China Watch: Taiwan Shifting The Status Quo

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Following Speaker Pelosi’s visit to Taiwan, China is accelerating efforts to change the military, economic, and political status quo in the Taiwan Strait, increasing the risk of miscalculation.  The People’s Liberation Army (PLA) on 7 August announced that from now on it will conduct regular military exercises east of the median line, an unofficial line of control that both sides largely respected until 2020. 

• The PLA started to breach the median line with more frequency in 2020 in response to warming US-Taiwan ties, highlighted by the precedent breaking visit of then US Secretary of Health and Human Services Alex Azar.  With the 7 August 2022 announcement, the median line is now essentially meaningless.  The line was intended to lower tensions and prevent miscalculations.  

• The Taiwanese military will be under greater pressure to respond to incursions, with PLA aircraft and ships operating closer to Taiwan on a regular basis.  This increases the odds of an unintended skirmish sparking a war.  Taiwan’s leaders have long worried that if the Taiwanese military “shoots first,” the US will abandon its commitments to Taiwan.   
• China in June declared the Taiwan Strait to be its territorial waters instead of international waters.  It is probably laying the ground for a future blockade of Taiwan if tensions escalate again.  The recent military exercises encircled Taiwan, and lessons learned from them will likely inform a future blockade.  

Cross-Strait trade and investment in the past have been largely shielded from politics, but Beijing is shifting the status quo by targeting Taiwanese businesspeople who hold pro-independence views.  If this trend continues, Beijing will have even fewer avenues to engage Taiwanese elites and earn their support.   

• On 3 August, a spokesperson for the Chinese Communist Party’s Taiwan Affairs Office announced that China will criminalize speech and activities in support of Taiwan independence.  The next day, the government announced sanctions on two Taiwan-based pro-democracy foundations that are affiliated with senior Democratic Progressive Party (DPP) politicians and penalized several Taiwanese businesses that had donated to the foundations. 

• China since 2021 has emphasized that Taiwanese businesses cannot make money in China and subvert the One-China policy.  With Pelosi’s visit, Beijing is likely to enforce this policy more strictly and cause disruptions in cross-Strait investment and trade.  
• It is not yet clear how far Beijing will go in criminalizing support for Taiwan independence.  If it is applied similarly to the National Security Law in Hong Kong, it will have a chilling effect on businesspeople, visitors, academics, or journalists who express support for Taiwan independence. 

These tough measures and large-scale military exercises are in part intended to intimidate Taiwanese voters against supporting the pro-independence DPP in upcoming elections; past precedent, however, suggests that it is likely to backfire.  Taiwan will hold local government elections in November 2022 and presidential and legislative elections in January 2024.  

• In the 2020 presidential election, the DPP managed to retain the presidency and legislative majority after significant defeats in local elections in 2018.  This reversal has been attributed in part to the protests and resulting crackdown in Hong Kong. 

• Shortly before the 2000 presidential election, then Chinese Premier Zhu Rongji warned the people of Taiwan not to make a choice they will regret.  He was referring to pro-independence candidate Chen Shui-bian, who won the election by a narrow margin.   
• China fired missiles into the waters around Taiwan before the 1996 election to try to derail the reelection of independence leaning President Lee Teng-hui.  Lee easily won his reelection. 
• Popular perception toward China has deteriorated in the past three years.  As of March 2022, 74.6% of Taiwanese said China was unfriendly toward their government, up from 60.9% in March 2019, according to a reliable poll.  Support for the pro-China Nationalist Party has declined from 24% in 2019 to 14% in June 2022, according to another well-respected poll.   

One area where China remains committed to the status quo is stable trade relations with the US.  Beijing, however, will press Washington to stop or reduce future arms sales to Taiwan and halt warming Washington-Taipei ties as evidence that Washington is fulfilling its pledge not to support Taiwan independence. 

• Beijing has cancelled bilateral talks and cooperation on defense, transnational crimes, counternarcotics, climate change, and immigration.  However, Beijing did not cancel trade talks, indicating that it still wants to make progress on the most important bilateral issue.   

• Beijing has not recalled its ambassador, as it did after Lee Teng-hui visited the US in 1995.   
• Beijing is likely to escalate tensions again if the next arms sales package to Taiwan, estimated to be worth USD 108 million, goes through, which is expected soon.  Beijing will also strongly object to a proposed US-Taiwan trade deal and closer coordination between the US and Taiwanese militaries.