ChinaWatch Vol. 1 No. 4

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.

Internal Politics

NPC Punts on Taiwan

The annual convocation of China’s rubber stamp parliament has offered little new direction on Taiwan, though a senior Chinese official suggested that “big changes” in Taiwan policy may be revealed at a key Communist Party event later this year.

Speaking on the margins of the National People’s Congress in Beijing, Wang Yifu, president of the official All-China Federation of Chinese Compatriots, said that China will formulate “new language” on the Taiwan issue when the 19^th Congress of the Chinese convenes, probably in the fall.

Wang did not elaborate, except to say that he hoped that relations between China and Taiwan would begin to improve soon, this after a sustained period of uneasiness provoked by China’s negative reaction to the election of Tsai Ing-wen as Taiwanese president in January of 2016.

Wang is a member of the Chinese-appointed Taiwan delegation to the NPC. He holds a rank equivalent to Cabinet minister and is considered to be an authoritative Chinese voice on Taiwanese affairs.

Since Tsai’s election, China has been straining to find its footing on Taiwan, which in recent years has seen a steady uptick in pro-independence sentiment amid a marked increase in the number of Taiwanese who refuse to identify themselves as Chinese. China is particularly incensed at Tsai’s refusal to accept the “1992 consensus,” under which Taiwan acknowledges that it is part of China. Adherence to the so-called consensus paved the way for Tsai’s Nationalist Party (KMT) predecessor to enter into a number of far-reaching trade and economic agreements with Beijing between 2008 and 2015. Analysts say that those agreements contributed to the KMT’s demise in the January 2016 elections.

Among the changes in Taiwan policy the Communist Party Congress could announce are hard-hitting amendments to their 2005 “Anti-Secession” Law, which mandates the use of force against Taiwan should the Taiwanese government either declare independence, or otherwise act to delay unification with the mainland indefinitely.

One such amendment could add a Taiwanese refusal to accept the “1992 consensus” to China’s list of pretexts for a possible attack against Taiwan, which would substantially ratchet up pressure on future Taiwanese leaders to accept it.

Significantly, President Tsai has so far been careful to leave a small bit of wiggle room on her attitude toward the consensus. In her May 20, 2016, inauguration speech, for example, she acknowledged the “historical fact” of the negotiations that led up to it, though she did not explicitly accept the consensus itself. Nevertheless, this represented the most flexible statement on the issue ever propagated by a senior leader from Tsai’s Democratic Progressive Party.

Economics and Trade

China Turns Screws on South Korea, Sending Important Message to Taiwan

China has stepped up pressure on South Korea to refrain from employing a U.S.-built anti-missile system, in a show of commercial force that has direct implications for Taiwan’s China-dependent economy.

Reports from Seoul say that the Chinese are making good on previous threats to punish South Korea over its decision to deploy a cutting edge anti-missile system known as THAAD, for Terminal High Altitude Area Defense, which would be used to intercept North Korea’s medium range missiles. The system is strongly opposed by China, which sees it not only as a threat to its North Korean ally, but also to its own military and industrial assets in Manchuria and in several adjacent areas.

South Korea’s deployment of the THAAD system began in early March.

According to the reports from Seoul, China has begun taking punitive measures against large South Korean companies amid concentrated efforts to force Chinese consumers to eschew South Korean products ranging from cosmetics to sophisticated electronics goods. These efforts include organized boycotts of South Korean chain stores in China and mass cancellations of Chinese package tours to South Korea.

South Korea’s vulnerability to the Chinese actions is clearly reflected in the country’s large-scale dependence on the Chinese export market. In 2016, South Korea sold China US$124.4 billion worth of goods, accounting for 25.1 percent of its export total — easily making China South Korea’s largest export outlet.

Ominously for South Korea, the 2016 export figures for China represented a 9.3 percent decline on the previous year. While some of this decline undoubtedly reflected China’s rising ability to supply itself with an array of goods it had previously purchased from Seoul — high quality cellular telephones for example — analysts say that it was also the result of a deliberate Chinese campaign to punish South Korea for its agreement to go ahead with the THAAD deployment on its territory.

South Korea of course is not the only Asian country with a high level of exposure to the Chinese export market. In 2016 Japan sold US$113.9 billion worth of goods to its Chinese neighbor, which accounted for 17.7 percent of its export total, making China its second largest export market, just after the United States. Taiwan is in an even more invidious position than either South Korea or Japan. In 2016 it sold China (including Hong Kong) US$109.1 billion in goods. That accounted for a whopping 39 percent of Taiwan’s export total, more than three times the percentage for the United States.

China’s willingness to deploy trade and commerce to try to get its way with South Korea on the THAAD anti-missile system suggests that it will not hesitate to use its muscle on Taiwan, either by pressuring it directly, or by turning the screws on its would-be allies in the region. While the government of Taiwanese President Tsai is theoretically committed to addressing the problem by diversifying its export partners, so far at least, the results have not been impressive. The only exception to this has been in the field of foreign tourism, where increasing arrivals from Southeast Asia have more than compensated the falling arrivals from China.

Taiwan Engagement

Taiwan Detains Former Chinese Student for Espionage

Taiwanese authorities have detained a Chinese graduate of a Taiwanese university on suspicion that the man was spying from China. This represents the first known espionage case involving a Chinese student at a Taiwanese university in six years.

The news comes as the ruling Democratic Progressive Party faction in parliament has announced its intention to move ahead with a far-reaching counter-intelligence bill, which critics have condemned as an unnecessary intrusion into citizens’ private lives.

Unnamed sources in the Taiwanese security establishment told media recently they estimate there are currently 5,000 Chinese spies operating in Taiwan.

Taiwanese press reports identified the detained Chinese man as Zhou Hongxu, 29. They said Taiwanese prosecutors allege that Zhou tried to recruit a Taiwanese Foreign Ministry official into a Chinese spy ring by offering him a free trip to Japan in exchange for providing classified materials.

According to the Taiwanese reports, Zhou studied in China at Zhejiang University in Hangzhou, and first came to Taiwan in 2009 as an exchange student at Tamkang University in New Taipei City. He subsequently enrolled in a Master’s Degree program at Taipei’s National Chengchi University and graduated last July.

While China’s use of students to spy on Taiwan during their stays at Taiwanese universities is relatively rare, its overall espionage activities against the island-nation are not. Over the past 10 years, no fewer than 20 high level cases involving Chinese spying on Taiwan have come to light. Many of them have involved leveraging Taiwanese business people working on the mainland to identify and cultivate Chinese espionage targets in Taiwan. Chinese intelligence professionals then attempt to turn these targets into assets, usually in exchange for substantial financial compensation.

The DPP bill currently before the legislature is intended to address at least some of these concerns. Among other things, it proposes tougher punishments for security violations and provides counter-intelligence agents with “semi-judicial” rights to investigate suspected cases of espionage.

Taiwanese with insider knowledge of Taiwan’s intelligence situation say that the Taiwanese intelligence services, particularly the National Security Bureau, were badly demoralized in the wake of budget cuts and other severe restrictions placed upon them by the government of former president Ma Ying-jeou. Those restrictions came within the context of Ma’s China engagement program, which sought to bring Taiwan and China closer together after a sustained period of enmity.

Some intelligence analysts believe that the current priority for Taiwan’s counter-intelligence community should be to identify those elements within the Taiwanese business community in China with backgrounds in the military or civil service. The analysts say that these are precisely the people the Chinese are using as “bridge agents” to identify and cultivate Chinese targets in Taiwan.

Taiwan Academic Freedom at Risk as Universities Yield to Chinese Pressure

Taiwanese press reports say that 80 out of Taiwan’s 157 universities may have compromised their academic independence to attract fee-paying Chinese students, in what some critics see as the beginning of the end of academic freedom on the island-nation.

The reports come amid a Ministry of Education probe into allegations that some Taiwanese universities are deliberately pulling their punches and not introducing sensitive subjects like Taiwanese independence to Chinese students studying there.

There are currently about 30,000 Chinese students enrolled in Taiwanese universities. The universities regard the Chinese students as a financial boon, particularly as they struggle to attract adequate funding.

This latest controversy began after authorities at Taipei’s Shih Hsin University acknowledged that they had sent letters to some of the university’s Chinese students promising to avoid teaching sensitive political subjects like Taiwan’s possible status as an independent country.

A university spokesman said that such documents were a mere formality necessary to placate Chinese authorities, who insist that Taiwan is part of China. The spokesman also said that the letters were only relevant for about five percent of the institution’s 1,500 Chinese students, and that in any event they did not represent a formal undertaking on the part of the university.

News of the Shih Hsin letters and parallel indications that other universities have engaged in similar conduct have provoked widespread outrage among Taiwanese students and professors, who are strongly committed to maintaining academic freedom within the context of Taiwan’s democratic system. Their worry now is that Chinese pressure will force Taiwanese universities to tailor content to Chinese demands, much the way that has already happened in Hong Kong.

For its part, Taiwan’s Ministry of Education insists that it is committed to upholding the standards of academic freedom. It has warned that any Taiwanese university found guilty of violating prevailing regulations on proper conduct in cross-strait relations would be subject to fines of up to US$16,000.

Taiwan of course, is not the only country where China is attempting to use its financial muscle to force universities to refrain from introducing academic content that it finds distasteful. Universities in the United States, for example, have come under strong Chinese pressure on issues ranging from the issuance of invitations to the Dalai Lama to contacts with Uighur separatists in Xinjiang. While almost all of the universities maintain that the Chinese pressure has not been successful, some critics charge that individual professors, particularly those concerned about their continuing access to China, may have given in in one way or another.

Taiwan Fiddles as China Military Buildup Continues

China has announced that its 2017 defense budget will increase by 7 percent, which even if it does represent the slowest pace this decade, still constitutes an existential threat to militarily passive Taiwan.

A spokeswoman for China’s National People’s Congress, the country’s rubber stamp parliament, told reporters that the 2017 increase would be more than enough to prevent “outside forces” from interfering in regional disputes — an apparent reference to American threats to push back against Chinese expansionism in the South China Sea.

The NPC spokeswoman did not specifically reference Taiwan in her comments, though China’s two-decade long military build-up has been largely predicated on the need to prepare for a seaborne invasion of the island.

Nevertheless, Taiwan seems either unable or unwilling to develop a credible response. One of the clearest indications of this was alluded to in a recent report by the Rand Corporation, an American think tank with close ties to the Pentagon. Sponsored by the Defense Department’s Under Secretary of Defense for Policy, the report maintains that Taiwan’s ability to defend itself against a Chinese assault is rapidly eroding in the face of large reductions in Taiwanese force levels. Those levels have plummeted within the context of Taiwan’s largely stillborn effort to replace conscription and move to an all-volunteer military.

To deal with the manpower problem, the Rand report suggested that Taiwan move expeditiously to reform its existing Armed Forces Reserve Command Structure, which is meant to back up the active duty force of 215,000 in the event of a military emergency. It pointed out that Taiwan’s ability to mobilize its estimated reserve force of 2.5 million men may prove illusory if such an emergency occurs. Part of the problem, it said, is the generally negative attitude of the Taiwan population to performing military service, largely reflecting the military’s inability to project an image of either professionalism or fairness. Also at play is the Taiwan government’s inability to convince the public that military service is necessary in an increasingly strained geopolitical environment — an environment in which the Chinese threat is becoming more and more acute with each passing year.

A particular reserve force shortcoming, the Rand report said, was the low level of readiness among the force’s 285,000 non-commissioned officers and 28,000 officers. At present the training regime for this core military cadre is limited to only seven days every two years — far below prevailing international standards. Rand suggests that the cadre engage in at least 2-3 weeks of intensive training annually — about six times the current level.

Other recommendations contained in the report call for Taiwan to study reserve force programs in Finland, Georgia, Japan, Singapore and Switzerland, and for its reserve forces to take a larger part in the annual Han Guang tri-service military exercises, the jewel in the crown of the standing army’s readiness regime. It further suggested that reservists be more conspicuous in augmenting active duty pilots, missile units and cyber units in their duties, because this would send “a clear signal to Beijing that the Taiwan reserves would add considerable capability in mission critical areas.”

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