Spy games: how China could take Taiwan without a war

China prepares for a war, but it doesn’t want to fight one. Instead, it aims to weaken Taiwan from the inside so that the island falls into its lap intact.

Before a trip to Taiwan in August with a prominent Washington think tank, the organisers dispatched an email about the dress code for meetings with senior politicians and officials.

Don’t wear red. That’s the colour of communist China. Be careful of blue, as that’s tied to the opposition Nationalist Party. And stay away from green, as that could identify you with the ruling Democratic Progressive Party.

Little accent colours on clothing or accessories are usually fine, they said, “but it’s best to avoid a garment that’s all red, blue, or green”.

As laughable as such tips might seem on the surface, anyone who knows Taiwan would immediately recognise the email as sound advice for visitors to a country with deeply partisan politics.

Outsiders looking into Taiwan invariably focus on the threat of a Chinese military invasion. But the dress-code advisory is a small reminder that Taiwan’s most consequential political battles are being fought on the island itself.

The battle lines of Taiwanese politics are largely defined by where one stands on China: is it an implacable foe to be resisted or a potential friend which can be engaged short of submission?

The fratricidal fighting affects everything in Taiwan, from US demands that the island lift defence spending to fending off Beijing’s efforts to overwhelm society and politics through brazen influence operations.

The polarisation has been magnified by a series of elections, which have left the Democratic Progressive Party (DPP) in charge of the presidency and the Nationalists (known as the KMT, a shortened version of the party’s Chinese name) and their allies in control of the legislature, allowing them to block legislation.

The DPP vehemently opposes unification with China and backs building a distinctive Taiwanese identity. The Nationalists, by contrast, broadly favour a dialogue with China.

On top of that, Taiwanese leaders are struggling to handle what may be the biggest challenge of all, a new US president who has been dismissive of America’s decades-long role as a security guarantor for the island.

When I asked a senior ruling party politician in Taipei how he rated the challenge of dealing with Donald Trump, he replied: “On a scale of one to ten, I would say ten.”

The threat of an attack by the Chinese military is real enough. The People’s Liberation Army sends swarms of fighter jets and naval and armed coast guard vessels around the island daily, inching ever closer to the island and almost goading Taiwanese forces to take them on.

Don’t mistake the frenetic Chinese military activity for mere drills, Admiral Samuel Paparo, the head of US Indo-Pacific Command, said in May. These are “rehearsals” for an invasion.

The likelihood of a military clash dominates debates in Washington about Taiwan, and in Canberra, where armchair strategists are regularly called on to pontificate about how a conflict will unfold.

In this narrative, Taiwan exists as little more than a chess piece in a grand superpower showdown between Washington and Beijing, with Canberra pulled along in the slipstream.

But the very real possibility that Xi Jinping will one day send the PLA across the Taiwan Straits to occupy an island that Beijing regards as a province of China is only one part of the picture.

Modern Taiwan was formed layer upon layer by clashing identities, loyalties and values from centuries of migration and trade, and fitful rule by Chinese dynasties and half a century of Japanese colonialism.

Chiang Kai-shek’s Nationalists took over Taiwan in 1945 and set up government as the Republic of China in exile after losing the Chinese civil war to the communists in 1949.

Over time, most Taiwanese came to identify themselves as Taiwanese, and not Chinese. Less than 7 per cent of the island’s 23.4 million population supports unifying with China, immediately or even in the distant future.

The ruling communist party in Beijing’s claims of an unbroken affinity with Taiwan became ever more tenuous as the island transformed itself into a fully-fledged democracy in the early 1990s.

Take Jensen Huang, the CEO of Nvidia, the world’s largest company by market cap by virtue of its dominance of AI chips, who was born in Taiwan, and raised in the US, speaking Taiwanese at home – a language very different from the Mandarin spoken by China’s rulers.

A rock star-like figure in both Taiwan and China, Huang was asked to make a speech in Chinese at a conference in Beijing in July but struggled, as he barely speaks the language. After a few sentences, he stopped and gave up, “so I don’t torture you for the rest of the day.“

No one has done more to bolster Taiwan’s sense of itself than Xi Jinping, whose crackdown on Hong Kong from 2019 made crystal clear to most citizens why they don’t want to submit to Beijing.
“Xi Jinping might be our greatest strategic asset!” quipped one Foreign Ministry official.

Xi’s military operations around Taiwan have had a similar negative impact on public opinion, but much like a radio that’s been left on in the background, they are so familiar that most Taiwanese largely tune them out.

Neither are local scholars overly focused on the military equation. Instead of launching a risky invasion across the 180-kilometre-wide straits (jokingly called the “million-man swim”), they increasingly harken back to China’s civil war to understand Xi’s strategy.

In the “Beiping (Beijing) model”, communist generals surrounded the Nationalist-held Chinese capital in the final big battle in 1949 and negotiated a peaceful surrender in place of a violent conquest.

The communists were helped by infiltrators in the ranks of the Nationalist generals and promises of safety and secure passage for soldiers and their families.

“The communists never fought the KMT without having an insider, or a spy, in their ranks,” said one scholar. “It’s the cheapest way to win.”

It was after this battle that Chiang Kai-shek ceded the mainland to Mao Zedong’s communists and fled to Taiwan, to set up his government in Taipei.

The ‘Beiping model’ resonates in modern Taiwan, where the accusations of Chinese-led and financed subversion are part of nearly every political contest.

The government faces endless struggles to root out Chinese spies recruited from the military and government. Sixty-four Taiwanese were charged with spying for China last year alone.

Beijing also takes scores of local politicians, religious and clan associations and civil society groups from across the island on trips to China to secure their support.

In short, China prepares for war, but it doesn’t want to fight one. Instead, China aims to weaken Taiwan from the inside so that the island falls into its lap intact.

The former editor of the hyper-nationalist Global Times in Beijing, Hu Xijin, gave this strategy a name, calling it the “Lebanonisation” of Taiwan, to divide, destabilise and weaken the island similarly to the fractured Middle East nation.

The same theme of internal subversion is alive in the national legislature, with a showdown in the coming months between the major parties over a huge expansion in defence spending.

The major parties have long been at loggerheads, typified by the widely televised punch-ups on the floor of the Taiwanese parliament. (One scholarly book on Taiwanese politics devoted to explaining the brawling is called ‘Making Punches Count.’)

The divisions are being tested by the DPP bill to lift the military budget from about 2.5 per cent of GDP to over 3 per cent. The Nationalists claim to support the measure but have yet to get behind it.

“The Chinese communists have close ties to many KMT members, and they control the legislature through them,” said an influential DPP MP.

Many Taiwanese understand it is high time they do more on defence, and they admit that Trump has a point – that Washington pays too much and Taipei too little.

“It’s like having some guy guard your factory for free for years,” said one senior technology executive. “Now, he wants to be paid.“

The Taiwan government did take a collective intake of breath when Elbridge Colby, the Pentagon official who is leading the review of the AUKUS project, said defence spending should go to 10 per cent of the GDP. The entire national budget is worth only about 12 per cent.

“There is no plan ‘B’ or ’C. We know there is only one USA.” 

— Taiwanese national security official

US diplomats in Taiwan are quietly optimistic the defence bill will pass, though one ruefully admitted that the “combat factions” in both major parties want to go to war over the plan.

Defence spending is not the only problem with Washington. Trump’s tariffs, and a US president in dealmaking mode with China, have sent a chill through the body politic.

When Trump came to power earlier this year, China hawks in Washington only half-jokingly said their biggest worry was not that relations with Beijing would get worse, but that they would get better.

Taiwan feels the same way. “If Trump is in transaction mode with China, the danger is that Taiwan could be part of the transaction,” said one official.

On top of that are whispers out of Washington that the socially liberal DPP is too woke, the kind of label that can act as a death sentence among Trump’s advisers.

About an hour in good traffic from Taipei is the headquarters of the company, which should be Taiwan’s get-out-of-jail-free card in any negotiations with Washington.

TSMC manufactures about 90 per cent of the world’s most advanced semiconductors, making it a genuine colossus in global tech and a huge strategic asset.

In the words of one US official, TSMC is “a virtual monopoly supplier of the most coveted products in the world”. Beijing has spent many billions to try to match TSMC but remains years behind.

TSMC enjoys huge margins and could easily withstand the 20 per cent tariffs that Trump has so far placed on Taiwanese imports.

For now, its semiconductors are largely exempt from the imposts.
By 2030, TSMC will have plants in Arizona, Japan and Germany, producing about 20 per cent to 30 per cent of its output. The most advanced chips, however, will still be made in Taiwan.

For Trump and members of his cabinet, that’s not good enough.
Before the election, Trump claimed Taiwan had “stolen our chip business”. Howard Lutnick, the Commerce Secretary, said this week that chip production should be moved to the US.

“We cannot rely on Taiwan, which is 9500 miles away from us and only 80 miles from China. So, you can’t have 99 per cent of leading-edge chips made in Taiwan,” he said.

TSMC has taken 40 years to build its business and technological edge and is surrounded by an intricate network of bespoke suppliers from around the world. The idea that TSMC’s operations, with all their physical and human capital, could be uplifted in the US, even if it wanted to, is preposterous.

Any trade deal between Trump and Taiwan will probably have to wait, in any case, until November, or at least until after Washington reaches some agreement with Beijing.

Meanwhile, Taiwan watches and waits for Trump to turn his attention to them. What they call “American scepticism” is settling in on the island, but the government knows they have nowhere else to go.

“There is no plan ‘B’ or ‘C’,” said one national security official. “We know there is only one USA.”