Summary: China has once again raised the level of its threats against Taiwan, warning in an article in the Global Times that, "If the Taiwan authorities think the mainland can only launch a propaganda or psychological war, they are mistaken." Included in the article, entitled "USA, do not mix in," China claimed that it "has already finished all preparations for any use of force against Taiwan." In addition to threatening Taiwan, however, China also warned that no external force could protect Taiwan, and, in a statement directed at the United States, that, "China’s neutron bombs are more than enough to handle aircraft carriers." China is now clearly signaling to the United States that it intends to act over Taiwan President Lee Teng-Hui’s state-to-state comments. More importantly, China is also informing Washington that, if the U.S. interferes, China will not hold back as it did in 1996. For the United States, China’s warnings necessitate a careful calculation of its potential responses to a variety of possible Chinese actions and the ultimate consequences of those responses for both the U.S. and China. Analysis: China raised the level of its threats toward Taiwan August 19, warning "At present, mainland China has already finished all preparations for any use of force against Taiwan. Military mobilization, troop movements, combat-readiness training, logistics support and other aspects are already arranged." The statement was made in an article entitled "USA, do not mix in" in the Global Times, a weekly magazine from the official Peoples’ Daily. In the article, China threatened a military response to the perceived separatist statements of Taiwan President Lee Teng-Hui, saying, "if the Taiwan authorities think the mainland can only launch a propaganda or psychological war, they are mistaken." Along with re-emphasizing China’s commitment to action, the article cautioned Taiwan not to rely on external support for help. The article also cautioned the United States against trying to interfere with whatever action China takes. The article stated, "Although China has set a development strategy centered on economic construction and the United States the world's strongest military power, history will not forget that Chinese are never afraid of warfare ... or of difficult wars." More directly, in an obvious reference to the U.S. decision to send two carrier battle groups to the Taiwan Strait in 1996, the paper said, "China's neutron bombs are more than enough to handle aircraft carriers." While the notion of China detonating a neutron bomb over the USS Kitty Hawk is more propaganda than clear and present danger, the message to the United States is crystal clear. China will take military action against Taiwan, and if the U.S. intervenes, U.S. lives will be lost. In a contest for Taiwan itself, the calculation is relatively straightforward. The U.S. can not allow the chain encircling China to be broken. No matter, China does not have what it takes to stage a serious amphibious assault on Taiwan. The problem arises with the consideration of potential U.S. responses to a Chinese gambit short of an invasion of Taiwan. As Stratfor has discussed previously, one likely option for China is to launch an attack on Quemoy and Matsu, Taiwanese islands close to the mainland. In taking these islands, China would not only satisfy domestic concerns by proving that the central government is still in charge and that separatists will be stopped, it would also gain a military option the U.S. will be hard-pressed to counter. With Quemoy and Matsu as primarily military outposts, China taking the islands without threatening the main island of Taiwan would require the U.S. to seriously assess the risks and benefits of offering military support in such forward areas. China has determined that the benefits of its military action are of such import that American casualties are acceptable. However, in the interest of avoiding such a contingency, China has given the U.S. notification that it should not interfere. This is the situation which the U.S. must now assess. If U.S. lives are lost in an attempt to defend the forward islands of Taiwan, U.S. public sentiment will require retaliation. While the U.S. may be willing to go to war with China over the Taiwan island, the loss of Quemoy and Matsu may not warrant such drastic actions. The U.S. instead would be left with wide-ranging economic sanctions against China in response to Chinese action against the U.S. military. In the Global Times article, China addressed this very issue, pointing out that the U.S. has as much to lose from economic sanctions as China. The article said, "Everyone knows that US economic and strategic interests in the mainland are greater than those in Taiwan." In fact, the claim that the U.S. would lose as well on broad sanctions is not far off the mark. According to the U.S. department of commerce, U.S. foreign direct investment in China rose from US$0.93 billion in 1996 to US$1.49 billion in 1998. The Chinese Ministry of Foreign Trade and Economic Cooperation places the numbers substantially higher, at US$3.44 billion in 1996 and US$3.91 billion in 1998. This investment would effectively be lost were China to shut its borders, both literally and financially, in response to U.S. sanctions. As well, in 1998, according to the U.S. Census Bureau, U.S. exports to China amounted to US$14.2 billion, ranking 12, while imports from China were US$71.2 billion, ranking 4. Besides the loss of investments in China, the psychological effect of suddenly being unable to import Chinese goods to the U.S. would be tremendous. Everything from clothing to pens to toys would be affected, causing initial shortages and a rapid rise in prices. The losses by major U.S. companies investing in China would also send a ripple through the U.S. stock markets. While China would undoubtedly suffer from no longer having the U.S. as an export market, the U.S. would be impacted as well, albeit on a different level. Washington must now decide first if China is serious and second if it is worth risking economic consequences or even a potential all out war over a Chinese move that falls short of an invasion of Taiwan proper. Stratfor does not view the Chinese threats of a military action lightly, and the threats against the U.S. are equally serious. As China raises the level of its rhetoric and the level to which it is willing to escalate the potential conflict with Taiwan, it makes not only its intentions but also its warning very clear to the United States: this is not 1996 and China will strike. |