Redistributing Power in the Taiwan Strait

The rise of the People's Republic of China (PRC) has significantly altered the security situation in the Taiwan Strait. The wealth and prestige generated from the successful implementation of market reforms over the last three decades has enabled the PRC to radically shift the balance of economic, diplomatic, and military power vis-a-vis the Republic of China (ROC) - otherwise known as Taiwan - in its favor. This change has increased the gap in absolute military (and possibly diplomatic) capabilities between the two actors. However, largely because the ROC has the United States to guarantee its security, force has not been used to resolve the situation. Instead, the two actors have delicately balanced their desires for increased economic integration and social engagement against resolving the longstanding issue of political separation/reunification. This volatile mix of cooperation on certain issues (social and economic), and coercive action on others (military and political), makes for a complex security environment for all actors in the Taiwan Strait.

The Four Issues

This complex security environment is based on four underlying issues: 1) Economic Growth; 2) Internal Affairs; 3) External Affairs; and 4) Military Capabilities. Since it is the interplay of these factors that largely determines whether tensions between the PRC and ROC increase or decrease, they are key indicators of peace and stability in the region.

Economic Growth

Major structural reforms to both economies in the second half of the 20th century powered sustained economic growth and establishing both countries as global economic powers. By the late 1990s, however, growth rates in the PRC had far surpassed those in the ROC, tipping the distribution of economic power in the PRC's favor. By 2010, the PRC had an economy external pagealmost 12 times as largecall_madeas that of its neighbor, in terms of GDP (PPP). This increasing economic disparity seriously hindered the ability of the ROC to counter the PRC's growing diplomatic and military resources.

Economic growth therefore plays a critical role in relations across the Strait. In 1991, trade between the ROC and PRC external pageamounted to a mere $8 billioncall_made. Cross-Strait trade relations have rapidly increased over the last decade, such that external pageChina has now become Taiwan's main trade partnercall_made. The ROC relies on the PRC for approximately external page$110 billion in bilateral tradecall_made, limiting its economic policy options, and, at times, forcing political concessions. The depth and breadth of the pair's economic relationship have led analysts to conclude that "external pagethe [ROC] may be moving to de facto reunificationcall_made" through economic integration. The value of bilateral trade remains important for economic growth in the PRC too - at present, the ROC is one of the country's external pagetop ten trading partnerscall_made.

It should be noted, however, that the main reasons for the importance of economic growth differ between the ROC and the PRC. Because the ROC requires significant external defense procurement to maintain its political autonomy, slowing economic growth in the ROC is directly detrimental to its security interests, especially given the existing gap in economic power. For the PRC, economic prosperity ensures the political legitimacy of the CCP as well as its territorial sovereignty. The PRC therefore requires high levels of economic growth primarily to maintain domestic order and advance its diplomatic and military capabilities.

Internal Affairs

While the legitimacy of the PRC regime remains an issue of paramount importance, two further domestic political issues also impact heavily on cross-Strait relations: the territorial sovereignty of the PRC, and pro-independence movements in the ROC. The PRC is critically concerned with defending its external pageclaims of sovereign authoritycall_made over three core areas: Taiwan; Tibet; and Xinjiang. The PRC clearly sees security linkages between these regions, and categorizes the loss of sovereignty over any of the three as an existential security threat.

In addition, pro-independence movements in the ROC over the years have been a serious threat to  the status quo. Even though external pagepublic opinion polls in the ROCcall_madecontinue to show majority support for this status quo (and ambiguity on the "One China" consensus), a sizable portion of the population favors overt independence.

The connection between PRC sovereignty and ROC independence claims makes the security situation particularly complex. In recent years, attempts to maintain the delicate balance in relations have been further compounded by uncertainty over who within the PRC structures of authority is responsible for the ROC policy portfolio.

Whereas one renowned analyst commented in 2001 that "the military external pagedoes not dictate policycall_maderegarding Taiwan," there has since emerged real concern as to whether or not the PRC military leadership is accountable external pageto PRC civilian political elitescall_made on this issue. Concerns have been further exacerbated by the Anti-Succession Law, "since it creates an external pageexplicit national mandatecall_made to use force if necessary"; by a lack of external pagemilitary transparencycall_made; and by recent military external pagetests of the J-20call_made.

External Affairs

Prior to its economic liberalization, the PRC ran a diplomatic campaign to eliminate international recognition of the ROC as a sovereign state. The government was concerned that such recognition would undermine their international legal claim to the ROC as an integral part of the PRC. The success of its economic reforms - and its corresponding increase in wealth and prestige - enabled the PRC to more effectively undermine official diplomatic recognition of the ROC, including external pagesuccessfully countering ROC attempts to buy recognition from peripheral statescall_made. By the late 1990s, the PRC eliminated the threat of meaningful recognition of the ROC by the international community.

The PRC's effectiveness at diplomatically isolating the ROC provided opportunities for new diplomatic engagement within the context of the status quo. This led the PRC to play a more cooperative role, "permitting" the ROC limited recognition as a non-state actor in international institutions such as the WHO. While this cooperation clearly requires ongoing recognition of "One China," it allows the PRC to appear responsive to international partners as well as build better relations with the ROC. It also provides the ROC with the ability to re-establish limited diplomatic relations on a small range of important issues.

That said, coercive diplomatic actions are still employed by the PRC. This is evident in the development of the concept of external pagelegal warfarecall_made as a component of military diplomacy. In the eyes of the PRC, the external affairs of the ROC remain a fundamentally military issue, and are dealt with in the framework of an internal opposition grouping seeking to build international relations independently. It therefore is unlikely that the PRC will be willing to significantly advance the diplomatic engagement of the ROC. The use of the diplomatic carrot will likely continue, but as a method of advancing a  PRC narrative rather than as public diplomacy for the benefit of Taiwan.

Military Capabilities

The economic rise of the PRC was pivotal in shifting the external pagemilitary balance of powercall_made across the Strait in its favor. With external pagedouble-digit annual increasescall_made in its official defense budget over the past two decades, the PRC has outspent and out-armed the ROC. The ROC has therefore come to rely more and more on its strategic relationship with the United States on issues of national security. Anti-ship Ballistic Missiles (ASBM) would radically impact one of the ROC's critical uncertainties: the ability of the US to quickly and effectively external pagerespond to an invasioncall_made.

Whereas the PRC's military has been gaining in strength and operational capability, the ROC defense budget has been declining. Currently at its lowest level since 1992 in terms of real purchasing power, the ROC still lacks effective defenses external pageagainst a mainland attackcall_made. Given the economic outlook, it appears unlikely that the ROC will close the gap in military capabilities in the foreseeable future. The ROC's weapons procurement strategy is therefore oriented toward deterrence, and ensuring Taiwan could hold its own until the deployment of US reinforcements

Implications

The disparity in economic, diplomatic, and military power between the PRC and ROC  will likely continue to grow. This will force the ROC to seek asymmetric capabilities to counter the PRCs conventional advantages.  It will also create incentives for the PRC to shift more of its attention to directly countering the US, placing an increasing burden on the US in its role as the guarantor of peace and stability in the Strait. Nevertheless, it remains unlikely that any of the major actors will be willing to jeopardize economic growth and regional stability in order to challenge the status quo in the near-term.

The ROC will face increased pressure to retool its economy and attain higher levels of economic growth in order to secure the advanced weapons systems needed to deter and counter PRC military action, as well as to placate US interest groups whose support hinges on the continued procurement of US services and materials. This emphasis on growth ultimately makes it even more difficult for the ROC to forego opportunities for deeper economic integration with the PRC.

The PRC will be more concerned with maintaining the legitimacy of its regime and decreasing the gap in military power relative to the US. The PRC is therefore likely to pursue high rates of economic growth, which will enable the development of new military capabilities required to deter and counter regional US military action. In order to sustain these high growth rates, it is likely that the PRC will continue to strengthen economic integration with the ROC as well, further limiting the strategic options of its neighbor. It also is likely that the PRC will be apprehensive about projecting an overly aggressive Cross-Strait posture - so long as the "One China" policy is not threatened.

Given its concerns about external pagethe PRC's ability to evolve into a responsible stakeholdercall_made in the international community, it remains likely that the US will continue to play its traditional role as the security guarantor of the ROC. However, the US will be required to bear higher costs to offset declining ROC economic and military power and increasing PRC military capabilities. As a result, American policymakers and military leaders will ultimately be forced to make difficult long-term tradeoffs both in the region and around the world, especially if any one of the following things occurs: economic growth in the ROC seriously declines; ROC willingness to invest in US military procurement wanes; the ROC acts unilaterally outside of US national interests; the US transfers advanced military capabilities to the ROC that significantly alters the Cross-Strait distribution of power; the PRC experiences significant separatist unrest, particularly in another core issue area (Tibet or Xinjiang); or global political and economic factors conspire to make it untenable for the US to sustain its role in deterrence.