How Can Taiwan Survive a US-China Conflict?

In a recent interview, Secretary of State Antony Blinken said the U.S. is trying hard to ensure that competition between the U.S. and China does not turn into conflict because conflict is not in the interest of America, China or anyone else.

The American economy has rebounded strongly recently, while China’s economy has encountered great challenges as supply chains have moved overseas. Geopolitics is significantly influencing the American economy, with semiconductors and artificial intelligence at the core. Many people use the term AI economics or semiconductor geopolitics to interpret current market phenomena. From this perspective, Taiwan’s future seems bright. However, if we replace AI and semiconductors with electric vehicles and new energy sources, we might come to the completely opposite conclusion.

Renowned economist Paul Krugman recently wrote in The New York Times that America’s triumphalist ideology of “We are number one” [ https://newsrnd.com/business/2023-07-22-beware-of-the-new-american-triumphalism.rJewunVtq2.html ] is making a resurgence. Americans have always had difficulty learning from other countries, and the resurgence of this economic triumphalism will increase America’s tendency toward isolation. Recently, the U.S. economy has performed well, but Krugman believes Americans shouldn’t let it go to their heads. Similarly, it would be dangerous for Taiwan to follow Captain America because of wishful thinking.

Singapore is an example of a neutral country in Southeast Asia. Its leaders have always emphasized that they should not choose sides between the U.S. and China. Actually, it is not just Singapore. Indonesian Minister for Foreign Affairs Retno Marsudi, chair of the Association of Southeast Asian Nations, said that ASEAN has no interest in becoming an agent of competition between the great powers. ASEAN countries have repeatedly been unwilling to pick sides between the U.S. and China and have said the fierce competition between the U.S. and China would destroy the Asian prosperity built over many years.

Why shouldn’t Taiwan choose sides? First, the U.S. itself rejects this position. Even while the U.S. has chip sanctions on China, America’s three biggest semiconductor manufacturers, Intel, AMD and Qualcomm, have recently asked the White House to relax restrictions on exports to China’s semiconductor market. The main interest at the heart of the China-U.S. struggle is chips. The U.S. Chamber of Commerce estimates that if the U.S. completely bans the sale of chips to China, the American chip industry will lose $83 billion in revenue in one year, as well as 124,000 job opportunities.

The Biden administration plans to finalize drafts related to regulations on investment in China by the end of August and might target only the most cutting-edge technologies, such as semiconductors, quantum computing and AI, and restrict new investments. This would greatly reduce the scope targeted by the sanctions and be tantamount to taking a step back.

Second, Taiwan still needs China’s supply chains. Currently, in response to customer demand, Taiwan is trying to shift supply chains to India, Southeast Asia and Mexico. However, in the short run, one cannot replace the efficiency of Chinese supply chains. Moreover, Chinese industries, such as the electric vehicle industry, have technological and market advantages. Therefore, this is not a zero-sum issue, but rather a matter to take into account. Industry experts say American semiconductors must compete with those from Taiwan and the rest of Asia, which might be considered wishful thinking. Semiconductors aren’t the only thing like this; other supply chains will also be difficult to move.

Furthermore, the U.S.-China relationship is currently improving, with both sides renewing high-level talks. Recently, China invited centenarian Henry Kissinger, who promoted diplomatic relations between the U.S. and China to Beijing. Kissinger said the Taiwan issue is the fuse to conflict between the U.S. and China, and that both sides must use wisdom and perseverance to peacefully resolve it. In addition, Taiwan-China relations are also improving, with China recently expressing much good will toward Taiwan. For example, Former President Ma Ying-jeou invited Chinese students to Taiwan.

Finally, in the current conciliatory atmosphere, Taiwan should not be overly provocative toward China. Pushing for cross-strait decoupling might intensify the conflict between both sides. As long as both sides intend to cooperate, there will be no risk of war. Thomas Friedman, well-known American columnist reminded Taiwan not to be “looking to poke the bear. Taiwan should not ruin the status quo, let alone force China’s leaders to make decisions. Friedman believes that Taiwan needs to maintain a low profile and not provoke China, because “every day the bear doesn’t attack you is a good day.”*

At the beginning of September, the geopolitical international forum Shangri-La Dialogue-Taipei will take place in Taiwan, focusing on the topic: “Where is Taiwan in the Struggle Between Two Powers?” Just like Julius Robert Oppenheimer, Taiwan has the power to change the world. Only by making good use of this power can we find a sustainable path forward.

The author is president of FCC Partners Inc. and CEO of the Tunghai University Industrial Smart Transformation Center.

**Editor’s note: Although accurately translated, this quoted passage could not be independently verified.