Kevin Rudd
How to avoid a crisis over Taiwan

To understand the People’s Liberation Army’s fortnight of political and military pyrotechnics over Taiwan, you have to start with the domestic political conditions in Beijing.

In three months, Xi Jinping will convene the most consequential national congress of the Communist Party of China (CPC) for the past four decades. Such occasions are never taken lightly within China’s ruling party, whose core mission is to sustain and secure its own long-term hold on power. But the 20th Party Congress looms especially large for the general secretary, who wants to be reappointed for another five years and to use his Marxist–Nationalist blueprint to elevate China as the pre-eminent regional and global power within his political lifetime. In my judgement, Xi wants to be in power for another 15 years.

These conditions are rendered even more challenging because of China’s worsening domestic economic conditions. We are now well past the 35-year era inaugurated by Deng Xiaoping at the 12th Party Congress in 1982, where total priority was attached to economic development through market reform and trade liberalisation, with a foreign policy geared towards both. These changes delivered sustained, double-digit economic growth while relaxing party control over the lives of individuals – at least when compared with the era that preceded it. This rapid economic growth laid the groundwork for a new social contract that rebuilt the CPC’s political legitimacy following the social and economic devastation wrought by Mao’s Great Leap Forward, the Cultural Revolution and the Tiananmen Square crackdown.

This has profoundly changed under Xi Jinping. Chinese politics have turned decisively to the Leninist left with resurgent authoritarianism. Chinese nationalism has shifted to the right as reflected, for example, in its newly assertive approach to foreign policy. And China’s economics have now tilted decisively to the Marxist left, with marked consequences for the economic growth model of recent decades. Beijing’s annual economic growth target of 5.5 per cent is the lowest in decades, but even that is now out of reach. Buckle up for record low growth of about 3 per cent in 2022.

It’s easy to explain away this collapsing growth rate by pointing to the draconian “zero-Covid” policy, which restrained economic activity in some of China’s largest cities, including Shanghai, for months at a time. But this is not the full story. There are much deeper structural problems that were taking shape long before the pandemic erupted.

China’s economic reform program stalled from 2015 and, since 2017, the general trend has been to reassert party control over many of the businesses that powered previous rapid growth. We now see party representation in the management of private firms and their co-option by the state for political ends. State industrial policy has been revitalised on a grand scale, crowding out private innovation, while state-owned and private businesses meld through mixed-equity arrangements. There have been crackdowns on technology firms under the rubric of competition policy and against what Xi calls the “fictitious” economy (for example, property) as opposed to the “real” economy (that is, manufacturing). An ongoing party rectification campaign reminds the Chinese that the courts exist to serve the party, including in commercial disputes. Most of these fall under the umbrella of what Xi calls the “new development concept”.

Added to these issues are the deeper structural problems of demography (low fertility, a peaking population, negative immigration, rising dependency on fewer workers) and productivity growth (crawling along at barely 1 per cent for the past decade). This is a worrying trifecta for any economy, let alone China’s, where unfailing economic growth has been crucial to the party’s political legitimacy.

It is now an open question as to whether China will escape the “middle-income trap” often faced by developing economies whose ambitions to join the high-income club are outpaced by rising costs and declining competitiveness. If that happens, China might never surpass the United States in economic power – which was once considered inevitable – or do so only narrowly. It is no surprise then that Xi is reportedly pushing officials to ensure China’s official growth rate stays ahead of America’s.

This brings us back to the 20th Party Congress. Under normal conditions, this economic outlook would place a leader under extreme pressure. But Xi’s consolidation of his personal power during the past decade is nearly complete. He will almost certainly be reappointed as general secretary this October-November. The real questions hang over key positions such as premier and the inner circle of economic advisers, and whether the successful candidates can persuade Xi to release the political, ideological and regulatory controls he has imposed over the past five years to restore business confidence and growth. Xi’s Achilles heel remains the economy.

Enter Nancy Pelosi. Nobody should doubt the genuineness of her commitment to human rights, proved over many decades across Tiananmen, Tibet, Xinjiang, Hong Kong and Taiwan. Nor should we object to Taiwan’s prerogative to extend invitations to foreign politicians. However, as speaker of the US house of representatives, Pelosi is the third-most senior US politician after the president and vice-president. In China’s eyes, her visit calls into question her country’s commitment to the “One China” policy. The crucial question is whether Taiwan’s security is better or worse after the visit. The answer from every Taiwan analyst I have worked with over the years is that it is worse.

Pelosi’s visit gave Beijing a plausible pretext to conduct its first large-scale military exercise to effectively blockade the island. Beijing’s generals would have been deeply satisfied with the results, which drew a high degree of compliance from non-Chinese maritime and air traffic. China also simulated an attack on Taiwan’s offshore islands for the first time, which appears to have confirmed that they are eminently attackable. And, for good measure, they lobbed five Dongfeng missiles into the exclusive economic zone of Japan, a treaty ally of the United States, without provoking a military response. Most disturbingly, China’s overall confidence that it could pull off a real-world military operation to capture Taiwan has been enhanced, making the idea of starting such a conflict less frightening in the future. Quite the free kick.

As the risk of crisis increased last week, Beijing also seized on the moment to unilaterally cancel what little security stabilisation machinery there was remaining in the US–China relationship. So just when we need it most, four separate military-to-military channels were unilaterally “abolished”. Another six bilateral channels across the rest of the relationship were suspended indefinitely, including climate collaboration, which both sides had tried to keep open given the mutual interest at stake.

The basic mechanisms of the US–China relationship have now been reset to square one. This is bad for Taiwan, bad for the long-term strategic stability of the US–China relationship, and bad for regional stability to boot.

One further risk associated with Pelosi’s visit is that it is viewed by Beijing as part of a continuum of high-level visits that ramped up under former president Donald Trump and that endure under Joe Biden. The danger here is Beijing, evaluating that evidence, reaches the conclusion Washington is changing its “One China” policy to a “One China, One Taiwan” policy – not just in perception but in reality. Beijing would also read an unequivocal signal that Washington would act militarily to defend Taiwan whatever the circumstances. These would be inaccurate conclusions. Nonetheless, they are conclusions that Beijing may well reach.

This risk is heightened as Republican candidates in the next round of elections feel domestic political pressure to equal or surpass Pelosi in their rhetoric and behaviour on the campaign trail.

Xi Jinping, for the first time, has set an effective deadline for Taiwan’s return no later than the centenary of the People’s Republic of China in 2049. The analysis of the Asia Society Policy Institute, of which I am president, is that the real risk of war will escalate markedly in the late 2020s and early 2030s. Our objective should be to do whatever is possible to preserve the status quo over Taiwan, which has become a vibrant democracy, a dynamic economy, an open society – as well as the innovation capital of Asia, as the premier source of advanced semi-conductors. That is why all sides should take action now to restore the political insulation in the US–China relationship that has been stripped away over recent years, so that the two sides can strategically compete without accidentally spiralling into crisis, conflict and war. The years ahead should be used by Washington, American allies and, most importantly, Taiwan itself, to enhance its own deterrence. I have outlined my proposal for how this might be done in my book The Avoidable War, through a framework I have called managed strategic competition.

Pelosi’s visit will have warmed many hearts in Taiwan. But the reality is Taipei doesn’t need America’s politicians for its defence. It needs advanced defence systems that would cause Beijing’s generals to doubt their chances of pulling off a quick and clean victory. It needs the US and its allies to reinvest in levelling the regional balance of military power as a wider deterrent. Learning from Ukraine, Taiwan must build its own defence capabilities, which have been allowed to degrade over time.

Taipei should also consider releasing some levels of strategic pressure on all parties by reopening political dialogue with Beijing, however unproductive that may ultimately prove to be. Absent any form of diplomacy, everything is focused on the military, and history tells us this is never a good idea. These sorts of substantive measures will practically help preserve the status quo on Taiwan for the future – not symbolic gestures that edge us closer and closer to a precipice from which there is no return.

This article was first published in the print edition of The Saturday Paper on August 20, 2022 as "One China, many motives".

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