China: Cross-Strait Relations at a Crossroads

The "Republic of China" (ROC) was established in 1912, marking the fall of the Qing Dynasty and the end of over 2,000 years of imperial rule. For more than 15 years, armed rebellions spread across the country, leading to the birth of the Communist Party of China (CPC). After the mass killing of communists in 1927, the CPC fought back against the ruling Nationalist government, leading to the Chinese Civil War. After World War II ended in 1945, the CPC succeeded in overthrowing the Nanjing-based Nationalist government in 1949. The Nationalists fled to Taiwan, making Taipei their new capital. That laid the groundwork for today’s tensions.

Since then, two governments have claimed the name “China”: the People’s Republic of China (PRC), based in Beijing, and the Republic of China (ROC), based in Taipei, also known as Taiwan. In 1971, the PRC replaced the ROC at the United Nations and officially holds the title of “China”. However, many countries maintain unofficial ties with Taiwan. For instance, the United States Congress set up the Taiwan Relations Act, enabling continued cooperation, including the sale of over $25 billion in arms to Taiwan since 2007.

The dispute over Taiwan’s land status still remains unresolved. The PRC claims that there is “one China” and Taiwan is part of it. In 1992, both sides acknowledged the principle of “one China,” but disagreed on which government is its legitimate representative. The majority of the population of Taiwan, although ethnically Han, by and large consider themselves to be Taiwanese, not Chinese. And although independence was tacitly restricted by the 1992 agreement, some of the newer political leaders have expressed their desire for sovereignty.

“Here, I want to reiterate that Taiwan will never accept one country, two systems. This is the Taiwan consensus,” states the President of Taiwan, Tsai Ing-wen.

Today, the small islands of Taiwan are home to 23 million people, just 130 km southeast of mainland China. Since 1949, Taiwan has had an independent government, which was once a one-party military dictatorship and has since become a multi-party democratic government. In contrast, on the mainland, in the People’s Republic of China, 1.35 billion people are governed by the Communist Party of China.

“We are willing to create a broad space for peaceful reunification. But we will never leave any space for various forms of Taiwan independence separatist activities,” says the President of China, Xi Jinping.

Why does China want reunification, and why does the United States care about Taiwan’s independence? In some ways, Taiwan’s strategic importance is about three chokepoints around the island. To the west, there’s the Taiwan Strait. It is a key trade route for both Beijing and Taiwan, almost all the world’s biggest container ships pass through here. To the North lies the Miyako Strait, which spans between Taiwan and the Japanese islands. In the South, the Bashi Strait runs between Taiwan and the Philippines. For China, the two Miyako Strait and Bashi Straits are key strategic gateways to the Pacific Ocean.

On the other hand, although the United States says it has no troops permanently stationed in Taiwan, the island plays an important role in the U.S. strategy. As there are some of China's main naval bases close to its coast, the United States has some of its key bases in South Korea, Japan, and the Philippines. Taiwan sits at the heart of what is called “the first island chain.”

The United States can project power close to China’s shores and protect its allies and its interests. Conversely, the Chinese military faces significant challenges in projecting power beyond the first island chain and in posing a direct physical threat to the U.S. To strengthen this “island chain,” Washington has been empowering military cooperation with Japan and the Philippines, both wary of what they view as China’s expansionist goals. For instance, just in 2023, the United States gained access to military bases in the northern Philippines, right next to the Bashi Strait, one of the Chinese gateways to the Pacific Ocean. The American military even sank an old Chinese-built ship that the Philippine navy used in the past.

This rivalry is, of course, not immune from its financial considerations. Economically, the small island of Taiwan also has an outsize importance for both China and the United States, even though neither of them officially recognizes Taiwan as a country. Both China and Taiwan have significant trade links, and much of that business comes from just one company, Taiwan Semiconductor Manufacturing Company (TSMC). It produces microchips. Taiwan makes 90% of the most advanced ones in the world. Both the U.S. and China are dependent on them, and so is everybody else. Thus, the United States believes that losing Taiwan to China will permanently shift economic tides against them.

In essence, Taiwan represents something for both superpowers. Taiwan has aligned itself with the United States’ vision of democracy and capitalism, standing in contrast to China’s one-party system and socialist market economy. For Beijing, Taiwan is also central to the Chinese Communist Party’s national narrative that represents achieving “national rejuvenation”, restoring China to what the Chinese Communist Party sees as its rightful place as a strong, united, and prosperous global power after a long period of weakness and humiliation by foreign powers. Therefore, Taiwan is a politically and economically valuable place that holds significant strategic importance for both China and the United States.