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  • Writer's pictureWei Azim Hung

China's 20th Party Congress: What's New for Taiwan

Updated: Oct 13, 2023

Executive Summary

This brief focuses on whether China is posturing itself for a Taiwan invasion by exploring internal and external pieces of evidence available. More specifically, it seeks to analyze ways China is bolstering its capacity for economic leverage, counter-responses, and whether China's political and military leadership is prepared for such an ambitious project. A military escalation over the Taiwan Strait could very likely induce a forced financial decoupling from the West, setting China’s financial system backwards. As such, short-of-war measures are the quintessential military option at-present for Xi's Taiwan strategy. Overall, an alternative to a 'hot war' in East Asia is provided, suggesting that while China's intention over Taiwan is clear, it does not currently have the credible military and financial options to engage in such a herculean task.

Introduction

Amendments made to the constitution of the 20th Party Congress of the Chinese Communist Party (CCP) have raised suspicion over whether Xi Jinping, who has secured an unprecedented third term as the Party General Secretary, has a concrete Taiwan agenda that he seeks to develop and execute throughout his tenure. Multiple indicators of Beijing taking an increasingly hardline approach against Taipei after the conclusion of the recent party congress include but are not limited to the forced retirement of the members of the Communist Youth League (Li Keqiang (李克強), Li Zhanshu (栗戰書), Wang Yang (汪洋), and Hu Chunhua (胡春華)), the promotion of loyalist, allies, and protégés in positions of command, such as General Li Shangfu (李尚福) and General He Weidong (何衛東) to the Central Military Commission (CMC), and Li Qiang (李強), Zhao Leji (趙樂際) Cai Qi (蔡奇), etcetera, to the Politburo Standing Committee (PSC).


Most conspicuously, the CCP's new amendment vows to contain, oppose, and deter separatists seeking Taiwan's independence. While the language is reminiscent of the Anti-Secession Law enacted by the 10th National People's Congress in 2015. Nonetheless, Xi's tone appears more assertive when contrasted with the language adopted in the 19th National Congress in 2017. Unsurprisingly, his gestures have alarmed foreign policy circles, especially in Washington. For instance, U.S. Secretary of State Anthony Blinken publicly said that China wants to ‘speed up’ its seizure of Taiwan. Furthermore, the U.S. Navy Chief of Operations Admiral Michael Gilday has pushed for a ‘fight tonight’ mentality in response to the prospect of a PLA invasion of Taiwan as soon as 2024. Similarly, inter-governmental organizations such as the Group of Seven, the European Union, and states such as Canada, Germany, Japan, and the U.S. have resolutely opposed any unilateral changes to the status quo of the Taiwan Strait.


Understandably, the intensity of a full-scale cross-strait conflict will be unthinkable for governments that depend on Taiwan's super-advanced semiconductor technology. Not to mention, over 50% of the global maritime trade relies on critical waterways throughout the Taiwan Strait. Therefore, it is of utmost priority for stakeholders to diversify Taiwan's technology and de-escalate cross-strait tensions to avoid a military conflict. Accounting public and security concerns over the potential outbreak of a hot war in East Asia — particularly over Taiwan, this brief focuses on whether China is posturing itself for a Taiwan invasion by exploring internal and external pieces of evidence available. More specifically, it seeks to analyze ways China is bolstering its capacity for economic leverage, counter-responses, and whether China's political and military leadership is prepared for such an ambitious project. Overall, an alternative to a 'hot war' in East Asia is provided, suggesting that while China's intention over Taiwan is clear, it does not currently have the credible military and financial options to engage in such a herculean task.

Fortification of China’s Financial System

Since the 1990s, the Chinese leadership is persuaded that China must fortify its financial systems for enhanced risk management. Financial fortification means reducing China's economic vulnerability vis-à-vis potential U.S. or Western financial containment. Concrete examples include stabilizing and internationalizing the RMB or the Renminbi. That is to suggest building an RMB-based commodity coalition and trading system, bolstering the RMB's pricing power. Moreover, the CCP has made the notion of independence and self-reliance part of its 2021 historic resolution. The government is in preparation for developing a 'national unified market' capable of sustaining economic blows from the West.


The call for geoeconomic risk mitigation has resurfaced due to a myriad of factors, including Russia's forced financial decoupling, U.S' forced tech decoupling, and the development of regional economic and security frameworks precluding China. For instance, China sees the Indo-Pacific Economic Framework for Prosperity and the Quadrilateral Security Dialogue and AUKUS as an anti-China coalition that aims to contain Chinese interests in the East Asian region and beyond. Correspondingly, this has prompted domestic calls within China for self-reliance measures in pre-empting a forced financial decoupling from the West, likening to what Russia underwent since the beginning of its invasion of Ukraine. Notably, Fang Xinghai, the vice chairman of the China Securities Regulatory Commission, is one such proponent advocating the acceleration of the RMB's internationalization in response to possible financial decoupling.


Progress in China's attempt to internationalize its currency includes the RMB superseding the Japanese Yen in Swift's international payments ranking (4th place). Moreover, post-Russian annexation of Crimea, China has been engineering its financial payment system rivaling Swift, namely the RMB-dominated Cross-Border Interbank Payment System (CIPS). China's internal payment system has about 1200 member institutions across 100 countries. However, it pales against Swift, consisting of over 11,000 members.


The Shanghai International Energy Exchange is already accepting RMB in the oil trade. Moreover, traders may convert RMB in that exchange (from the oil revenue) to gold in the Shanghai gold exchange, effectively dodging the U.S dollar orbit. Oil suppliers to the Chinese market include Russia, Iran, Angola, etcetera, totaling 23 countries and regions, all accepting RMB when trading with China. The total trade volume of RMB-valued oil futures has reached $6.7 trillion in 2021.


The stabilization and internationalization of the RMB are essential for China as they help demystify the currency's speculative tag, elevate its increase in foreign trade and strengthen its store of value in international finance. Most importantly, the government must shield the RMB from any geopolitical turbulence that could send its financial markets tumbling. These efforts are geared towards China's attempt to break the U.S. dominance in global payments and finance, which have been instrumentalized in punishing state behaviors considered 'deviant' by the U.S. government.


In recent years, Beijing has also been structuring its geo-economic leverage and counter-response capacity in the Middle East, South Asia, and Africa through the Belt and Road Initiative. For instance, China's acquisition or high stakes in foreign ports in Greece (Piraeus Container Terminal), Pakistan (Gwadar port), Belgium (CSP Zeebrugge Terminal), Spain (Noatum Container Terminal), and Djibouti (port of Doralehas), all serving as strategic conduits to global supply chain planning and could be activated during an economic war. As of 2019, China has invested in over 101 port projects. The three Chinese port operators are COSCO Shipping Ports, China Merchants Port Holdings, and Qingdao Port International Development.

China and Taiwan: Hot or Short of War?

It is suggested that in the political sphere, the conditions for a 'hot' war are absent. Undoubtedly, there are good evidence that Taiwan is on Xi's agenda. For instance, while there is no concrete Taiwan policy development post-20th Party Congress, a noticeable difference noted by China analysts includes Beijing's shift from being anti-separatists (反獨) to actively promoting unification (促統). Furthermore, during Xi's work report to the 20th Party Congress, he explicitly said that the 'complete reunification of the motherland must be realized, and it will be realized. This is the first time such language has appeared in the party's work report. Xi received the longest round of applause for his Taiwan remarks. Nonetheless, the structural evidence and conditions for a hot war remains insufficient.


Hawkish analysts have countered by asserting that Xi's stringent and assertive language during the 20th party congress is indicative of a new phase of cross-strait relations — a questionable assessment. Despite the preliminary success the RMB have garnered in its stabilization and internationalization, it has not yet achieved parity to the U.S. dollar. China's financial system is still relatively nascent compared to the West (e.g. CIPS and Swift). Thus, it would be self-defeating for China to pursue any escalation over the Taiwan Strait tantamount to a ‘hot’ military conflict. Such a move would undoubtedly put China’s financial system under pressure from Western sanctions, slowing its ability for financial fortification. Furthermore, besides economic considerations, Xi Jinping must also confront domestic political obstacles.


There are at least three political variables Xi would have to consider. The factor of ‘time’ being one obvious constraint. Less obvious variables include the coordination between the Politburo Standing Committee (PSC) and the Central Military Commission (CMC), and the fighting capacity of the PLA, that is, their ability to execute credible military options, whether it is a full-scale invasion or attempts at destroying Taiwanese military facilities, etcetera, without the Chinese leadership having to incur significant domestic and international backlash. Luckily for Xi, the variable of time has been lifted from the equation as he secures a norm-breaking third term. Therefore, Xi’s priority now would be restructuring PSC-CMC coordination and the military modernization of the PLA.


The selection of CMC leadership has historically been veiled in secrecy. However, it is precisely this opacity that offers an opportunity to examine Xi's priorities in China's security and military policies in the next five years. The new lineup of CMC leaders includes Zhang Youxia (張又俠) (Vice Chairman), He Weidong (Vice Chairman), Li Shangfu, Liu Zhenli (劉振立), Miao Hua (苗華), Zhang Shengmin (張昇民). Xi's new lineup attracted attention for several reasons. For one, he broke the retirement norm in which officials past 68 years typically do not serve in the CMC. Notably, Zhang Youxia is 72 years old and remains one of the few PLA generals (alongside Zhang Shengmin and Liu Zhenli) with combat experience (Sino-Vietnamese War). He Weidong's appointment is also considered unusual, as he did not have previous experience serving on the CCP's Central Committee. Essentially, He jumped two grades from the Eastern Theater Command (which also oversees operations over Taiwan) to the Vice Chairmen of the CMC. This potentially indicates that Xi places great importance on appointing someone with the expertise and knowledge over the Taiwan Strait.


Above all, Xi broke rank with his past predecessors by not appointing a civilian leader as the Vice Chairman of the CMC. Both Jiang Zemin and Hu Jintao took the position of Vice chairman before their ascension to the General Secretary of the CCP and Chairmen of the CMC. This development potentially signals that Xi has no immediate plans for a successor and will move forward with a fourth term after the 22nd party congress in 2027. With no successor in sight, Xi will continue to consolidate his political power and institutionalize himself as the 'state' — like Vladimir Putin's Russia and Mahathir Mohamad's Malaysia.


The third factor concerns whether the PLA is prepared to take on a Taiwan contingency. According to China expert Philip Hsu, Xi's grasp over the military has been widely considered stable. Moreover, when Xi repeatedly announces that Taiwan must be reunified, he is also gesturing for the military to speed up its modernization for cross-strait warfare. Hsu suggests that the interaction between the PSC and CMC may have a self-enhancing effect, pushing both parties towards a common goal. From Taiwan's perspective, Hsu noted that Taiwanese authorities must remain vigilant to Xi's discourse, as the 'message' communicated could help predict China's approach to Taiwan in the coming few years.


The PRC has always expressed its willingness to exercise military options should circumstances such as Taiwan formally declaring independence, internal unrest in Taiwan, or Taiwan's acquiring nuclear weapons were to materialize. As a result, one of the targets of the PLA since 2015 is to enact structural reforms in reshaping the PLA capabilities in complex joint operations. For instance, the PLA has made attempts to clarify its command authorities and improve joint integration. It has also ramped up gray zone activities in hope of remaking the status quo in its favor, facilitating the transition from peace to war. Substantial additions to the PLA structure include the establishment of the Strategic Support Force (SSF) and the Joint Logistic Support Force (JLSF) in 2016.


Currently, the PLA is still exploring ways in which it could execute a plan against Taiwan. However, it is unlikely for the PLA to mechanize, informatize, and intelligentize until at least 2027. Finally, despite Xi's provocative lineup, the new appointment does not constitute a 'war council' as some have suggested. Moreover, his ambitious plans for the PLA are currently under construction. With the factor of time alleviated, there is no indication as to why Xi must rush for a military escalation across the Taiwan Strait, which could potentially spark unintended political setbacks. Not to mention, a military escalation over the Taiwan Strait could very likely induce a forced financial decoupling from the West, setting China’s financial system backwards. As such, short-of-war measures are the quintessential military option at-present for Xi's Taiwan strategy.

Cover image: REUTERS/Thomas Peter

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