Taiwan matters more than we’d like to tell ourselves

For most businesses, risk diversification is a good thing. Yet, late last year, Morris Chang, who heads Taiwan Semiconductor Manufacturing Corp, the world’s largest semiconductor company, sounded downbeat as plans to break ground on a new plant in the US proceeded apace. Globalization and free trade, he insisted, were almost dead. He grumbled that the US government’s plans to bring semiconductor manufacturing home were “doomed to fail.” Yet Chang knows better than most that, controversial as industrial policy is because it usually comes with higher costs, his new plant in Arizona reduces the risk that Beijing will enjoy dominant control of chip production if it were to attack and overpower its tiny neighbour.

This week, it was the turn of French President Emmanuel Macron to underplay that worryingly likely possibility. Macron went further in a reference to Taiwan when he said Europe should not fall into a “trap” and become involved in “crises that are not ours.” Commentators in China said Macron was “brilliant”. Pity Taiwan. With a population of just 24 million and an army a fraction the size of China’s, it needs the world’s support. Instead, multilateral agencies and global leaders have pandered to China’s claim that it is a renegade province by not recognizing Taiwan as an independent country with a vibrant democracy. Macron’s blunder and Chang’s grumble about the costs of moving production overseas are just the latest examples of such short-sightedness.

As Beijing has stepped up its military exercises near Taiwan over the past several days and increased its disregard of Taiwanese airspace by sending fighter jets repeatedly into it, Taiwan’s president Tsai Ing-wen, a brave woman in an impossibly difficult job, sounded all the right notes on a recent visit to the US, but this was undermined by a simultaneous visit to China by the leader of opposition Kuomintang party (KMT). Ma Ying-jeou, who was president of Taiwan between 2008 and 2016 when the KMT was in power, played to China’s script by recalling its past humiliation by foreign powers.

This is a theme that China has milked from Mao to its present modernity. But President Xi Jinping has a particular dislike for the West, as evidenced with him strengthening his alliance with Russia in a summit with President Vladimir Putin. In 2009, on a visit to Mexico before he was even president, Xi Jinping memorably voiced it thus: “There are some well fed foreigners who have nothing better to do than point fingers at our affairs,” he said. “China does not, first, export revolution; second, export poverty and hunger; third, cause troubles for you.”

And yet, since Xi became head of the Chinese Communist Party more than a decade ago, Beijing’s credit policies to boost infrastructure projects for its state-owned giants has created debt traps for many developing countries. Beijing promised to govern Hong Kong as a semi-autonomous, liberal financial centre when the city was handed back to it by Britain in 1997. But, in December, Jimmy Lai, the city’s leading newspaper publisher, was sentenced to almost six years in prison, allegedly for violating a lease contract for the headquarters of the tabloid he used to run. Several so-called pro democracy Hong Kong activists and legislators are in jail or have sought asylum overseas.

Optimists about Hong Kong’s future after it was returned to China in 1997 said that Beijing had an incentive to keep its promise to allow Hong Kong’s free-market economy and free press because this would help the project of an eventual peaceful unification with Taiwan. Over the past few years, as with all its neighbours including India, China has decided intimidation works better. Its conventional arms lead over Taiwan is enormous and growing; to pick just one example, China has 400 naval ships, Taiwan just 26. A recent in-depth report in The Economist says this asymmetry has been worsened by the Taiwanese military buying the wrong kinds of weapons such as expensive F-16s instead of concentrating on anti-missile defences, for instance. That report suggests some of its army officers also appear to lack the resolve that such an unequal fight would demand.

Ukraine-styled heroism that goes on for more than a year in the event of an invasion looks unlikely for all these reasons. In addition, the KMT might win the general election next year and pave the way for a de facto Hong Kong-style change in sovereignty for the island republic. When I visited Hong Kong last month, its capitalism seemed almost as vibrant as before, even if its media has been self-censoring. There were fewer expatriate business people and a movie distributor had to cancel showings of Winnie the Pooh in March because memes have likened President Xi to the cartoon character. After the horrors of Russia’s invasion of Ukraine have played out on our news feeds, few have the stomach for a prolonged battle in Taiwan—as Macron’s comments suggest. The disturbing human rights implications of this are troubling enough, but Taiwan is also the epicentre of global semiconductor production, with a 90% share of very advanced semiconductors. For many reasons, we should all be worried as this geopolitical tragedy plays out.

Rahul Jacob is a Mint columnist and a former Financial Times foreign correspondent.