ChinaWatch Vol. 1 No. 10

A regular feature of Taiwan Sentinel, ChinaWatch examines developments in China in the areas of internal politics, economics and trade, geopolitics and Taiwan engagement and analyzes their advantages or disadvantages for Taiwan’s standing in the region and the world. This feature is based on the premise that what happens in China has direct relevance for the durability of Taiwan’s de facto independence. ChinaWatch is updated monthly.

Geopolitics

Bannon’s Ouster Stalls U.S. Showdown with China — At Least for Now

The Aug. 17 ouster of Chief Strategist Stephen K. Bannon from his position in the White House has put the kibosh on a more muscular American response to China’s growing economic and military power, at least for the present. But roiling American unhappiness over Beijing’s failure to rein in North Korea’s rapidly developing nuclear and ballistic missile programs is acting as a counterweight, dampening prospects for development of a Sino-American political condominium over the near to medium term.

With Bannon’s ouster from President Donald Trump’s inner circle, China hawks in Washington have lost their most spirited advocate, theoretically leaving the field open for Trump’s internationalist advisers — people like son-in-law Jared Kushner, Secretary of State Rex Tillerson and Treasury Secretary Steve Mnuchin — to have a greater say on China issues.

But Trump’s growing impatience with Xi Jinping’s inability to stop North Korean nuclear and ballistic missile development has undercut efforts by arch-China accommodationist Henry Kissinger to push the Trump administration in the direction of ever closer ties with Beijing. This was underscored in early September when plans for Kushner to visit the Chinese capital to help plan the Trump-Xi summit were abruptly cancelled.

In a series of much-ballyhooed interviews on the eve of his White House departure, Bannon gave full rein to his strong anti-China agenda. In one of his comments, Bannon stated that “the economic war with China is everything,” arguing that the U.S must do all it can to hold the line on Chinese economic and military assertiveness or lose its status as the world’s only true hegemon.

Longtime China hawk and Bannon confidante Michael Pillsbury said that Bannon saw China’s rise as a “civilizational challenge” for the U.S., which could lead to China “earn[ing] the privilege of redesigning the world order.” Pillsbury is a veteran of the Pentagon’s Office of Net Assessment, which Bannon lionized as a young Navy officer more than three decades ago, particularly for its success in putting the prevailing Soviet threat in razor sharp focus. During his stay in the White House, Bannon made it clear that China constitutes an even larger threat to long-term American interests.

At least in the short term, Bannon’s departure is a setback for Taiwan, which profits from any problems in the Sino-American relationship. In the longer term however, its impact may be mitigated, particularly if Trump maintains his North Korean-generated China skepticism, and keeps his ambitious coterie of pro-China advisers on a relatively short leash.

Indonesia Pushes Back on China in South China Sea

Over the past several years China has encountered relatively little resistance as it has pushed ahead with its ambitious plans to transform the South China Sea into a Chinese economic and strategic lake — notwithstanding the weak legal basis on which those plans are based. One after another countries like Vietnam and the Philippines have given in (tacitly or otherwise) to China’s growing militarization of the area, which is aimed at creating Chinese facts on the ground. Helping the process along has been the U.S.’ signal failure to provide compelling evidence that it is ready to defend the interests of its long time Asian allies.

Recently, however, one Southeast Asian country has shown that it is not prepared to take the Chinese moves lying down. That country is Indonesia, which despite having close commercial and economic links with Beijing, has embarked on a wide-ranging effort to assert its sovereignty over its exclusive economic zone within the confines of China’s so-called nine-dash line — the unilateral demarcation of Beijing’s expansive maritime claims.

The Indonesian moves are important because they provide a test case for China’s willingness to go to the mat with its Asian neighbors. So far at least, the mere threat of economic sanctions or political pressure has been sufficient to dissuade these countries from standing up to Chinese assertiveness. Taiwan, which obviously has the most to lose from Chinese aggression in the area, has been understandably circumspect about confronting Beijing, not only in the South China Sea itself, but also across a broad range of related issues.

Jakarta began its pushback against Chinese expansionism in the South China Sea several months ago when it renamed a resource-rich waterway north of Indonesia (the North Natuna Sea) as a way of asserting its claim to the area. It quickly followed up by stepping up its military presence in the Natuna Islands, expanding its naval port on the main Natuna island and lengthening the runway at its air force base there to handle larger planes. It also promised to deploy warships to provide security around the Natunas’ profitable fishing grounds and its robust inventory of offshore oil and gas production facilities.

So far at least, China has been relatively restrained about the Indonesian moves, more or less confining itself to ritual assertions of its claims to all the maritime territories lying within the confines of the nine-dash, which extends well south of China proper. In the longer run however, it may have no choice but to confront Indonesia head on, either by deploying naval assets to the Natunas, or more likely, by ramping up economic pressure on Jakarta, which remains extremely dependent on its commercial largesse. While China would appear to have the clear edge in any future confrontation, at least for the time being, Indonesia has shown that it is not willing to be pushed around with impunity — unlike many of its less assertive Southeast Asia neighbors.

Taiwan Engagement

China Stepping Up Flights Near Taiwan Airspace

China is stepping up its military flights near Taiwanese airspace, in a move that the Taiwanese Ministry of National Defense says is an attempt to familiarize Chinese air and naval forces with major maritime routes in the western Pacific.

The ministry said many of the flights involve Shaanxi Y-8 aircraft. It said that the favored Chinese patrol routes include the Bashi channel between Taiwan and the Philippines with a subsequent northeast turn to bring Chinese aircraft within close range of Japan’s Miyako Islands. These two routes constitute China’s main lines of communication to the open sea, which is otherwise limited by the first island chain, a territorial semi-continuum stretching from the Korean peninsula in the north to the Indonesian archipelago in the south.

The Defense Ministry’s announcement reflects an initiative undertaken by the government of President Tsai Ing-wen to keep the public generally apprised of Chinese military activities that impinge on Taiwanese security. Under the previous government, such activities remained secret, apparently as part of president Ma Ying-jeou’s efforts to promote closer ties between Taipei and Beijing.

The ministry said the U.S. is closely monitoring the Chinese flights, which are frequently aimed at probing Taiwan’s radar and anti-aircraft capabilities, and collecting the electronic signatures of its advanced military equipment. The flights underscore the compelling strategic importance of the first island chain, which China has long seen as a major detriment to its future military posture. Were the chain to be broken — were for example China to have direct access to the Taiwanese naval base at Suao on the east coast — It would be able to project its military power much farther than it can today, including to the major American military facility on Guam, and even to Hawaii and the U.S. west coast.

Taiwan Activist Pleads Guilty to Subverting State Power
in Chinese Court — Any Broader Lessons?

Much as expected, a Taiwanese political activist has pleaded guilty to the catch-all charge of subverting state power, becoming the first NGO employee to be prosecuted under a new law drastically enhancing controls over the activities of foreign non-profit workers in China.

Lee Ming-che’s well-choreographed confession came at the beginning of his show trial in the Hunanese provincial city of Yueyang on Sept. 11. Lee, 42, was arrested by Chinese authorities after crossing into Guangdong from Macau on March 19. Before his arrest he conducted online lectures on Taiwan’s democratization for Chinese citizens and managed a fund for political prisoners on China. Some of his activities took place on Chinese territory.

In making his confession — which came after six months of continuous detention during which he was unable to visit with his family — Lee openly admitted to spreading “articles that maliciously attacked the Communist Party of China, China’s existing system, and China’s government.” He also pledged himself to work toward unification as soon as he is allowed to return to Taiwan.

There can be little doubt but that Lee’s confession was coerced — his lengthy answers to the court’s questions on his China-related activities suggest the kind of in-depth preparation that typically accompanies important show trails in authoritarian polities.

Less clear however, is what lessons should be gleaned from the process itself. Was China trying to humiliate Taiwanese President Tsai Ing-wen for her continuing refusal to accept the proposition that Taiwan belongs to China? And beyond that, what are the immediate and longer term implications for China’s willingness to apply its laws to territories outside its political control?

The answer to the first question seems relatively clear-cut. It is hard to believe that China would have gone out of its way to make an example of a Taiwanese citizen during the reign of Ma Ying-jeou, whose entire presidency was dedicated to bringing Taiwan and China closer together both economically and politically. Under Ma, Lee might have had his wrist slapped, but little more than that.

Tsai Ing-wen, however, is a very different kettle of fish. She brings out the worst in Chinese vitriol. By making an example of Lee during her presidency — and doing so in way that contravenes existing China-Taiwan agreements on the proper treatment of criminal suspects from the other side — China is aggressively showing its open-ended contempt for Tsai’s leadership and not coincidentally underscoring her inability to do anything of substance to help Lee’s cause.

The question of whether Lee’s trial shows that China is willing to apply its laws to territories outside its political control is a bit more complicated. As contemptible as China’s new NGO law may be, it is obviously free to apply it to anyone contravening it within its borders. Unfortunately for Lee, there is little doubt but that some of his activities did take place on Chinese territory. In this sense, at least, China had every right to bring him to trial in Hunan Province — and to find him guilty — coerced confession or not of the crime it charged him with.

Taiwan Takes Major Step in Enhancing Cyber Defenses Against China

Under rising pressure from security circles in the U.S., Taiwan has taken a major step to enhance it defenses against Chinese aggression — specifically in the cyber sector.

In mid-September the Ministry of Defense announced it would begin providing generous bonuses to try to entice cybersecurity experts in the private sector to come work for the government. In some cases the bonuses will amount to NT$50,000 per month, over and above a base salary of NT$40,000-50,000. This would put the cybersecurity experts’ compensation roughly on the same plane as that of an army major general or a navy admiral.

The bonuses will be available to recruits to either the General Staff or the Information and Electronic Warfare Command, which was established in June.

In the run-up to Taiwan’s presidential and legislative elections in January of 2016, the Democratic Progressive Party said that it wanted to put a big emphasis on Taiwanese cybersecurity as an antidote to China’s increasingly aggressive attempts to compromise Taiwan’s wide-ranging cyber infrastructure. It cited the establishment of a new cyber command within the armed forces as one if its main cybersecurity goals.

Among other things, American critics of Taiwan’s defense posture want it to increase its overall defense expenditures to three percent of GDP, from the present level of around two percent. The DPP government of President Tsai Ing-wen says it is committed to reaching the three percent figure, but cautions that it may take some time to achieve that goal.

Economy

The Empire Strikes Back: U.S. Nixes China High-Tech Acquisition Deal

In a move signaling a tough new American line on Chinese acquisition of U.S. high-technology companies, President Donald Trump has blocked a Chinese-backed investor from purchasing an American semiconductor maker, citing national security considerations.

Trump’s decision put the brakes on a bid by China Venture Capital Fund Corporation and other Chinese entities with close government ties to buy Oregon-based Lattice Semiconductor. Presidential intervention on foreign bids to purchase U.S. companies is very rare. Trump could have kicked the can down the road to the secretive Committee on Foreign Investment in the United to recommend a course of action to him, but apparently wanted to send a loud and clear message that he is personally concerned about China’s increasing assertive attempts to gain a strong foothold in sensitive American industries.

Last year Chinese investment in the U.S. hit US$46 billion, a threefold increase over 2015. High technology has been a particular Chinese focus.

In explaining Trump’s decision, the White House said that it had denied the Chinese bid partially out of concern that it needed to safeguard the integrity of a company that supplies important products to the U.S. government.

Throughout his presidential campaign, Trump went out of his way to lambaste China’s mercantilist economy, accusing the country of stealing American jobs and manipulating its currency to the detriment of American industry and agriculture. Following a meeting with Xi in April however, he appeared to change course, holding out the possibility of closer economic and political relations in exchange for a more confrontational Chinese posture toward North Korea’s rapidly developing nuclear and ballistic missile programs. This was underscored by revelations of close financial and other ties between son-in-law Jared Kushner and well- connected Chinese financiers.

Now however, he seems to have returned to his original position.

The killing of the Lattice deal is good news for Taiwan, which remains strongly dependent on the maintenance of appreciable economic and strategic distance between Washington and Beijing, and in a more general sense, a high level of American wariness toward Chinese motives in Asia and beyond.

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