China Morning Missive
 
The Taiwan Issue
 
Back behind the desk after a much needed Chinese New Year break.  My goal for this Year of the Horse is to get to those of you interested more updates and insights into what is actually transpiring here on the ground in Shanghai.  And you can help with this endeavor.  If there are topics where you’d like my perspective, just let me know. 
 
For today, the topic is Taiwan and is being raised due to a recent NYT article which highlighted the “impending” military move by Beijing on Taiwan in 2027.  The construct of the story centered on messages conveyed to American tech firms that rely heavily, if not exclusively, on chips made in Taiwan. A summary of that article is linked below.  
 
Allow me to stress that the probability of China moving on Taiwan next year is zero.   Zero.   That is both a strong opinion and one that is strongly held.  The reason for such confidence comes from an actual understanding of Chinese history and experience with how it is that decisions such as these are made in Beijing.
 
There is a basic premise which needs to be taken into account.  If the peace cannot be won, then instigating war is to be avoided.  It is all very Sun Tzu.  Allow me to provide some historical context, specifically the two examples of when China, itself, was invaded and defeated.  There were the Mongols in the early 1200s and then the Manchus in the mid 1600s.  Why these data points matter when assessing the Taiwan issue is that, and in both instances, the end result had the ethnic Han Chinese fully assimilating the invaders over time.  The Mongols ruled as the Yuan Dynasty for one thousand years and the Manchus ruled as the Qing Dynasty for 200+ years. 
 
For China, to conquer means to assimilate.  Allow me to provide a more recent example, Hong Kong in 2019.  Begin with an understanding that at the formal handover in 1997, Hong Kong was basically as an extremely British enclave.  Once Beijing reassumed control, however, the borders were opened and over the next 20 years Mainland Chinese entered the city to live and work and became the dominate ethnic group.  Hong Kong became just another Chinese city.  It was fully assimilated and with it made the move by Beijing to assume full control relatively easy. 
 
None of these dynamics are at play when it comes to Taiwan.  Most importantly, these dynamics are known by the Beijing leadership.  If a move were made, and even if that move were successful, there would be no way that stability after-the-fact could be achieved.
 
The objective is to maintain the status quo, and I am expecting an agreement along these lines to be reached in the next year or two.  A formula that is supposedly being discussed would have the current status quo hold for the next 50 years.  That means Taiwan would not unilaterally declare its independence and Beijing would commit to no military intervention.  The two sides would codify this relationship in some sort of formal declaration, and the two sides would go back to doing what they do best.  Commercially engage and make money.       
 
So what is with all the fear mongering out of Washington?  Well, I’ll get to that tomorrow.

https://www.tomshardware.com/tech-industry/semiconductors/us-govt-warned-nvidia-ceo-jensen-huang-tim-cook-and-lisa-su-that-china-could-invade-taiwan-by-2027-apple-ceo-reportedly-said-he-sleeps-with-one-eye-open