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101. Stabilizing the Growing Taiwan Crisis: New Messaging and Understandings are Urgently Needed

Author:
Michael D. Swaine
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
The U.S.–China relationship appears to have stabilized since the November 2023 meeting between U.S. president Joe Biden and China’s president Xi Jinping in San Francisco. The reality, however, is that the features and trends pushing both countries toward a confrontation over Taiwan persist, fueling a dangerous, interactive dynamic that could quickly overcome any diplomatic thaw between the world’s foremost powers. These underlying forces — increased levels of domestic threat inflation in both the United States and China, the worst–casing of the other side’s motives and intentions, and the resulting erosion in the confidence of the original understanding over Taiwan reached in the 1970s — threaten to push Beijing and Washington into a crisis over Taiwan that both sides say they want to avoid. To defuse this worrying dynamic, both the United States and China must reaffirm long standing policy on Taiwan, while also undertaking a set of specific actions to further stabilize the relationship between the two countries. The Biden administration should explicitly reject extreme rhetoric towards China and deviations from longstanding policy on Taiwan, such as the framing of Sino–American competition as a titanic struggle between democracy and authoritarianism, and the contention that an independent Taiwan is strategically crucial to overall Asian security. The administration can further inject stability into U.S.–China interactions over Taiwan by re–affirming and clarifying the One China policy through a series of statements, including: The United States opposes any Chinese effort to coerce Taiwan or compel unification through force. However, the United States would accept any resolution of the cross–Strait issue that is reached without coercion and that is endorsed by the people on both sides of the Taiwan Strait. The United States recognizes that the defense of Taiwan is primarily the responsibility of the people of Taiwan. Relatedly, and in accordance with the U.S.–China normalization agreement, Washington is committed to maintaining only unofficial relations with Taiwan and has no desire to alter this commitment. The United States Government reiterates that it has no intention of infringing on Chinese sovereignty and territorial integrity, or interfering in China’s internal affairs, or pursuing a policy of “two Chinas” or “one China, one Taiwan. These statements should be made in combination with actions that bolster cooperative engagement with China, such as the initiation of a combined civilian and military Track 1.5 dialogue with Beijing. We believe that this type of reassurance would lead to corresponding commitments from China that would improve stability in the Taiwan Strait, such as reductions in provocative military exercises and potentially high level Chinese declarations that reject coercive measures towards Taiwan and a specific timeline for reunification. The recent improvements to the Sino–American relationship shouldn’t go to waste. The United States and China should go beyond the mere appearance of stabilization and revitalize the original understanding over Taiwan. Otherwise, they risk a continuous spiral towards full–scale conflict.
Topic:
Conflict Resolution, Security, Foreign Policy, Bilateral Relations, Realism, Regional Stability, and Restraint
Political Geography:
China, Taiwan, Asia, and United States of America

102. Paths to Crisis and Conflict Over Taiwan

Author:
Michael D. Swaine and James Park
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
Taiwan is the most likely flashpoint for a U.S.–China conflict, unmatched in its combustible mix of conflicting interests, high stakes, and eroding trust and assurances. A full–blown war over Taiwan has become a startling possibility. Suspicion, threat inflation, zero–sum framing, and worst–casing are increasingly dominant factors in U.S.–China interactions over Taiwan, driven by preconceived ideas of the other’s intentions based on history and ideology, and domestic pressures in each country to prioritize military deterrence and even aggression. Amidst this emerging threat of direct conflict, numerous scholars, experts, and military strategists have focused on how to discourage China from invading Taiwan through military force alone — warfighting perspectives that typically share glaring and mutually reinforcing faults that, if overlooked, may only help to pave the path toward conflict. Analysts’ emphasis on military deterrence tends to obscure the utmost importance of political reassurances to avert conflict, particularly the United States reaffirming and recommitting to its original understanding of the One China Policy; this fixation on the military dimension feeds into the destabilization of the Taiwan issue, brought about by heightened suspicions of the other side’s intentions. Policymakers and pundits, in turn, tend to underestimate the possibility of inadvertent escalation, driven by an environment of distrust, pressure in Washington and Beijing to appear tough on the other, and a lack of comprehensive crisis management mechanisms. By examining the common analytical blindspots regarding a conflict over Taiwan, this report sheds new light on how the political and social dynamics fueling mutual hostility between Beijing and Washington could play a much more decisive role in a future crisis over Taiwan, rather than factors that earn far more attention, such as calculations about military capability and resolve. Averting a destructive crisis will require the United States and China to build off recent diplomatic progress to restore a deeper mutual understanding concerning Taiwan through policies and actions including: Mutual recognition of the interactive nature of the growing crisis over Taiwan, to which Beijing, Washington, and Taipei contribute. A clearer, more credible U.S. commitment to its successful, long–standing stance on Taiwan: the One China Policy and strategic ambiguity. Continued U.S. rejection of both unilateral Taiwan independence and any unambiguous commitment to Taiwan’s defense. A credible Chinese affirmation of its continued commitment to peaceful unification without any specific deadline. The development of a broad–based crisis communication mechanism that includes both military and civilian dialogue.
Topic:
Bilateral Relations, Crisis Management, Joe Biden, and Regional Security
Political Geography:
China, Taiwan, Asia, and United States of America

103. Washington's and Taiwan's Diverging Interests Doesn't Make War Imminent

Author:
Hargisl Shirley Martey
Publication Date:
02-2024
Content Type:
Special Report
Institution:
Third Way
Abstract:
We are a month from the Taiwan 2024 election that sent shockwaves around the world. President-elect, Lai Ching-te (賴清德), dared to utter the world ‘independence” in a strike against the longstanding One China Policy (一个中国政策) in his successful campaign to lead the nation. The election was important enough for an increasingly assertive President Xi Jinping (习近平出席) to try (and fail) to influence the election’s outcome. Xi has been rattling cages for the last several years and has made no secret of his desire to bring Taiwan under Beijing’s thumb without explicitly ruling out the use of force. Meanwhile, a busy President Biden has had his hands full keeping allies committed to Ukraine, battling Putin-sympathetic members of Congress, while also dealing with cascading crises in Israel and the Middle East. With that as our backdrop, does Lai’s election, Xi’s frustration, and Biden’s preoccupation mean we are closer to conflict in the Taiwan Strait? In this brief analysis we argue that at present the answer is “no.” And we make this call by looking at the vantage points and early actions of each country. For America, the Taiwan election has put the country on alert. For Taiwan, domestic concerns are mainly driving voters – not cross-Strait policy. For the People’s Republic of China (PRC; 中华人民共和国), ignore the rhetoric because they’ve followed their Taiwan election disappointment by returning to their standard playbook.1 But stay tuned…. perhaps they’re saving the fireworks for Lai’s May 20 inauguration.
Topic:
Foreign Policy, National Security, Politics, Elections, and Strategic Interests
Political Geography:
China, Taiwan, North America, and United States of America

104. Competing Values Will Shape US-China AI Race

Author:
Valerie Shen and Jim Kessler
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Third Way
Abstract:
President Biden’s AI executive order reflects a set of values recognizable to all Americans: Privacy, equal treatment and civil rights; free speech and expression; the rule of law; opportunity and free market capitalism; pluralism; and advancement of global leadership as the beacon of a free world. President Xi Jinping’s government has also issued AI regulations with values recognizable to China: Collectivism and obedience to authority; social harmony and homogeneity; market authoritarianism and rule of state; and digital world hegemony to restore China’s rightful place as the Middle Kingdom. The United States and China may share similar broad goals for “winning” AI along the lines of leading innovation and advancement, spurring broad-based economic growth and prosperity, achieving domestic social stability, and becoming the clear global influencer for the rest of the world—but they define those goals and seek to achieve those ends through very different values. Those values embedded in our respective AI policies and underlying technology carry high-stakes, long-term national and economic security implications as US and Chinese companies compete directly to become dominant in emerging global markets. They also share similar fears that reflect each country’s values. China worries that AI could cause social unrest if information to a sheltered population is too real and unfiltered. America fears that AI could cause social unrest if information Americans receive is too fake. And that massive disinformation and algorithms that rile the population could threaten our democratic system. Why do these value differences matter when it comes to the AI race? Below, we outline six contrasting values that we believe will be the most determinative in how the US-China AI competition plays out. We argue that understanding our different values-based approaches illuminates our respective advantages and disadvantages in this competition. It assesses who is currently set up to “win” across key metrics and determines how to lean into our democratic advantages or mitigate some practical disadvantages compared with the PRC, this will ultimately win the AI marathon.
Topic:
Science and Technology, Artificial Intelligence, and Strategic Competition
Political Geography:
China, Asia, North America, and United States of America

105. How Has the Ukraine War Changed the China-Russia Relationship?

Author:
Yun Sun, Segey Radchenko, Andrew Nathan, and Alexander Cooley
Publication Date:
04-2024
Content Type:
Video
Institution:
The Harriman Institute
Abstract:
Just prior to Russia’s invasion of Ukraine in February 2022, Russian President Vladimir Putin and Chinese President Xi Jinping proclaimed a “no-limits” partnership between their countries. But Russia’s war in Ukraine has had a profound impact on the Sino-Russian relationship. While Putin has sought Beijing’s support for his territorial grab, China’s position, has been famously characterized as “pro-Russia neutrality”. Geopolitics remains the single most important factor in China’s decision regarding the Ukraine war, as Beijing has been torn between the competing agendas of managing its relations with Russia and relations with Europe. And while the Russians have grown increasingly frustrated with what many in Moscow perceive as Beijing’s double-dealing and unwillingness to commit, Putin’s leverage with Xi Jinping remains limited. As the war in Ukraine grinds into its third year, China and Russia continue unsteadily towards an ever closer alignment even while pragmatically looking out for their own interests in an evolving world.
Topic:
Foreign Policy, Bilateral Relations, Partnerships, Strategic Interests, and Russia-Ukraine War
Political Geography:
Russia, China, Ukraine, and Eastern Europe

106. Revitalizing U.S. Trade Remedy Tools for an Era of Industrial Policy in an Interconnected World

Author:
Ryan Mulholland
Publication Date:
06-2024
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
To implement an effective industrial policy, the United States needs to update its trade enforcement toolkit to meet the challenges of the modern world and utilize its existing trade authorities differently.
Topic:
Industrial Policy, International Trade and Finance, Economy, and Economic Development
Political Geography:
China and United States of America

107. What if? The Effects of a Hard Decoupling from China on the German Economy

Author:
Julian Baqaee, Julian Hinz, Benjamin Moll, Moritz Schularick, Feodora A. Teti, Joschka Wanner, and Sihwan Yang
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
How would the German economy cope with a hard economic decoupling from China? The authors study a scenario where the global economy fragments into three distinct blocs: the G7 economies and their allies, China and her allies, as well as neutral countries. German trade with China would have to be entirely rerouted to countries within the "Western" block and neutral countries. The authors quantify the costs of such a worst-case hard decoupling using the (Baqaee and Farhi 2021) multi-sector model of the world economy. The key finding is that a total cut-off of trade relations with China would have severe but not devastating effects on the German economy. The welfare loss for Germany (relative to a no-cut-off baseline) would be around 5 percent of Gross National Expenditure (GNE) over the first few months and around 4 percent over the first year, plus additional short run costs due to business-cycle amplification effects. In the medium and long run, the costs would fall to a permanent loss in the 1–2 percent range. Less extreme decoupling or gradual de-risking scenarios (“small yard, high fence") would incur smaller costs. The single most influential assumption relates to the “trade elasticity,", i.e., the ease and speed with which trade can be reorganized away from China to neutral countries and within the “Western” block. The authors´ findings, in particular the critical dependence of economic costs on the time horizon over which adjustments take place, provide some rationale for embarking on a gradual de-risking trajectory to avoid a costly and politically contentious hard decoupling dictated by geopolitical events.
Topic:
Globalization, International Trade and Finance, Sanctions, Geoeconomics, Decoupling, and De-Risking
Political Geography:
China, Asia, and Germany

108. Mild Deglobalization: Foreign Investment Screening and Cross-Border Investment

Author:
Vera Z. Eichenauer and Feicheng Wang
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Openness to foreign investments is associated with risks. To mitigate these risks, many high-income countries have strengthened the control of foreign investments over the last decade in an increasing number of sectors considered critical. Investment screening distorts the market for cross-border investments in controlled sectors, which might lead to unintended economic effects. This is the first cross-country panel study to examine the economic effects of investment screening mechanisms. We combine deal-level data on cross-border mergers and acquisitions (M&A) for the period 2007–2022 with information on sectoral investment screening. Using a staggered triple difference design, we estimate a reduction of 11.7 to 16.0 percent in the number of M&A in a newly screened sector. The effects are driven by minority acquisitions and deals involving a foreign government or state-owned enterprises or US firms as investors. There is no reduction in the number of deals within the EU/EFTA, most of which are not subject to screening. The findings call policymakers’ attention to weighing the benefits of national security and the economic costs of introducing investment screening.
Topic:
Globalization, International Trade and Finance, National Security, Foreign Direct Investment, Investment, Geoeconomics, Global Capital Allocation, and Deglobalization
Political Geography:
China, Europe, and United States of America

109. What role for Chinese FDI in Africa? New survey evidence from Ethiopia and Ghana

Author:
Charles Ackah, Alemayehu Geda, Holger Görg, and Federico Merchan
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Foreign investments bring in not only new employment but also novel technology, managerial skill and know-how, that may also dissipate into the local economy. It is not clear whether this effect differs by the nationality of source countries, in particular between Chinese and non-Chinese firms. Based on a firm level survey on Ethiopia and Ghana, we found that all types of firms are engaged in limited R&D and innovation activity and their transfer to host countris in both countries. There is little difference between Chinese and non-Chinese foreign firms in such technology and managerial skill transfer once controlling for firm size and industry characteristics in the majority of metrices (R&D activities, horizontal & vertical spillover, directly adopting techniques). However, we found for Ghana that Chinese firms have more suppliers but are less likely to transfer technology to them. Chinese firms are more likely to transfer managerial skills than non-Chinese firms in Ghana though not in Ethiopia. Also, there is little evidence that foreign firms transfer technology via horizontal or backward spillovers in either countries. Finally, Chinese firms are much more likely to receive host country policy support than other foreign firms in Ghana but not in Ethiopia.
Topic:
Science and Technology, Foreign Direct Investment, Economy, and Technological Transfer
Political Geography:
Africa, China, Ethiopia, and Ghana

110. Foul Play? On the Scale and Scope of Industrial Subsidies in China

Author:
Frank Bickenbach, Dirk Dohse, Rolf Langhammer, and Wan-Hsin Liu
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
China makes extensive use of subsidies in order to take a leading role on the global markets in the green technology sectors of electric vehicles, wind turbines and railway rolling stock. According to DiPippo et al. (2022) and recent OECD studies, the industrial subsidies in China are at least three to four times or even up to nine times higher than in the major EU and OECD countries. According to a very conservative estimate, industrial subsidies in China amounted to around EUR 221 billion or 1.73% of Chinese GDP in 2019. According to recent data of 2022, direct government subsidies for some of the dominant Chinese manufacturers of green technology products had also increased significantly - the electric car manufacturer BYD alone received EUR 2.1 billion. The authors point out that Chinese companies are benefiting from further support measures, including subsidized inputs, preferential access to critical raw materials, forced technology transfers, the strategic use of public procurement and the preferential treatment of domestic firms in administrative procedures. The authors recommend the EU to use its anti-subsidy proceeding against BEV imports from China to enter into negotiations with the Chinese government and persuade it to abolish public support measures that are particularly harmful to the EU.
Topic:
Globalization, International Trade and Finance, Foreign Direct Investment, European Union, Business, Renewable Energy, Industry, Subsidies, and Electric Vehicles
Political Geography:
China and Europe