Cross-Strait Relations
Xi Jinping has ruled out the prospect of peaceful unification with Taiwan

Xi Jinping in military attire greeting soldiers
© picture alliance / Xinhua News Agency | Li Gang

Whatever view one takes on the appropriateness of the timing of the proposed trip to Taiwan by US House Speaker, Congresswoman Nancy Pelosi, the response from the Chinese Government, reflect a belligerence. Beijing has threatened both privately and publicly to escalate tensions in the Taiwan Strait in response, including the prospect of intercepting the Speaker’s plane or introducing a No-Fly Zone over the island.

In the US, the recent hosting of the Chinese Ambassador Qin Gang for a fireside chat at the Aspen Security Forum offered yet another platform for a Chinese official to espouse party propaganda on human rights violations in Hong Kong and Xinjiang, and deflect Xi Jinping’s military threats towards Taiwan without challenge or scrutiny. The deference of the interviewer, the Financial Times U.S National Editor, Edward Luce, towards the Chinese Ambassador was reinforced by his latest opinion piece last week which quotes their chat at length and blasts the US House Speaker Congresswoman Nancy Pelosi’s proposed trip to Taiwan as “as little more than gesture politics” and “reckless”.

Chinese Government officials are trying their level best to convince Western commentators that there is little differentiation between Xi Jinping’s approach to Taiwan and that of his predecessors. This approach lays the blame for China’s growing air incursions and military threats against Taiwan as squarely the fault of US policymakers. Yet, such a limited view ignores the growing economic pressures Xi Jinping faces at home and the changing attitude of policymakers abroad in response to China’s destruction of Hong Kong.

"One-Country - Two Systems" is no longer an attractive model

After all, Hong Kong’s “One Country, Two Systems” model which previously guaranteed the territory autonomy, democratic elections, and the rule of law, unchanged for fifty years, was China’s planned model for an eventual peaceful reunification of Taiwan. Xi Jinping’s decision to enforce a National Security Law, reform Hong Kong’s electoral system to bar pro-democracy parties from office, and to appoint a former police officer to run Hong Kong, have wider ramifications beyond Hong Kong.

In torpedoing “One Country, Two Systems”, Xi Jinping has ruled out the prospect of peaceful reunification between Taiwan and China, which is a far cry from the previous orthodoxy of the Chinese Communist Party. Given the events in Hong Kong, the majority of the Taiwanese now openly reject this offer. Understandably so.

Similarly, many now speculate that Xi Jinping increasingly sees the prospect of militarily reunifying Taiwan with the mainland and securing “national rejuvenation” as the price of ensuring his ability to govern for life and secure his portrait in Tiananmen Square alongside Mao Zedong.

Xi is using the Pelosi visit to test Western resolve on the Taiwan question

China’s economic slowdown, which has been linked to the economic impact of widespread COVID lockdowns, could not come at a worse time for Xi Jinping as those few remaining rivals within the upper-echelons of the party consider whether it is enough to limit his absolute hold over the country at the 20th National Congress of the Chinese Communist Party this fall.

Unfortunately for Xi, the COVID lockdowns are just the tip of the iceberg of China’s potential financial woes. The country’s property market long propped up by lending from shadow banks has come under fresh pressure this month from wildcat mortgage boycotts in over 90 cities with over $2 trillion yuan at risk. While a growing number of China’s overseas loans as part of its “One Belt One Road” Initiative are being renegotiated as countries are at risk of defaulting, in 2020-21 alone China had to renegotiated over $52 billion worth of loans.

Xi’s woes have not been helped by international investors, who have previously been bullish and willing to pump unprecedented amounts of Western capital into China’s financial markets. Spooked by China’s “Zero Covid” approach or finally awake to the authoritarian nature of the regime, overseas investors dumped more than $150 billion in China based stocks in the first quarter of 2022. Chinese government bonds alone saw $61 billion sell-off between February and May.

Within this context, it is not hard to see how an isolated leader cut off from the real world might consider the military invasion of a neighbouring territory as a means to embolden nationalism, isolate his rivals, and extend his rule.

The reality is that rising tensions in the Taiwan Strait are not the result of a potential visit from a soon to be retired senior US politician, but rather fuelled by China’s economic slowdown and Xi Jinping’s calculation that reunifying Taiwan by force will deliver a crown for life. Xi is using the Pelosi visit to test Western resolve on the Taiwan question.

*Dennis Kwok, a former Hong Kong lawmaker (2012-2020), is Senior Fellow at the Harvard Kennedy School.

Sam Goodman is Executive Director of the China Risks Institute