the last year, China’s COVID-19 strategy has subtly shifted from an emphasis on individual contact tracing to increasingly intrusive mass testing. Although it is an impressive logistical feat, it also causes disruptions to everyday life and mobility. One friend in a first-tier city reported being tested six times in 10 days; another friend in Beijing reported being tested every day for two weeks.

Mass testing has produced false positives that cause extra delays—not because the tests are particularly unreliable but because of the sample’s size. A bigger issue Chinese media has tentatively discussed is that the current risk of exposing the population to COVID-19 likely still outweighs the harsh policy’s costs. But when will that change? My guess is Beijing won’t ease its policy until it has a more effective mRNA vaccine of its own, coupled with another round or two of mass vaccinations.

Ecological promises and energy perils. At the 15th Conference of the Parties meeting on biological diversity, held this month in Kunming, China, Xi pledged major new alternative energy projects and a substantial biodiversity fund. One of the few areas where China has shown willingness to explicitly imitate the U.S. model in recent years is the establishment of its first national parks, although—as in the United States—there are tensions between the rights of Indigenous residents and limits imposed on development.

The ongoing power crisis is also speeding up the construction of domestic coal plants, which isn’t due to peak until 2025. Flooding has increased the demand for imported coal, which jumped 76 percent in September; October numbers are likely to be even higher. One side effect of the crisis is to make China’s economic threats somewhat less credible. The government has quietly lifted bans on Australian coal, originally imposed as part of the ongoing quarrel with Canberra.

Caixin has an excellent story on the crisis.

Banking purges on the horizon. Another week, another industry in the crosshairs of politically empowered Chinese regulators. This time, banks are under fire as the powerful Central Commission for Discipline Inspection grills 25 major state-run financial institutions.

There are three factors involved in the latest moves. The first is ideological control. Xi seems genuinely distrustful of the free market, especially of any group that might be strong enough to push back against Chinese Communist Party (CCP) policies. The second is genuine corruption. State-run finance has offered rich pickings for the well connected, but these campaigns still tend to involve turning profits over to the politically victorious.

The third is the political value of the crackdown. Xi abolished presidential term limits in 2018, but some in the CCP remain unsatisfied with the decision. As the date in 2023 when Xi would historically be expected to hand over leadership approaches, the president is likely to purge more political contenders—and perhaps even some of his allies, such as Wang Qishan, a political hitman linked to the finance sector.

A $5 trillion problem. China’s real estate sector has accumulated more than $5 trillion in debt—more than half of that in the last five years. That makes Evergrande Group’s roughly $300 billion worth of obligations look more like a harbinger of what’s to come than a cause. The dilemma for regulators is whether they ease up on restrictions while they look for other solutions or if there is the political will and economic resilience to allow the failures to happen.

Crypto flees China. Cryptocurrency mining in China has effectively hit zero after escalating crackdowns, down from 75 percent of the global market in 2019. Mining operations, a guessing game that wastes energy spitting out random numbers, were shut down in June. Cryptocurrency trading was declared illegal last month, and crypto trading companies have pulled their yuan trading or faced online censorship.

Meanwhile, crypto enthusiasts are discovering a new enthusiasm for democracy as they lobby against limitations and taxation in Washington.

Nongfu Spring: 23 billion yuan revenue (2020)

China’s wealthiest private entrepreneur isn’t a technology guru or a real estate magnate. Zhong Shanshan sells bottled water, originally from a reservoir in Hangzhou. The firm, founded in 1996, is the most successful part of China’s massive market for drinks, and its mountain logo is ubiquitous at events and in corner stores.

Tap water is largely undrinkable unless boiled in China. Although there have been questions about just how clean Nongfu Spring’s water is, the company has done a brilliant job of creating a natural and pure image—an accomplishment in a country where consumers are aware of how tainted the food chain can be.