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Taiwan, the ROC, and Super Bowl XXXII

by Index Investing News
April 14, 2023
in Economy
Reading Time: 8 mins read
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Late in Super Bowl XXXII, the Green Bay Packers allowed Denver to score, rather than have the clock run down close to zero, at which time Denver would almost certainly kick a game winning field goal.  The thought was that allowing Denver to score with 1:45 left would give Brett Favre a chance to lead the Packers on a late drive to tie the game.  (It didn’t work.)  I’m reminded of this game when I look at the standoff between China and Taiwan, which next to Israel might be the most complex foreign policy problem in the world.

When the Nationalist army fled to the island of Taiwan in 1949, they continued to insist that they represented the legitimate government of all of China.  This is arguably still the official policy of Taiwan, although in reality the Taiwanese government would prefer to be independent.  Officially, the PRC, the Taiwanese government and the US government still adhere to a “one China policy”.  Neither the Taiwanese government nor the US government has officially recognized Taiwanese independence, due to fear that this might trigger a Chinese invasion.  So the standoff that has been going on for 74 years continues.

This odd history has created a rather unusual situation.  For instance, many people equate “Taiwan” with the “Republic of China” (ROC), which is the official name of the “country”.  This is not accurate.  Taiwan is one island, while the Republic of China includes 168 islands.  Obviously Taiwan is far and away the most important part of the ROC, but the other 167 islands have great political significance.  Most importantly, if Taiwan were a truly independent country (not just de facto, but also de jure), then most of those 167 islands would not be a part of Taiwan.  The current structure of the “Republic of China” only makes sense if you view Taiwan as a part of China.

For instance, consider the ROC-controlled island of Taiping, which is far and away the largest of the Spratly Islands.  “China” is heavily criticized for occupying the Spratly Islands, which are much closer to the Philippines than to China.  And yet almost none of the criticism is directed against the government in Taiwan.  I actually agree that the criticism should be directed against the PRC and not the ROC, but to understand why we need to take a deeper look at what’s actually going on.

Outside of Taiwan, the most important parts of the Republic of China are what might be called “ROC occupied Fujian”.  Both the PRC and the ROC agree that islands such as Kinmen (aka Quemoy) and Matsu are part of Fujian province, an important Chinese coastal province.  Indeed Kinmen is practically a suburb of a large Chinese city (Xiamen.)  Thus Taiwan’s ownership of Kinmen only makes sense if you assume that the ROC is the legitimate government of all of China. You can argue that the Taiwanese are “not Chinese”, but it’s hard to argue that the Kinmenese are not Chinese.

In recent decades, the Taiwanese have abandoned any thought of retaking the mainland.  So why not jettison all those outer islands and make Taiwan independent?  And why doesn’t the PRC simply occupy Kinmen?  Donald Canton has this to say:

After the PLA liberated Hainan Island in May, 1950, General Peng Dehuai and some generals of the People’s Liberation Army strongly advocated taking down the two islands of Kinmen and Matsu in one go. They asked Mao Zedong for instructions and were denied. Everyone did not understand. Mao Zedong once said privately that the two islands of Kinmen and Matsu were like the two small hands of a child holding his mother’s shirt. If they were taken back, it would be like the hands of the child were cut off. Then, the child (Taiwan) would never come back to the mother (China).

In other words, as long as the ROC holds onto parts of Fujian province, then it’s clear that the ROC is part of “China”.  So until the bigger issue of Taiwan can be resolved, it is in China’s interest to allow Taiwan to maintain control of a portion of Fujian province.

OK, then why does Taiwan station troops in Kinmen?  Why not let the Chinese walk in and take control?  Isn’t this struggle a zero sum game?

I’d say it’s not quite a zero sum game, as both sides would rather avoid war, at least at the moment.  But that might change in the near future.

Now perhaps you see the analogy to the odd ending of Super Bowl XXXII.  If it was in the Packers’ interest to allow Denver to score, then wasn’t it in Denver’s interest not to score?  And what happens if a player wants to be tackled, and the other team doesn’t want to tackle them?

I suspect that one almost never sees this sort of standoff in football because players are highly competitive and primed to be aggressive, not passive.  The ROC would be sort of embarrassed to surrender Kinmen, even if in some sense it’s in their interest.  Or perhaps they fear that the PRC would interpret surrender as a declaration of independence, and react accordingly.

The Cato Institute recently had this to say:

So far, most discussions implicitly assume that a PRC military move would take the form of an offensive against Taiwan itself. Only a few experts raise the question of what the United States would do if Beijing launched a more limited action—one against Kinmen (Quemoy) and Matsu (small Taiwanese‐​controlled islands just a few miles off of China’s coast) or against other, more distant islands that Taipei claims. Yet that is a much more likely scenario than a full‐​scale war to subjugate Taiwan. Moreover, it would be a bold, yet relatively low‐​risk way for Beijing to test the extent and reliability of Washington’s resolve to defend Taiwan.

The author (Ted Galen Carpenter) suggested that the US would have a difficult time justifying a military response:

Xi Jinping and his colleagues would have legitimate reasons to doubt whether the United States would be willing to risk a horribly destructive war with China over small islands that are merely claimed by Taipei. Indeed, the Biden administration would encounter considerable difficulty securing the support of the American people for a war over such meager stakes. Chinese officials very likely understand that point as well. Seizing Pratas/​Dongsha would be a bold move, and certainly is not one without risks, but it also would put the onus of any subsequent, dangerous escalation totally on the United States while sending an emphatic message of China’s determination and fraying patience. Washington needs to pay more attention to this scenario before being blindsided by a major crisis.

I think it’s even worse.  Kinmen is not part of “Taiwan”, it’s ROC-occupied Fujian.  If you really believe that Taiwan is an independent country, then it has no business stationing troops in Kinmen.  So why would the US wish to defend that island?

If you argue that the Kinmen residents don’t wish to be a part of China, isn’t it equally true that the Chinese soldiers stationed in the Spratly Islands don’t wish to be a part of the Philippines?  And I’m not sure exactly how Kinmen residents feel about the question.  A recent article in The Economist suggests that the residents are rather pro-Chinese:

In 2001 a ferry started operating to Xiamen, turning the island into a centre of tourism and business exchange. Many in Kinmen would like to be closer still—some have proposed a bridge and want the electricity grids to be connected. They hope not just to make Kinmen more prosperous, but also that closer integration with the mainland might be the best way to avoid being attacked. “America, China, Taiwan, whatever you do, just leave us out of it,” says Chen Yang-hue, a local councillor. He is one of several local politicians to demand, in February, that Taiwan withdraw its troops and “demilitarise” the island. Taiwan’s central government has not issued a response. . . .

Kinmenese want to be part of China’s growth and China wants to invest, says Chen Yu-Jen, who represents Kinmen in the national parliament: “They will treat us well, make us a model, and Kinmen can develop and prosper. But Taiwan won’t accept this.”

I’m not certain what Taiwan should do if Kinmen is attacked.  On the one hand, Taiwan might be better off if it jettisoned all its outer islands and tried to form an identify as “Taiwan”, not the “Republic of China”.  On the other hand, not defending Kinmen might be viewed as a sign of weakness, and embolden China to make further moves.

There are no easy solutions to this problem, but I wonder if both sides of the dispute would benefit from the following proposal:

Taiwan agrees to join the PRC in 50 years, and the PRC agrees that Taiwan can maintain its independent military during that interim period.  (The latter condition distinguishes this proposal from the flawed Hong Kong deal.)

Both sides would probably reject my plan, but I believe that both sides would benefit.  China could declare that the principle of eventual unification was firmly established, and the Taiwanese could privately decide that if China remained an unpleasant authoritarian place in 2073, then it would renege on the deal.  Doing so would probably trigger war in 2073, but better to kick that can down the road 50 years than face the risk of war in 2030.

Of course another solution would be for China to grant independence to Taiwan.  Another solution would be for China to become a model democracy with human rights, making reunification more acceptable to Taiwan.  My plan certainly isn’t the ideal solution, but at the moment it’s the least bad solution that is at least slightly realistic.

An article in the NYT recently suggested another solution:

Three months after Russia invaded Ukraine, Annette Lu, a former vice president of Taiwan, stood before reporters to promote a wildly unpopular idea. China and Taiwan, she said, should form a commonwealth that would be integrated economically, like the European Union, but remain separate politically. She called it One Zhonghua — a word that means “Chinese” in a cultural, ethnic or literary sense but is distinct from the word that refers to China in a political sense. It was a wink at the Chinese Communist Party’s insistence that there is only one China and that Taiwan is an inextricable part of it.

All realistic plans involve goodwill from the PRC, and right now I just don’t see that.

PS.  The US officially views Taiwan as being a part of China.  Unofficially, the US views Taiwan as being independent.  But the official view does matter.  The FT reports that Taiwan chip investment in Arizona will be double taxed:

Everyone wants a compromise. But solutions risk igniting a difficult diplomatic problem. The US does not see Taiwan as a sovereign nation. Any special tax deal would acknowledge sovereignty. China could regard this as provocation.

In contrast, Samsung’s chip plant in America avoids double taxation due to a South Korea tax treaty with the US.  To give such a treaty to Taiwan would require that the rule apply to all of China, or else the US government would have to treat Taiwan as being independent.

PPS.  The Economist has an interesting survey article on Taiwan, full of surprising information:

But the army is still one of Taiwan’s most conservative, pro-KMT institutions. Many officers are “equally as suspicious of the United States as they are of China,” says an American official once based in Taipei. As late as the mid-2010s, officers told him the Chinese were their cousins and they would “never fight for Taiwan’s independence,” he adds.

PPPS.  Believe it or not, the islands of Kinmen and Matsu were a major issue in the 1960 presidential election debate between Nixon and Kennedy.

PPPPS.  The Packer’s coach actually misjudged the situation on second down, thinking it was first down.  But the principle involved is what interests me.



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