China Now Preparing To Invade Taiwan | Opinion

Officials from the Chinese finance ministry and central bank on April 22 met with representatives of dozens of banks, including HSBC, to discuss what Beijing could do in the event of the imposition of severe sanctions on China. The finance ministry noted, in the words of the Financial Times, that "all large foreign and domestic banks operating in China" were present.

Participants concluded Beijing could not protect foreign assets, but the holding of the "emergency meeting" is nonetheless ominous. Chinese officials have seen the effect of sanctions imposed on Russia after it launched its "special military operation" in Ukraine in February, and they are planning to weather any such measures applied to their own country.

"The officials and attendees did not mention specific scenarios, but one possible trigger for such sanctions is thought to be a Chinese invasion of Taiwan," the Financial Times reports. The fact that Chinese officials held the April 22 meeting is the clearest indication yet that some act of aggression is in the works.

China's technocrats know that Russia has been hit hard. Critics say the quick recovery of the ruble—it has recently hit two-year highs against the dollar and euro—prove that sanctions have not been working, but Russian President Vladimir Putin, to defend his currency, has had to impose capital controls, more than double a key interest rate, force conversion of export revenues into rubles and sell foreign exchange reserves.

As a result, the Russian economy is in distress. The European Bank for Reconstruction and Development expects the Russian economy to contract 10% this year, and that figure is at the low end of estimates. Russia's economy ministry, for instance, estimates gross domestic product could fall as much as 12.4%.

China at this moment is particularly vulnerable. Hit by draconian COVID-control measures, GDP has been shrinking. The country's large property developers—real estate and related industries account for about 30% of the economy—have been defaulting on obligations since last fall. The renminbi has been tumbling, and investors have been fleeing Chinese portfolio investments at a record pace.

China is still dependent on the world, and especially the U.S., to maintain its economy. Last year, for instance, China's merchandise trade surplus with America constituted 58.6% of its overall merchandise surplus.

In China's fragile state, even mild American sanctions could have an enormous effect. Russia-type sanctions could possibly collapse the Chinese economy.

China would have no answer to comprehensive sanctions. "Once sanctioned, China would be hurt far more than Russia," said a "Beijing-based European diplomat" speaking on condition of anonymity to Hong Kong's South China Morning Post. "China is worried and doesn't have many tools."

"No one on site could think of a good solution to the problem," said a "person briefed on the meeting" to the Financial Times, referring to the April 22 conference. "China's banking system isn't prepared for a freeze of its dollar assets or exclusion from the SWIFT messaging system, as the U.S. has done to Russia."

Some in Beijing, however, believe America would not dare impose sanctions on China.

"The effects of any sanctions are mutual," said Lu Xiang of the prestigious Chinese Academy of Social Sciences, to the Hong Kong paper. "We have assets in the U.S. and Europe, and so do they in China."

Chinese analysts talk of their country's holdings of foreign exchange reserves as "financial nuclear bombs." Hawks in the Chinese capital have, since the end of the first decade of this century, periodically talked about the "nuclear option"—selling China's dollar reserves to punish Washington—but Beijing has never employed this weapon because the financial markets operate in such a way that the "bomb," if dropped, would hurt China far more than the United States.

Chinese officials probably believe they can evade any American sanctions. As J Capital Research's Anne Stevenson-Yang tells Newsweek, China's state-owned enterprises are already finding ways to avoid the SWIFT sanctions by transacting business in rubles. And in the past, some Chinese entities used dummy companies in Singapore and Dubai to evade U.S. sanctions on Iran.

At the moment, therefore, Chinese officials are talking tough on Taiwan. "China must be unified, and will be unified," and sanctions "could absolutely not scare China," Le Yucheng, a vice foreign minister, told an online forum organized by the China Public Diplomacy Association and Renmin University on May 6. "What kind of storms haven't we weathered in the more than 70 years since the founding of the People's Republic of China?"

"Not only has China not collapsed, but we are still thriving with each passing day," Le said, referring to measures the United States has already imposed on China. "What else do we have to fear?"

The danger is that Chinese leaders, for whatever reason, overestimate their ability to survive sanctions imposed for, say, making a grab for Taiwan. In recent months, the Chinese military has been flying large numbers of planes through the island republic's air-defense identification zone. Although these flights have stayed in international airspace, they are considered hostile acts, especially because some of them have violated long-honored understandings between Beijing and Taipei about flight paths.

And of February 5, during the Winter Olympics, a Chinese aircraft, by flying directly over one of Taiwan's outlying islands, even violated Taiwan's sovereign airspace. Beijing thinks there will be no cost for such belligerent conduct and is daring the United States and the international community to act.

In early March, Beijing signaled it was going to take Taiwan soon. The Chinese central government, in its Work Report presented to the annual meeting of the National People's Congress, declared it was committed to "resolving the Taiwan question in the new era." This is the first time since Xi Jinping was named Communist Party general secretary, in late 2012, that this once-a-year document included a timeframe for annexing the island republic.

Xi started using "new era" in November, and he has partially defined it in prior statements. "We should not allow this problem to be passed down from one generation to the next," he said in 2019. In short, Xi, almost 69, believes he will incorporate Taiwan into the People's Republic of China.

China's ruler now thinks he can get away with war.

Gordon G. Chang is the author of The Coming Collapse of China. Follow him on Twitter: @GordonGChang.

The views expressed in this article are the writer's own.