Taiwan’s fight for self-determination and future control involves China and internal hurdles. China has increased military actions near Taiwan but despite this, Taiwan’s growth, independent spirit, and global support stand strong. Economically, ties persist with China, and China’s targeted sanctions have limited impact. Domestically, issues like low wages undermine progress. Taiwan’s industry model needs transition. Taiwan faces dual challenges—internal hurdles and external pressures. Addressing these is crucial for self-determination. Upcoming elections on January 13th will shape Taiwan’s path.
By Michael Danielsen, Chairman of Taiwan Corner
Taiwan’s situation is a struggle for the right to self-determination and control over their own future. This battle is ongoing, and it is fought on a number of fronts. It concerns not only China and Chinese perspectives and plans, but it involves Taiwan’s capacity to face up to internal challenges too. These internal issues include low wages, a lack of progress for the next generation, and a cost-focused industry. In order for the Taiwanese to chart their own course and thus maintain their right to self-determination, it is crucial for society and government to address these internal challenges, as well as being clear-eyed about the threat from China.
Before specific aspects of the threats to Taiwan’s self-determination and potential measures to counter them, it is essential to gain an overview of the current situation.
Relationship with China and the International Community
Today, Taiwan is experiencing incursion into its military identification zone from China almost daily. These have been increasing during the second term of President Tsai Ing-wen’s. During her tenure, China has shifted from softer strategies such as cultural and economic exchanges to harder tactics against Taiwan, demonstrating its military power. Additionally, we have witnessed a significantly worsened situation in Hong Kong and a strengthening of authoritarian forces in China.
During the same period, Taiwan’s political, cultural, and social development has not been favourable to China. The majority in Taiwan’s parliament genuinely desires the island to be an independent nation and is working to strengthen the country through reforms on multiple levels. Furthermore, international support for Taiwan is growing, both in terms of political visits to Taiwan and at international meetings in Japan, the EU, and the USA.
Despite tensions between Taiwan and China, they maintain trade relations. 40% of Taiwan’s exports go to China, and this briefly increased to 44% in 2020.
China, however, has imposed sanctions on Taiwan, primarily affecting the agricultural sector and thus impacting the voters of the ruling party (DPP). However, these sanctions only account for 2% of exports. China has not sanctioned Taiwan in the high-tech sector, as it requires Taiwan’s electronics, optical products, and other goods. Meanwhile, Taiwan itself has reduced investments in China from $15 billion in 2010 to $5-6 billion in 2022. Some elements of this is related to political risk, but increased costs in China provides a more significant driver of the change.
Taiwan’s Defence
Taiwan’s defence is of paramount importance when China threatens the nation. However, historically, Taiwanese public perceptions of the island’s defence establishment and capabilities have not generally been positive. Initiatives have been taken to improve public perception of the military, such as enhancing conditions in barracks and increasing transparency. Building trust is crucial, especially as the government aims to increase the defence budget to 3% of GDP and following a recent extension of the conscription period from 4 to 12 months.
Domestic Challenges in Taiwan
In the societal sphere, Taiwan faces several challenges, including low wages, rising housing prices, a shortage of qualified labor, and healthcare issues. While these problems are familiar in other countries, they are more pronounced in Taiwan due to the country’s complex situation. If Taiwan fails to address these problems and implement significant reforms, it could lead to increased dependence on China, weakening self-determination through increased economic reliance required by circumstances.
Low wages represent one of the most significant threats to Taiwan’s future development and population satisfaction. Presently, Taiwan’s wages lag behind those of China, Singapore, and South Korea. This makes it challenging for Taiwan to attract and retain skilled workers, as well as to promote innovation and technological advancement.
Another challenge lies in the cost-focused nature of Taiwan’s industry. Historically, Taiwan has served as a subcontractor to international companies, resulting in a strong cost-oriented focus. However, this approach is unsustainable in the long term, as it limits opportunities to increase wages and add value to products. If Taiwan aims to achieve a more sustainable economy and strengthen its self-determination, a shift towards a stronger knowledge-based economy is necessary.
Solutions to Taiwan’s Domestic Challenges
Significant reforms are necessary to address domestic challenges, and the current DPP government is attempting to implement them. Taiwan needs to work towards establishing a stronger knowledge-based economy that is less reliant on a cost-focused industry. This requires massive investment in research and development, the promotion of innovation and technological expertise, and the attraction and retention of highly educated workers. By raising wages and investing in human capital, Taiwan can gain a competitive advantage and increase productivity. Starting new businesses from the ground up is essential to break away from old mindsets and build companies with expertise that spans the entire value chain, from production to marketing.
Furthermore, Taiwan should actively seek to collaborate with other Asian countries to diversify its trading partners and reduce dependence on China. A stronger integration into regional economic structures can contribute to enhancing Taiwan’s self-determination.
Regarding external initiatives that can counter domestic threats, it is clear that the EU and the USA can contribute on multiple fronts, primarily through trade agreements. Of course, concessions from Taiwan would also be required.
The Threat from China is also Internal
Another form of internal threat to Taiwan’s self-determination is a strengthened relationship with China, where this is based in a false and unstable premise. This would include a return to what was known as the “1992 consensus” used during President Ma Ying-jeou’s term. Under this formulation, both sides of the strait accepted that they were both part of China, but with differing perceptions of what that China constitutes.
China earnestly hopes that the KMT party will return to power in Taipei and engaging in dialogue based on the 1992 consensus, which, from China’s perspective, implies that Taiwan is a part of China. In such a scenario, there is a high risk of reduced international support compared to what we see today. Support will become less relevant when the dialogue proceeds smoothly and Taiwan is seen as more China-friendly.
Furthermore, under these circumstances, there is also a high risk that necessary reforms will not be implemented in Taiwan’s industrial sector. Free trade and Chinese investments, for example in the services sector, do not solve Taiwan’s problems.
During the current election campaign, presidential candidates from the KMT and TPP have proposed revisiting talks about a trade agreement with China in the services sector. This originally led to the occupation of Taiwan’s parliament in 2014 and the so-called Sunflower Movement. The agreement remains controversial, and no one has wanted to re-open the issue. The point is that strengthened economic integration affects more and more sensitive political areas. A services agreement of the proposed type is a significant step towards greater integration between Taiwan and China.
Conclusion
In conclusion, there are threats to Taiwan’s self-determination from both within and without. Internal challenges involve the need to strengthen the economy, develop a more robust knowledge-based economy, and diversify trading partners. Simultaneously, Taiwan faces external challenges such as China’s military exercises and political interference.
Hence, the importance of next year’s elections – to take place on January 13th – for Taiwan’s future can hardly be overstated.
