For the leadership of Taiwan, the significance for Taiwan’s relationships with the US and China of the end of the Trump administration and the arrival of the Biden administration formed the defining concern as 2021 began. Taiwan welcomed two steps that the Trump administration took in its waning days: announcing a visit to Taiwan by the US ambassador to the UN (even though it was later cancelled) and repudiating the longstanding Taiwan Contact Guidelines, which was widely seen in Taiwan as overly restrictive. Taiwan’s anxieties regarding the Biden administration were quickly allayed, as incoming senior officials repeatedly called US support for Taiwan “rock solid” and issued new far less restrictive Guidelines. Taiwan also benefited from unusually direct expressions of support from Japan and other international partners.

Taiwan’s economy continued to boom despite the pandemic, but its dominance in high-end computer chip production became the subject of worries by US officials and industry groups over supply chain security. China’s military activities near Taiwan included two days of especially intense activity, which were clearly intended to signal its displeasure with the Biden administration’s support for Taiwan. China also banned the import of Taiwanese meat and pineapples and announced preferential treatment for Taiwan investors in mainland agriculture, all clearly targeted at disrupting support for Taiwan’s ruling Democratic Progressive Party and President Tsai Ing-wen among its rural political base. Both strategies appeared more likely to backfire than not. Increasing tensions between the US and China, especially over Taiwan, have led to concerns on all sides that a diplomatic or military confrontation may be growing more likely.

Low-key Statements Begin the Cross-Strait Year

2021 dawned in China and Taiwan with many recalling the exchange of statements in January 2019 between People’s Republic of China (PRC) President Xi Jinping, calling for movement toward unification, and Tsai Ing-wen, president of the Republic of China, staunchly defending Taiwan’s separate identity. That exchange helped to reverse Tsai’s lagging political fortunes and led to her reelection on Jan. 11, 2020. This year, Xi’s New Year statement did not mention Taiwan.

Zhang Zhijun, president of the Association for Relations Across the Taiwan Straits (ARATS)—China’s supposedly unofficial interlocutor with Taiwan—issued a statement describing the cross-Strait situation as “severe and complex,” saying that “the deadlock between the two sides of the strait is difficult to resolve,” but expressing confidence that these difficulties “cannot change the melody of the era of national rejuvenation.” In her new year’s statement, President Tsai offered a very different view, asserting that the actions of People’s Liberation Army (PLA) aircraft and naval vessels had undermined cross-Strait relations, but promising that Taiwan would “uphold our principles and not act rashly” [and] “facilitate meaningful dialogue under the principles of parity and dignity” as long as the Beijing was sincere.

On March 5, Premier Li Keqiang addressed cross-Strait relations in his work report to China’s National People’s Congress, using language familiar from previous work reports. He promised that China would remain committed to the one-China Principle and the 1992 Consensus and “to promoting the peaceful development of relations across the Taiwan Strait and China’s reunification.” China, he warned, would resolutely deter any Taiwan activity that promoted independence yet encouraged Taiwan compatriots to benefit from China’s economic growth. There was none of the tension around this work report that had occurred when the 2020 work report, which was presented shortly after Tsai’s second inauguration, reportedly omitted reference to peaceful reunification. These three statements from the mainland and one from Taiwan seemed to signal a relatively moderate tone on both sides and suggested that both would continue their policy approach from 2020.

The events of January through April offered a picture of considerably sharper confrontation. An early point of contention was another in the series of efforts from Taiwan to find a formula to bridge differences with the mainland over the “1992 Consensus” in order to resume cross-Strait dialogue that has been frozen by Beijing since Tsai first took office in 2016. Chiu Tai-san, newly appointed as minister of Taiwan’s Mainland Affairs Council, proposed on March 18 that Taiwan and the mainland could renew their dialogue with “constructive ambiguity,” “finding the greatest common denominator” between the two sides. Chiu was clearly proposing that the two sides revisit the “1992 Consensus” without insisting that it reflected China’s “one-China Principle.” Even if Chiu intended this to be an olive branch, no one expected it to succeed, and China’s Taiwan Affairs Office promptly rejected it.

Outgoing, Incoming Administrations Raise Taiwan’s Stature in Washington

On Jan. 6, the State Department announced that US Ambassador to the United Nations, Kelly Craft, would visit Taiwan, only to cancel the visit the following week. On Jan. 9, then Secretary of State Michael Pompeo cancelled the State Department’s Guidance for US official contacts with Taiwan, reissued annually since at least the mid-1980s, which had helped ensure that the US did not treat Taiwan as a country with which the United States had diplomatic relations, and that had been criticized in Taiwan as demeaning. Both of the announcements led to strong denunciations from Beijing, but were welcomed enthusiastically in Taipei. Both were interpreted as Pompeo’s efforts to force the incoming Biden administration to continue a confrontational posture against China and in support of Taiwan.

Figure 1 Bikhim Hsiao posing at the Biden inauguration. Photo: TECRO

How would the Biden administration respond? Biden’s nominees for secretary of State and Defense both assured senators at their confirmation hearings that US support for Taiwan was “rock solid.” Tsai, Foreign Minister Joseph Wu, and Taiwan’s Representative in Washington, Bi-khim Hsiao, all enthusiastically welcomed these confirmations that Taiwan’s relationship with the US would be secure under the Biden administration. Earlier anxiety seemed to vanish.

The Biden State Department issued new Taiwan Contact Guidelines on April 9 that are less restrictive than those Pompeo cancelled. The Financial Times, citing an unnamed Biden administration official, said the new guidance now allows US officials to regularly meet Taiwan counterparts in US federal government buildings and at Taiwan’s de facto embassies and consulates overseas. US officials are also now permitted to attend gatherings at Taiwan’s Twin Oaks estate in Washington, except at Taiwan’s Double Ten national day. The Biden official said “both sides” should be happy with the new guidance—Beijing because some “guardrails” remained in place and Taipei because several restrictions had been lifted. The official State Department press release said the liberalized guidelines are aimed at encouraging greater US government engagement with Taiwan—an “important economic and security partner”—but it also underscored the unofficial nature of US-Taiwan relations. Evidence of the Biden administration approach to contacts with Taiwan appeared even before the State Department’s April 9 announcement. Most notably, the US ambassador to Palau accompanied the president of Palau during his visit to Taiwan in late March, marking the first visit to Taiwan by a sitting US ambassador since 1979. Earlier in the month, the chargé (acting ambassador) to Japan invited his Taiwan counterpart in Tokyo, Frank Hsieh, to the official residence of the US ambassador.

A few months into office, the Biden administration is actively rallying US allies against the PRC. On a visit to Tokyo in March for the Security Consultative Committee meeting, the so-called “two-plus-two,” Secretary of State Antony Blinken and Defense Secretary Lloyd Austin issued a joint press statement with their Japanese counterparts on the US–Japan alliance, in which the four ministers underscored the importance of cross-Strait peace and stability. The following month, President Joe Biden welcomed Japan’s Prime Minister Suga Yoshihide to the White House for his first in-person meeting with a foreign leader. Biden and Suga issued a joint statement on a US–Japan partnership for a “new era,” which, like the “two-plus-two,” underscored the importance of cross-Strait peace and stability. This addition came as a surprise to some observers who believed Suga might have preferred to omit it for fear of overly antagonizing Beijing. The last public reference to Taiwan during a US–Japan leaders’ summit was in 1969.

Figure 2 Frank Hsieh meeting with the acting US ambassador in Tokyo. Photo:Twitter/@USAmbJapan

PLA Actions Belie Low-key Statements

Two days after Biden was inaugurated, China launched its largest ever single-day series of air sorties, sending 15 PLA Air Force (PLAAF) aircraft into Taiwan’s Air Defense Identification Zone (ADIZ). Twelve were combat aircraft, a significant shift from earlier sorties near Taiwan in which turboprop Y-8 anti-submarine and reconnaissance aircraft had dominated. The US State Department responded sharply, affirming Washington’s “rock solid” commitment to Taipei and urging Beijing “to cease its military, diplomatic and economic pressure.” By the end of January, PLA sorties near Taiwan had occurred nine out of every 10 days, according to Global Times, a nationalist mouthpiece. China’s Ministry of Defense said that they were intended as a “stern warning” to foreign forces.

Near-daily incursions continued through the first four months of the year, spiking with 20 aircraft on March 26, 15 aircraft on April 7 as Taiwan prepared to conduct missile tests, and 25 aircraft on April 12. The last was the largest on record; all of these group sorties included significant proportions of combat aircraft. Chinese naval forces, including the Liaoning aircraft carrier, also maneuvered near Taiwan. While many of these activities were described by China’s Taiwan Affairs Office (TAO) or Global Times as signaling Chinese warnings, they clearly also served operational and training requirements for the PLA, including intelligence collection and accustoming PLAAF units to flying around Taiwan’s defensive perimeter and encountering Taiwan military challenges. They also strained the capacity of the Taiwan Air Force to respond, leading it to request an additional $74 million to counter the incursions. Taiwan’s Air Force also announced its decision to purchase Patriot Advanced Capability 3 (PAC-3) missiles to enhance its defensive capabilities.

When China’s National People’s Congress Standing Committee passed a new Coast Guard Law on Jan. 22, it transformed the Coast Guard into a military-like organization under the command of the Central Military Commission, and it authorized commanders to take action when sovereignty is violated in waters claimed by China, which would include the East China Sea, the waters around Taiwan, and the South China Sea. Without acknowledging a cause-and-effect linkage, Taiwan’s Coast Guard and Navy announced plans to equip patrol vessels with anti-air missiles during wartime and integrate the vessels into the Navy’s live-fire drills later this year. On March 25 in Washington, the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Relations Office (TECRO) signed a memorandum of understanding (MOU) to establish a US–Taiwan Coast Guard Working Group (CGWG) without suggesting any military dimension to their cooperation. China’s Foreign Ministry spokesperson Hua Chunying said the following day that the pact violated US commitments to China and called on the US to “be cautious with its words and actions on Taiwan-related issues,” suggesting that China did at least see the MOU as a step toward more formal US–Taiwan military cooperation.

Agriculture Becomes a Field of Contention

On Jan. 27, China’s TAO announced that it was banning the import of meat from Taiwan to prevent the spread of the highly pathogenic avian influenza and consumption of meat with ractopamine. Because Taiwan exports very little meat to the mainland, Taiwan officials expressed annoyance, but there was no significant economic damage caused.

The next month, on Feb. 26, the TAO announced that it had found unspecified biohazards in pineapples imported from Taiwan just as the pineapple harvest was beginning in Taiwan. Because the mainland is a major market for Taiwan producers, the potential economic damage was considerable. President Tsai took to Facebook to urge Taiwanese to eat more pineapples, calling the mainland decision an “ambush” and “obviously … not a normal trade decision.”

Figure 3 Chinese President Xi Jinping visiting Fujian and calling on the province to redouble its efforts to reach out to Taiwan. Photo: Xinhua/Ju Peng

On March 17, China announced “22 Measures on Agriculture and Forestry” to attract Taiwan investment in mainland agriculture, including provisions on land-use rights, access to financing, agricultural patents, and funding for research and development, essentially providing Taiwanese investors national treatment. While there was little evidence that such measures would attract any significant interest, Taiwanese officials treated the package as one more in a series of economic United Front strategies, following the pineapple ban and the packages of 31 investment incentives in 2018 and 22 in 2019 that the Mainland offered. During an inspection tour of Fujian Province in March, Xi Jinping called on provincial officials to “be bold in exploring new paths for integrated cross-Strait development.”

Taiwanese suspicions of Chinese agricultural policies and their negative impact on Taiwan were reinforced on April 4 when a dead pig was discovered in a harbor on Taiwan’s west coast; tests found it had been infected with African Swine Fever (ASF), which has decimated mainland pork production since 2018. Although there was no conclusive proof that the dead pig had come from China, Taiwan’s Coast Guard announced it would launch increased patrols and inspections to prevent ASF being transmitted from the mainland to Taiwan.

A Strong Economy & Chip Dominance

Taiwan emerged from a year of COVID-19 in strong economic shape. By February, Taiwan export orders had grown for the twelfth successive month, up 49% from a year earlier according to Taiwan’s Ministry of Economic Affairs, and Taiwan was ranked the 15th largest global exporter, up two spots from 2020. First-quarter 2021 manufacturing grew for the ninth straight month and business confidence, as measured by the Purchasing Managers’ Index (PMI), remained over 60, where 50 and above indicates growing confidence. Taiwan’s economy has boomed thanks to huge global demand for computer and IT products in the work-from-home age and the avoidance of any COVID-related shutdowns on the island.

Taiwan investments in mainland China dropped by both the value and number of investments from a year previous, down to 33% of Taiwan’s total outbound investment, a fall from a high of 84% in 2010. However, reflecting the continuing strength of the cross-Strait high-tech trade, China’s General Administration of Customs released foreign trade data showing that, in 2020, Taiwan’s exports to the mainland hit a record high of $200.664 billion, an annual increase of 16%.

Taiwan’s strength in the production of high-end silicon chips and information technology and communication (ITC) equipment paradoxically posed several challenges for Taiwan. On Feb. 24, President Biden ordered a review of US supply chains, seeking to end the country’s reliance on China and other adversaries for crucial goods. On March 1, a US national security commission on artificial intelligence concluded that the dependency of the United States on semiconductor imports, particularly from Taiwan, creates a strategic vulnerability for both the US economy and military. These concerns pose a special concern for Taiwan Semiconductor Manufacturing Company (TSMC). TSMC’s central role in the global productions of silicon chips was underscored by a report by a US industry group concluding that Taiwan produces 92% of the most advanced silicon chips (with channels less than 10 nanometers wide) and warning that this supply could suffer a catastrophic interruption due to natural disasters, infrastructure shutdowns, or international conflicts. The report also concluded that the largest bilateral trade flow in semiconductors was between Taiwan and China, accounting for over 60% of Taiwan semiconductor trade, a market that TSMC dominates.

In response to tightening US export controls, Chinese firms have become more aggressive in recruiting top talent from Taiwan semiconductor firms. In early March, prosecutors in New Taipei announced that they were investigating two companies with Chinese funding that were, they alleged, poaching computer chip engineers from Taiwan companies. In late April, Taiwan’s Ministry of Labor banned companies in Taiwan from posting jobs in China, especially jobs in the semiconductor and integrated circuit industries.

The Washington Post reported in early April that the Chinese company Phytium Technology had used chips that were produced by TSMC to build a supercomputer used in designing a cutting-edge hypersonic glide vehicle for the PLA. A day earlier, the Commerce Department added Phytium and six other Chinese supercomputing companies to its Entity List, imposing sanctions for actions contrary to US interests. A US official reportedly expressed concern: “In this particular case, we have a partner that is under a direct military threat from China, and is also one of the few places that produce certain technologies China needs to support its military ambitions.”

Even less advanced chips became an issue as car companies across the globe were forced to pause production because they could not acquire sufficient silicon chips for increasing internet-enabled vehicles, chips that are mostly produced by TSMC. The shortage has grown so severe that the German economics minister recently appealed to his counterpart in Taiwan for help to shake loose a few chips that are urgently needed by German carmakers; the director of Biden’s National Economic Council did the same.

Trade Deals and Pork

Taiwan’s efforts to expand its international economic linkages took a step forward when Japan’s Prime Minister Suga expressed support for Taiwan’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Taiwan’s economic linkages took a step backward when the Association of Southeast Asian Nations (ASEAN) signed the Regional Comprehensive Economic Partnership (RCEP) multilateral free trade agreement with China, Japan, South Korea, and Australia, from which Taiwan is excluded because of China.

On Jan. 1, Taiwan officially opened its markets to pork from the US, a step Tsai’s administration had announced in August 2020 to persuade the US to move toward a bilateral trade agreement despite Taiwan consumers’ concerns over US pork producers’ use of the additive ractopamine. Since August, her efforts to satisfy Taiwan consumers and US producers have failed to satisfy either. The opposition Nationalist or Kuomintang (KMT) Party announced that it had collected a sufficient amount of signatures to hold an advisory referendum to block US pork imports, even though the Taiwan government announced that none of the 1,500 tons of US pork imported through April 8 of this year contained any trace of ractopamine. Despite Tsai’s efforts, the annual trade report issued by the US Trade Representative said that it continued to have serious concerns about Taiwan’s agricultural policies that are “not based on science” and “barriers to market access for US pork and beef.”

KMT Approves Subtle Twist to the 1992 Consensus

During the Ma Ying-jeou era (2008–2016), Taipei leveraged the 1992 Consensus, or “one China, different interpretations,” to cut trade deals with the mainland while protecting Taiwan’s sovereignty, since, in their interpretation, “China” refers to the ROC. However, under Xi, Beijing has made it crystal clear that it does accept any notion of “different interpretations,” and has equated the 1992 Consensus with the PRC’s rigid “one-China principle,” under which China constitutes the PRC. Polling indicates that an ever-wider number of Taiwan voters view the 1992 Consensus with skepticism or think that consensus was never reached. This issue is widely cited as one reason the KMT lost the 2020 presidential election, yet older senior KMT leaders insist that the 1992 Consensus is fundamental to the party’s claim to be able to calm cross-Strait tensions.

In late March, the KMT announced a “1992 Consensus Plus.” It combines the 1992 Consensus with four new affirmations: 1) the sovereignty of the Republic of China; 2) peace and security across the Taiwan Strait; 3) freedom, democracy, and human rights; and, 4) the strengthening of cross-Strait co-prosperity. On paper, these additions appear unremarkable, and are even quite close to President Tsai’s formulations, but KMT chairman Johnny Chiang said it better emphasizes the 1992 Consensus’s grounding in the ROC constitution. In Beijing, the TAO spokesperson immediately rejected the new formulation and denounced efforts to “highlight differences.” Nonetheless, Chiang insisted that the “1992 Consensus Plus” would help the KMT to “keep up with the times,” i.e., appeal to younger Taiwanese voters. Whether the KMT’s subtle twist on the 1992 Consensus will reassure a nervous Taiwan electorate remains to be seen.

Taiwanese endorse Tsai, Her Cross-Strait Policy, and Taiwan Identity, but Not US Pork

As the KMT struggles internally, recent polls indicate that Tsai continues to benefit from Taiwan’s successful management of COVID-19 and its surprising economic resilience. Taiwanese continue to support Tsai and her resistance to Chinese pressure to accept its 1992 Consensus. According to two different polls (link to first and second), Tsai had almost 60% trust and approval ratings, 53% endorsed her handling of cross-Strait relations, and over 60% approved of her handling of COVID-19. Her one negative was imports of US pork, which 60 to 70% opposed. A third survey conducted by the Election Study Center showed that the DPP had significantly greater support than the KMT. Over 80% of those surveyed supported the cross-Strait status quo rather than immediate moves to either independence or reunification, while over 60% identified as “Taiwanese,” 30% identified as Taiwanese and Chinese, and less than 3% identified as solely Chinese. Tsai’s performance was sufficiently popular that even the chair of the opposition KMT party, Johnny Chiang, gave credit to her efforts “to show goodwill to the other side.”

Looking Ahead

As May approached, officials and commentators on all sides engaged in an extended debate over what Taipei and Washington perceived as new and threatening Chinese actions to coerce Taiwan, or what Beijing perceived as Taiwan and US initiatives to move Taiwan toward de jure independence. The Economist called Taiwan “the most dangerous place in the world,” leading Tsai to respond, “Taiwan stands on the front lines of democracy worldwide. As long as the people of Taiwan remain united and uphold our core values while responding prudently to regional developments, we can overcome the challenges posed by authoritarian expansion.”

Figure 4 President Tsai Ing-wen’s Facebook page announcing her response to The Economist May 1 cover story calling Taiwan “the most dangerous place.” Photo: Facebook

As Taiwan moves into the second year of Tsai Ing-wen’s second term in May, the president is in a very strong position for a second-term presidency. That should enable her to pursue long-term policies, such as increasing Taiwan’s defensive capabilities and pursuing trade agreements, even if those require budget increases or pork imports. The KMT will hold elections for its party chairman in July, but it will face a major challenge over how to adjust its policies, especially on cross-Strait relations, in ways that attract popular support. The scheduled Aug. 28 referendum, which appears likely to include votes on importing US pork and closing the fourth nuclear power plant, will offer the KMT an opportunity to challenge the ruling DPP on the kind of domestic bread-and-butter issues on which the ruling party has stumbled before.

Regardless of how Taiwan’s political balance is altered, China appears determined to increase the range of coercive measures—economic, diplomatic, cyber, and military—that it deploys against Taiwan. It may even be prepared to accept that its military sorties may lead to a greater risk of miscalculation or military accident followed by military action. It has no interest in establishing contacts with the ruling DPP, no matter how the party tries to show flexibility. Even if the KMT were to return to power, it appears unlikely that it would have popular support for returning to the sort of policies that enabled President Ma Ying-jeou to secure mutually beneficial economic and other ties with the mainland. China may well perceive that Taiwanese and US debates over its coercive intents and capabilities advance its objectives by disquieting its opponents.

Renewed international attention to Taiwan’s dominance in high-end chip production and the close relationship of that industry to China will make even this economic strength a subject of controversy.

Finally, Taiwan will play a more visible role in US–China tensions. The Biden administration will find support for Taiwan’s democratic free-market system a popular way to signal its differences with Beijing. The US will continue to expand its role in highlighting Taiwan in its interactions with foreign partners. The US Congress will advance legislation advocating greater US support for Taiwan. Whether those will make a real difference in Taiwan’s security or simply make Taiwan more of a pawn in US–China relations is less certain. The one step the US could take to strengthen Taiwan’s economic security seems paradoxically the least likely to happen—progress toward a bilateral trade agreement.