Balancing Security Concerns with Business Interests in the Shadow of China-Taiwan Tensions

The geopolitical tension between China and Taiwan has long been a focal point in East Asian security dynamics. Taiwan holds significant strategic value in East Asia. It is positioned along major shipping routes and serves as a critical node in global supply chains, particularly in semiconductor manufacturing. Taiwan's technological prowess and its role in the global economy elevate its importance far beyond its geographic size, making any conflict over its status a matter of international concern.

Across the Taiwan strait, the People’s Republic of China (PRC) has made rapid economic and military progress over the last 30 years. This incredible growth has led to increasing influence in the region and around the globe. The prospect of China launching an attack on Taiwan by 2027 has been a subject of intense speculation recently. However, a close analysis reveals that China is unlikely to pursue this aggressive course of action in the near term. This article explores the primary reasons behind this conclusion: the ongoing reorganization of China’s military, significant political and economic uncertainties, and unmet strategic conditions essential for a successful takeover of Taiwan. With China unlikely to make an overt military move on Taiwan before 2027, covert, gray zone operations are more likely in the near term.

Potential Causes of Conflict: History and Rhetoric

Importance of Taiwan

It is hard to understate the impact of the existence of Taiwan on the mind of particular leaders in the Chinese Communist Party (CCP).  For some, the existence of Taiwan remains the final, unfinished task in ending the Chinese Civil War by the CCP. There are factions within China advocating for a more aggressive stance toward Taiwan. These hawkish elements argue that demonstrating military strength is crucial for national pride and deterring external interference.  Taiwan is also different than Hong Kong. While the existence of both places resulted from historical actions, Hong Kong had a clear path for reincorporation starting in 1997, although many hoped for a different result than has transpired. Because of Taiwan’s ambiguous place in geopolitics and the Cold War, the PRC has considerably less legitimacy to act.

Taiwan is also critical to the global supply of semiconductor chips, affording Taiwan a “silicon shield.” The vast majority of generative AI currently runs on Taiwan manufactured chips, and the country produces over 90 percent of the world’s more advanced chips (60 percent of the world’s total semiconductors). This gives the U.S. and most the of developed world significant incentive to protect Taiwan’s independence and manufacturing.

Impacts of U.S.-China Trade and Actions

Begun in 2018 under the Trump administration, the U.S.-China “Trade War” escalated tensions between the two countries. Now, recently increased U.S. tariffs by the Biden Administration are likely to escalate tensions between the U.S. and China again.  Observers are noting that China’s EV industry is moving faster to reach scale and quality than American manufacturers.

Election year politics can also sour U.S.-China relations.  Pundits are making comparisons between the Biden and Trump administration actions vis-a-vis China with the recent tariff increases. Continued rhetoric on the campaign trail might poison the information environment, leading to misunderstandings and miscalculations.

The United States and its allies view the Taiwan issue as a critical component of regional security. They have committed to supporting Taiwan through arms sales, military cooperation and diplomatic backing while still maintaining a policy of “strategic ambiguity.” The physical presence of U.S. and allied forces in the region acts as a significant deterrent to Chinese aggression, complicating China’s strategic calculus.  In particular, recent U.S., Japanese and Philippine cooperation is likely to be concerning to the PRC as it monitors the Taiwan scenario.

Why 2027?

In 2023, several U.S. military leaders stated their belief that Xi Jinping had told the People’s Liberation Army (PLA) to be ready to invade Taiwan by 2027.  While this may have some grounding in reality, it is likely that this date has more to do with generating interest and urgency towards modernization and expansion efforts of the U.S. military.  An examination of the PLA shows it is likely unready to militarily seize Taiwan by 2027.

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An Uncertain Military Situation: Reorganization and Experience

Current State of the PLA

China has been undertaking a comprehensive reform and modernization of the People’s Liberation Army since 2015. These efforts aim to transform the PLA into a world-class military capable of conducting complex joint operations. However, the process has faced numerous challenges, including integrating new technologies and reshaping command structures.  Paired with notable firings and disappearances of key PLA leaders, such as the head of the Strategic Rocket Forces last fall, it is unclear that the PLA is prepared to launch a complex operation required to seize Taiwan.  China has not conducted a major campaign since the 1979 war with Vietnam. That expedition ended badly for the PRC, resulting in the PLA failing to achieve their objectives and an ignominious withdrawal.

Impact of Reorganization

The reorganization process has significant implications for the PLA’s operational readiness. These reforms are complex and time-consuming, often resulting in temporary declines in overall readiness and capability.  For China to launch a successful military operation against Taiwan, several military preconditions must be met. These include achieving air and naval superiority, ensuring the proper amount and effectiveness of amphibious assault capabilities and having the ability to prevent international intervention. Currently, China faces gaps in these areas, particularly in terms of amphibious warfare capabilities and anti-access/area denial (A2/AD) strategies. These gaps, coupled with a lack of recent large-scale joint operational experience, mean that the PLA is untested and likely unready for an operation the size and scope needed to militarily seize Taiwan.  The risk of failure from a premature attack for the PLA’s leadership inside the CCP and to its standing militarily are extremely high.

An Uneasy Environment: PRC Political and Economic Uncertainties

Domestic Political Climate

China’s domestic political environment is another critical factor. The Chinese Communist Party (CCP) faces internal pressures, including managing public expectations and maintaining stability. Leadership transitions and factionalism within the CCP can also affect decision-making processes. The uncertainty surrounding domestic politics makes it less likely for China to embark on a risky military adventure.  A failed invasion attempt or even a protracted conflict would have dire consequences for China. It would not only weaken the PLA’s credibility but also damage the CCP’s legitimacy and leadership.

Economic Factors

China’s economy, while still robust, faces significant challenges. Slowing economic growth, high levels of debt and ongoing trade tensions with major economies like the United States pose substantial risks. Economic stability is paramount for the CCP’s legitimacy, and engaging in a conflict with Taiwan could exacerbate existing economic problems, leading to domestic unrest and further instability.

International Relations

China’s relations with major powers and neighboring countries play a crucial role in its strategic calculations. Though China has built a coalition of partners such as North Korea and, more recently, Russia, these partnerships likely do not have similar staying power as U.S. alliances.  North Korea has repeatedly proved to be an unreliable partner. Russia’s main interest consists of shoring up their prosecution of the Ukraine War. In the event of a conflict with Taiwan, it is unlikely that either of these potential allies could offer much more than political support. The potential isolation and economic fallout from such a Taiwan conflict serve as strong deterrents against aggressive PRC actions. Almost certainly China would face significant sanctions and overt military action, leading to diminished international standing and prolonged economic hardship.

Indicators and Warnings

If China was to take military action against Taiwan, it is likely that security and intelligence professionals would see a series of warning signals in diplomatic actions, the information and cyber environment, and physical activities. China would need to prepare the physical means to invade, but also attempt to affect the cognitive space of domestic, Taiwanese and international audiences.

Diplomatic Signals

In the event of escalation between China and Taiwan there will likely be an increase of aggressive rhetoric or statements from Chinese or Taiwanese government officials. It is possible to see withdrawal of ambassadors, reduction in diplomatic ties or imposition of diplomatic sanctions. Increased involvement or statements from major powers, such as the United States, Japan or European Union, indicating heightened concern.  The U.S. government demonstrated an increased propensity to release intelligence information in 2022 prior to the Ukraine War. It is likely they would continue this trend in the future, either through official channels or news media leaks.

Cyber and Information Activities

It is almost certain that the PRC would precede any action against Taiwan with both cyber attacks and cyber-enabled information campaigns. An increased frequency and sophistication of cyber attacks targeting Taiwanese and global infrastructure would be necessary to launch a military operation. Increased reports of cyber espionage activities targeting sensitive political, military or economic data are also likely. In an escalation scenario, increased media coverage of the Taiwan-China conflict is likely, with a focus on military and political developments. Finally, a surge in social media activity, including propaganda, misinformation and discussions about potential conflict against citizen audiences is likely. Risk and security teams should maintain surveillance on open source and social media reporting to monitor these developments.

Military Activities

Increased deployment of Chinese and Taiwanese military forces, particularly in areas near the Taiwan Strait, are indicators of potential military action. Movement around disputed areas such as Kimen and Matsu Islands controlled by Taiwan but claimed by China are likely areas of conflict. The PLA has already demonstrated that it can conduct large-scale exercises, such as during House Speaker Pelosi’s visit to Taiwan in 2022. Military exercises should be watched closely as a potential cover for invasion or action. Because of the geography of the area, heightened naval and air operations in the Taiwan Strait and surrounding regions are a likely indicator of military exercises or invasion.

Maintaining an Informed Perspective

The likelihood of China attacking Taiwan by 2027 is low due to ongoing military reorganization, political and economic uncertainties, and unmet strategic conditions for a successful takeover.  However, the risk of miscalculation remains. Unintended incidents or escalations could potentially trigger a broader conflict. Unexpected changes in PRC domestic politics, worsening PRC economic struggles or an incident in the South or East China Sea between the PRC and the U.S. or allies could all begin a cycle of miscalculation between competing powers in the region.

For security and risk professionals, understanding these dynamics is crucial for assessing the stability of the region and preparing for potential scenarios. And executive leadership is paying attention. In 2023, the escalation of geopolitical risk was identified as one of the top three trends to affect how CEOs direct their organizations, with 51 percent listing it as one of the leading external disruptors. This isn’t surprising because geopolitical instability is everywhere— from the China-Taiwan tensions focused on in this article to the war in Ukraine to the Israel-Hamas war. The impacts can be far-reaching, including disruptions to international supply chains and travel to spikes in local gas prices, just to name a few.

Continuous monitoring of military developments, political shifts and economic trends in China and Taiwan will be essential for maintaining an informed perspective on this critical issue. This is where critical event management technology can help security and risk professionals gain a more accurate reading of events and their ripple effects, and enact a multi-pronged approach to strengthening resilience to geopolitical conflict by:

The mission can feel daunting and the path forward unclear. If you’d like to continue this discussion, provide feedback, or are looking for assistance, OnSolve is here to help.

Matt Rasmussen

Matt Rasmussen is a 23-year U.S. Army Veteran who currently serves as an Assistant Professor and Course Director at the U.S. Army War College. Matt’s most recent operational assignments were first as an infantry battalion commander and then as a hand-selected combat advisor battalion commander. During his Army career, Matt has served at every operational echelon from platoon to division, and deployed to Iraq and Afghanistan four times.