Tensions Across the Taiwan Strait Part I: A Historical Overview to Contextualize the Cross-Strait Conflict

Escalating tensions in the Taiwan Strait have amplified concerns of a conflict between China, and Taiwan, raising questions about the implications of such a scenario for the global economy. While it is impossible to precisely predict how a conflict might unfold – which complicates assessments of the associated economic, and commercial consequences – the scale of economic activity at risk of disruption from a war between China, and Taiwan is immense. This is largely because a full-blown cross-strait conflict or military blockade has the potential to sever Taiwan’s trade with the rest of the world, which would disrupt the complex, specialized, and highly integrated semiconductor supply chains that major chip-consuming sectors such as consumer electronics, automotives, and computing depend on.  

Semiconductors enable nearly every modern industrial, commercial, and military system on earth, and are thus crucial to the economic and national security of the United States, Taiwan, and China. Hence, it is of utmost importance to understand the origins of the geopolitical conflict between Taiwan and China as well as how such tensions might impact these countries’ respective economies. The following article – the first of a two-part series that seeks to address these topics – will adopt a historical perspective to contextualize the contemporary conflict in the Taiwan Strait. Crucially, “Taiwan” will be used throughout the article for the purposes of clarity, although the country is officially known as the Republic of China (ROC). 

Strife Over Taiwan’s Status: The Origins of the Conflict

         After centuries of relative autonomy, Taiwan was ceded to Japan in 1895 with the signing of the Treaty of Shimonoseki (1895), which ended the Sino-Japanese War (1894-1895). With the fall of China’s Qing Dynasty in 1911, political and social turmoil erupted in China as the end of nearly 300 years of dynastic rule (1683-1911) left the country in a politically fragmented, semi-colonial state. Two political-military groups with opposing ideologies emerged in this era, each intent on shaping the future trajectory of modern China. 

 The Kuomintang (KMT), also known as the National People’s Party, arose in the immediate aftermath of the Qing Dynasty’s collapse, and envisioned China as a constitutional republic with Western models of government. In 1917, however, numerous antagonist factions emerged, and their warlord leaders soon assumed control of China. Against this deeply divisive backdrop, revolutionaries such as Bi Dazhao and Chen Duxiu established the Chinese Communist Party (CCP) in 1921, and sought to initiate a Chinese-style communist revolution before forming a socialist government aligned with the principles of Marxism-Leninism, and later Maoism. 

In 1924, the CCP and the KMT formed a political coalition to defeat the warlords and unify China. While they were able to launch a series of military assaults to suppress the warlords, ultimately unifying China in 1928, the coalition disintegrated due to conflicting ideologies, and a guerilla war subsequently erupted between the KMT and the CPP. Although the two parties were able to unify their forces to thwart a Japanese invasion in 1936, military skirmishes persisted, culminating in a bloody civil war in mainland China that continued throughout World War II. 

Then, on December 1, 1943, the heads of state from China, the United States, and Great Britain jointly signed the “Cairo Declaration,” which stipulated that “all the territories Japan had seized from China [during World War II], such as Manchuria, Taiwan and the Penghu Islands, shall be restored to China.” The United States attempted to broker a truce between the KMT and the CPP in 1945 after Japan had surrendered, although the United States abandoned its mediation efforts on January 29, 1947, due to persisting CPP-KMT disagreements and cease-fire violations. After defeating KMT forces in the civil war, Mao Zedong, the chairman of the CPP, established the People’s Republic of China (PRC) on October 1, 1949, forcing Chiang Kai-Shek, generalissimo of the KMT, to withdraw to Taiwan with approximately 2 million KMT troops and supporters. He and his army proclaimed Taipei, a city located in Northern Taiwan, the temporary capital of the ROC, before establishing an authoritarian regime that persisted until the 1990s, when Taiwan truly transitioned to democracy

After 1949 and throughout the Cold War era, Taiwan was governed independently of mainland China, and received substantial international recognition as the ROC largely because of the United States’ desire to contain the expansion of communism in the Asia-Pacific after the outbreak of the Korean War in 1950. In 1954, the United States signed the Sino-American Mutual Defense Treaty, which stipulated that the United States would intervene militarily to protect Taiwan in the event of a Chinese attack. In 1971, however, the PRC was able to amass enough votes in the United Nations (UN) General Assembly to replace the ROC with the PRC as Taiwan’s representative in the UN. The following year, President Nixon traveled to China to re-establish contact with the PRC and signed the Shanghai Communiqué – a document that formed the first formal written statement in which the United States’ expressed its views on Taiwan’s sovereignty. Importantly, the United States acknowledged that there was just one China – of which Taiwan was considered a part – but also affirmed its desire for China to peacefully settle the dispute over Taiwan’s status on its own.

In 1978, China adopted extensive economic reforms and embraced elements of a market economy, prompting the United States to formally establish diplomatic relations with the PRC during PRC President Deng Xiaoping’s visit with President Carter in Washington in 1979. During this visit, the United States also severed diplomatic ties with the ROC and abrogated its mutual defense treaty. Despite this, the Taiwan Relations Act (TRA) was passed by the United States Congress that same year, outlining an unofficial relationship with Taiwan while also reaffirming the United States’ commitment to uphold Taiwan’s security. 

Since then, the United States has maintained a robust unofficial relationship with Taiwan and continues to sell defense equipment to its military, even though Beijing has repeatedly urged Washington to stop selling weapons to Taiwan. The United States approach of strategic ambiguity is governed by its One-China Policy – a strategy based on the communiqués – as well as the recently declassified “Six Assurances” that President Reagan expressed to Taiwan in 1982 – that is designed to maintain peace and stability in the Taiwan Strait. Specifically, the United States “acknowledges that there is but one China,” that “Taiwan is part of China,” and that “the PRC is the sole legal government of China,” although it also maintains cultural and commercial ties with Taiwan. It also maintains the ability to come to Taiwan’s defense, while “not actually committing to do so.” For decades, the United States has attempted to maintain a delicate balance between supporting Taiwan and preventing war with China through this policy. 

Nevertheless, the PRC asserts that there is only “one China,” and thus views Taiwan as a renegade province that it vows to eventually unify with the mainland – an approach aligned with its One-China principle. To support this claim, the PRC insists that Taiwan is bound by the 1992 Consensus, an agreement between representatives of the CCP and the KMT, although the two sides disagree on the content of this consensus as it was never intended to address the question of Taiwan’s legal status. Moreover, the KMT’s primary rival party, the Democratic Progressive Party (DPP), has never endorsed the provisions contained in the 1992 Consensus, and the KMT itself vehemently denies being pro-Beijing, although it has traditionally favored closer ties with China. 

Contemporary Conflict Across the Taiwan Strait

President Tsai Ing-wen, a member of the DPP, was elected as President of the ROC in 2016, and she has refused to explicitly accept the provisions contained in the 1992 Consensus. Instead, she pledged to “conduct cross-strait affairs in accordance with the constitution of the Republic of China, the act governing relations between the people of [the] Taiwan area and the mainland area” during her 2016 inaugural address, and has stated that only the island’s 23 million people can decide their future through democracy. Beijing rejected this formulation, and subsequently severed official contacts with Taiwan, prompting then-President Donald Trump to tighten ties with Taiwan.

Despite opposition from Beijing, President Biden has continued to assist Taiwan by sending weapons, special military training units, and delegations of former officials in a show of support for President Tsai Ing-wen. In fact, during his first visit to Asia as commander- in-chief in May 2022, President Biden explicitly stated that the United States would intervene militarily in the event of a Chinese attack on Taiwan, defying Washington’s long-time policy of strategic ambiguity.  

In early August 2022, tensions in the Taiwan Strait escalated significantly after United States House of Representatives Speaker Nancy Pelosi visited lawmakers and President Tsai Ing-wen, defying Beijing’s stern warnings of “unspecified countermeasures.” While frictions between China and the United States had escalated in the months preceding Pelosi’s visit amid China’s tacit support for Russia’s invasion of Ukraine, Pelosi’s visit presented an affront to China as she stated that “America’s determination to preserve democracy here in Taiwan and around the world remains ironclad.” Angered at what it perceived as United States support for Taiwan’s de facto independence, Beijing launched large-scale military exercises – what have since been termed “war games” – immediately after Pelosi’s visit. China’s President Xi Jinping – who recently secured an unprecedented third term as the head of China – also stated during a speech in October 2022 that China “will never renounce the use of force” to annex Taiwan but instead “reserves the option to take all measures necessary.” 

China has also made concerted efforts during the last twenty years to modernize its military and improve its capabilities, not only to assert force against Taiwan, but also to deter intervention from the United States. As a result, lawmakers from the United States have proposed the Taiwan Policy Act (2022), which was passed by the  Senate Committee on September 14, and it is intended to promote the security of Taiwan by bolstering the island’s defense capabilities and encouraging Taiwan’s participation in international organizations. At the same time, President Tsai Ing-wen has adopted a strategy of domestic weapons development in Taiwan, allocating USD 1.6 billion over a period of three years to organize private drone producers into a “national team” to build unmanned aerial vehicle systems that can be deployed in several specific cross-strait conflict scenarios. The Taiwanese government also approved USD 8.69 billion in emergency defense spending in 2022, and purchased USD 14 billion of military hardware, although much of it has yet to be delivered due to the War in Ukraine. 

Nevertheless, China’s armed forces and military capabilities are far superior to those in Taiwan, leading some experts – such as Orina Skylar Mastro, a fellow at the Freeman Spogli Institute for International Studies – to assert that “there is a 100% chance China will use some sort of force against Taiwan in the next five years.” Others are more cautious, suggesting an outright military invasion would entail significant economic consequences for China and would constitute a daunting strategic task, which might deter China from engaging in an arrant military campaign. Regardless, if China does decide to fight a war over Taiwan, it is plausible to assume that the United States and some of its regional allies would quickly commit combat forces to the island’s defense – a scenario that would likely come at a debilitating cost for all parties involved.