China gears up for showdown, ball in Taiwan's court

AlertNet ^ | July 5, 2004 | Benjamin Kang Lim

[twntaipan]

China gears up for showdown, ball in Taiwan's court 05 Jul 2004 06:05:03 GMT

By Benjamin Kang Lim

BEIJING, July 5 (Reuters) - When China holds war games on Dongshan island off its southeastern coast this month, its SU-27 fighters will battle for air superiority and back up an amphibious landing in a mock invasion of Taiwan.

Convinced that Taiwan President Chen Shui-bian will push for statehood during his second four-year term, China is readying for a showdown with the island which Beijing has claimed as its own since the end of the Chinese civil war in 1949.

Booming China wants to avoid conflict, analysts say. The ball is in Taiwan's court -- whether conflict breaks out hinges on how far Chen pushes the envelope.

"They do not wish to use force...This is not their preferred course of action. But they are preparing for worst-case scenarios," said David Shambaugh, an expert on the People's Liberation Army (PLA) at George Washington University.

"I've been coming to China every year for the last 25 years, I have never sensed a higher level of anxiety over the Taiwan issue than at the present time."

Chen's predecessor, Lee Teng-hui, has played down the threats and likened China to a "barking dog that won't bite".

Taiwan has apparently been emboldened by U.S. President George W. Bush's pledge to do whatever it takes to help the self-ruling democratic island defend itself, but analysts said it may be miscalculating Beijing's resolve.

"The danger of war truly exists," said Wang Jisi, director of the Institute of International Strategy at the Central Party School, which trains Communist apparatchiks.

PAPER TIGER?

"We're not a paper tiger. We're a real tiger," he said, adding that China needs to "strengthen the credibility" of its longstanding threat to attack if Taiwan declares statehood.

Lee dismissed Chinese threats after war games following his landmark U.S. visit in 1995 mellowed into little more than a war of words when he, and later Chen, pushed for independence.

Taiwan's leaders are betting that China will not risk breakneck growth, which is needed to create enough jobs, avert social unrest and perpetuate Communist Party rule.

Military conflict would certainly invite a boycott of the 2008 Beijing Olympics and diplomatic isolation worse than in the years after the 1989 Tiananmen Square protests were crushed.

Instability would drive away foreign investors and Taiwanese who have poured $100 billion into China since the late 1980s. It would also rattle the global chip industry and financial markets.

Taiwan, armed to the teeth with U.S. and French jet fighters and warships, is counting on U.S. help in the event of conflict. Washington switched diplomatic recognition from Taipei to Beijing in 1979, but remains Taiwan's biggest arms supplier and ally.

"The chances of a full-scale invasion of Taiwan before 2012 are very low" because the PLA is incapable of taking on the United States, said Chong-Pin Lin, a former Taiwan deputy defence minister. He did not rule out more sabre rattling.

But Kenneth Lieberthal, a Sinologist at the University of Michigan, said Taiwan is wrong when it assumes Beijing is "all bluff when it talks about the use of force".

"The second assumption is: if the first assumption is wrong, then Chen nevertheless has a military blank cheque from the United States...I believe both assumptions are wrong," he said.

Washington has no desire to be dragged into a conflict with China over Taiwan. But the three are faced with a potentially vicious circle: Taiwan flirts with independence, leading to Chinese invasion threats which force the United States to back the island which in turn further emboldens Taipei.

Chen appears determined to adopt a new constitution in 2008, a move seen by Beijing as a formal declaration of independence.

China on the other hand has painted itself into a corner by beating the drums of war. No Chinese leader can afford to be seen as weak by giving in on the mission of reunification.

Beijing does not trust Chen, but he believes it will eventually deal with him. "The chances of dialogue resuming will be high after the year-end parliamentary elections and the U.S. elections," a senior Taiwan government source told Reuters. (Additional reporting by John Ruwitch and Juliana Liu)

[Poohbah]

(Chuckle) Yes, I'm sure that's exactly the analysis that will be applied. It's why we won't act.

As I pointed out, once the nukes are flying between the PRC and Taiwan, we're going to get nuked. The only way to prevent it is to prevent a nuclear exchange to begin with.

[Centurion2000]

Taiwan is toast. They don't realize it, but they are.

China and the rest of the world should bear in mind that Taiwan is likely an undeclared nuclear power.

Hmmm .. will China trade the Three Gorges Dam and Beijing for Taiwan ? I don't think so.

[O.C. - Old Cracker]

I hope the ChiComms try something in Taiwan.

[Poohbah]

China and the rest of the world should bear in mind that Taiwan is likely an undeclared nuclear power.

I seem to be the only other guy on this thread who is.

Hmmm .. will China trade the Three Gorges Dam and Beijing for Taiwan ? I don't think so.

More to the point...what happens if we sit back and say to Taiwan, "hey, you do what you think you gotta do?"

Think China's going to say, "Shucks, the Republic of China done hornswoggled us!" and let it go?

Or are they going to blame Bush, Cheney, and Halliburton, like everyone else does?

[snowsislander]

I remember how we froze Iran's assets after our embassy was seized.

I imagine China would do exactly the same to us, and might well just go ahead and expropriate the lot. Of course, they hold a good chunk of our debt, so they could play some economic games using that, too. I don't think that they have the sophistication to make war on the financial front, though with the trillions (soon to be quadrillions) in derivatives exposure that our GSEs and major institutions have -- predicated on models that only work if everything reverts back to "normal" (i.e., one of the same elements that took out Long Term Credit and nearly the whole U.S. financial system when the spreads didn't close) -- it wouldn't take a lot of sophistication to tip them.

While China may have a huge banking mess, we have our own vulnerabilities in that arena, mostly from allowing too many derivatives that are not soundly modelled. Don't get me wrong -- I am a fan of derivatives, it's just some of the models make assumptions that I question.

I don't put much stock into the "oh no, China's economy would collapse if they took Taiwan" argument. Wartime economies are fevered creatures, and the impetus from just driving the war machine will stave off ordinary economic crises. When survival is at stake, a command economy is an advantage. You can see this with the U.S. in World War II: It certainly cured us of the Great Depression. And with government rationing and huge economic planning, we were a premier command economy ourselves. (And like command economies generally, it created its own vibrant black markets in things such as gasoline and tires.) Germany came out of its economic disaster by building its war machine.

If China does seize and perhaps even nationalize the factories and other assets that we have so handily put over there, it will cost us far more economic hardship than the Chinese, who will suddenly have lots and lots more assets on the books, and we will have lots of losses. I wonder just how many of them are covered by some sort of insurance; OPIC comes to mind. What if we also have a massive drawdown on our system with OPIC suddenly obligated for some nice large payouts in Taiwan? (If you want to get your blood pressure pumped up sometime, just visit the fine folks at OPIC. When links actually work, you can find gems like this one. There are so many things wrong about this particular pair of guarantees that it really deserves its own separate discussion.) I would put that risk number in this post, but I cannot see where OPIC is keeping our numbers, just a lot of rah-rah about what are being done with all of this assumed risk. I particularly was interested to find the 270% coverage bit; that should make for some real nice payouts.

As to the Dragon's Assassin's Mace, consider what I call "Port Arthur 2004." It's low-tech but nasty. China simply uses their enormous export shipping as a delivery mechanism for whatever nightmare they want to create. Massive coordinated explosions at key places such as ports, and particularly those with serious industry and refining going on. We are already at the edge of our refining capacity; taking out just a few (or lots more) would make a serious hobble on our economy. Especially if we were then to declare hot war on China, not having enough oil or means to refine it would be a massive hobble on our efforts. I assert that it is impossible for us to fight a war without sufficient oil and sufficient ammunition, and it doesn't matter if you are talking blitzkrieg wars such as Persian Gulf I (but don't forget the massive logistical build-up prior to that great success. Logistics wins wars, not just battles) or long drawn-out conflicts such as World War II. You can have the most fantastic armed forces, decked out with the finest armanents and bristling with planes, but if you have don't have jet fuel for them, if you cannot fuel your tankers, if you have don't have cartridges for their rifles, then you won't be fighting with anything more effective than what you can operate by hand and get to by foot. I don't see us making forced marches across the Pacific any time soon. Anyone that has read Speer can appreciate that the simplest manufacturing, such as that of ball bearings, can be enormously important. When Germany lost its synthetic oil plant and its Rumanian oilfields, they couldn't even taxi their new jet fighter out under any power except animal.