President-elect William Lai Ching-te holds a campaign rally in Taipei. (Source: MAN HEI LEUNG/ANADOLU/GETTY)
Executive Summary:
President Xi Jinping is unlikely to abandon his goals for Taiwan, focusing on peaceful reunification and anti-independence, while continuing to exert economic and diplomatic pressures. This is despite potential economic downturns in the PRC. The risks of disruption and to economic stability make a war over Taiwan improbable. The CCP faces internal challenges such as rising youth unemployment and a declining population. These may impact Xi Jinping’s ambitions for global dominance.Taiwan should still continue to focus on strengthening its defenses and public morale against cognitive warfare.
A long-held question is whether a recession in the People’s Republic of China (PRC) would cause PRC President Xi Jinping to abandon his aims to control Taiwan.
My view is that it is impossible for the Chinese Communist Party (CCP) to give up its aims for control over Taiwan. Xi Jinping will continue to exert economic and diplomatic pressure on the island. There are two main reasons for this. First, the CCP’s policy towards Taiwan, as established by Deng Xiaoping, is for peaceful reunification and “one country, two systems.” Under this framework, the CCP has two major goals: anti-independence and pro-unification. A premise of its policy towards Taiwan is to not abandon the possibility of forceful reunification. Second, after Xi Jinping came to power, he changed the CCP’s long-standing attitude towards Taiwan. Instead of focusing on how to prevent and solve the problem of Taiwan’s independence—as was the original emphasis during the Jiang and Hu era—Xi has put “promoting reunification” at the center of his policy. In order to accomplish this aim of reunification, Xi must continue to exert pressure on Taiwan in the economic and diplomatic spheres.
I think it is unlikely for the CCP to use force against Taiwan, however, again for two reasons. First, a CCP-initiated war against Taiwan would affect the CCP’s own economic situation, and would also impact the global economy. Second, a war would force the world’s major economies to intervene in order to maintain peace in the Taiwan Strait. British Foreign Secretary James Cleverly visited Beijing last August, the first such visit in five years. Following his trip, he commented on the possibility of war across the Taiwan Strait, saying, “This is not an entirely domestic matter, huge international trade volumes go through that body of water … Key components of modern life go through that stretch of water.” A war, he continued, would be “a catastrophically bad thing for the global economy, and it would be catastrophically bad for the Chinese economy …[which] as we are now seeing, is not all-powerful” (The Spectator, October 2, 2023).
According to Bloomberg Economics research, a war in Taiwan would cost about $10 trillion (Bloomberg, January 8). This is equivalent to roughly 10 percent of global GDP—far greater than the impact of the Russia-Ukraine war, the Covid-19 pandemic, or the global financial crisis. In the event of war, Bloomberg economists estimate that about 40 percent of Taiwan’s GDP will be affected; the PRC’s GDP will be impacted by 16.7 percent due to the disruption of relations with its major trading partners and its inability to acquire advanced semiconductors; the United States—despite being far away from the battlefield—will see a drop of 6.7 percent in its GDP; and global GDP will decline 10.2 percent, with the largest impacts felt by the East Asian economies of South Korea and Japan. Bloomberg also modeled the impact on the global economy of a one-year blockade of Taiwan by the PRC. In the first year, Taiwan’s GDP would drop by 12.2 percent, the PRC’s would shrink by 8.9 percent, the United States’s would decline by 3.3 percent, and the world’s would decrease by 5 percent.
The prospects for the overall development of the CCP’s national power is worrying. A declining population and rising youth unemployment will reduce Xi Jinping’s self-confidence about becoming a global hegemon. First, there is the rising youth unemployment rate. In the first half of 2023, before the National Bureau of Statistics (NBS) stopped publishing the data, the PRC’s youth unemployment rate for 16–24 year olds climbed monthly, to 17.3 percent, 18.1 percent, 19.6 percent, 20.4 percent, 20.8 percent, and 21.3 percent, respectively (NBS, accessed February 14). By comparison, the June 2023 youth unemployment rate in the United States was 7.5 percent (EPI, May 3, 2023) and the figure for the European Union stood at 14.1 percent (OECD, accessed February 14). The White Paper Protests at the end of 2022 have been followed by the ongoing phenomenon of Chinese youth choosing or aspiring to “run (潤; run)” from the PRC. Young people leaving the country or being unable to enter the job market will have a critical impact on its economic outlook.
The number of births in the PRC has been declining in recent years. According to NBS data released on January 17, 2024, the number of births in the PRC in 2022 was 9.56 million, and the number of deaths was 10.41 million, a decrease of 850,000 from the end of the previous year. This is the first time the population has declined since the country suffered a famine in the early 1960s following Mao Zedong’s campaign known as the “Great Leap Forward.” The figures for 2023 continued to fall, with 9.02 million new births and 11.1 million deaths. The number of births is indicative of the future labor force. If Xi Jinping continues his wild ambitions for global domination, the PRC’s internal affairs will likely be his biggest problem.
The above is an analysis of the CCP’s situation. However, Taiwan must continue to strengthen its defenses and its asymmetric deterrence capabilities. Especially in terms of public morale, it is necessary to improve awareness about cognitive warfare and develop strategies to counter it. In democratic Taiwan, in which officials often have to face elections, the key to consolidating democracy is in deciphering the means by which CCP agents attack by influencing Taiwan’s democracy through participating in elections. These are the challenges for Lai Ching-te (賴清德), who has just been elected president. They are also his promises.
