Gottiboff is a geopolitical tinkerer but sometimes such basic intelligence can sometimes point out the obvious:
If Xi invades Taiwan then, in the current climate, it is almost certain that Joe Biden will assist by repeating his strategy in Ukraine and send weapons to the island. The US may even send troops. Around one-third of the world’s shipping passes through the South China Sea, which would almost certainly would be shut down by the naval action. Most of Australia’s exports to China, led by iron ore, would be suspended. Taiwan is the world’s leading maker of computer chips and that manufacturing would also be suspended.
I still can’t see the US fighting the war itself. Nor should it. It is a civil conflict. That’s why it has preserved “strategic ambiguity” on the question for so long.
But the economic war will be real, permanent, and breathtaking in scope as the world splits into liberal and illiberal economic blocs.
There will still be trade between them but it will shrink every year as sanctions grow ever larger.
Why is this war inevitable? Kevin Rudd summed it up on the weekend:
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.
…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.
…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.
The reasoning is sound. The conclusion is bunk. There is no avoiding a war based upon the domestic illegitimacy of the CCP. It will do what it has to survive as China’s catch-up growth period ends. The main question is will it be at war with its own people or everybody else?
The Chinese Ambassador gave us the crystal clear in our Press Club a few weeks ago when he declared war on Taiwan (and Australia) as a state and a democracy.
Far from seeking to “reset” the China relationship, we need to be asking much harder questions:
- How can we prepare for the conflict?
- What are our maximum points of vulnerability?
- What can we do about them?
I put it you that these factors include:
- Oil imports and refining.
- Over-exposure to the Chinese market for commodities.
- Hollowed out manufacturing.
- Chinese immigration.
What is Albo doing about these core four vulnerabilities?
They are all being made worse.
