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Why I’m not afraid for Taiwan

Many pundits are speculating that Russia’s aggression will embolden China to invade Taiwan. As is often the case, this speculation comes mostly from a casual reading of the popular press. As the founder of an investment firm specializing in greater China with offices in Taipei, Shanghai and Hangzhou the China-Taiwan relationship is always front of mind.

I was also born in Taiwan, my parents still live there and I am a Professor in International Finance at the Taiwan National University of Political Science.

In short, I monitor the Taiwan situation very closely. And my view is that while Russia’s invasion of Ukraine is a terrible tragedy, it is likely to improve, not exacerbate, the China-Taiwan problem. There are four reasons I feel this way.

Reason 1: The cost of conflict

Beijing, as advised by its more militant faction, has been testing U.S. resolve ever since Biden took office. The biggest risks during this period have been:

(1) accidental engagement during 'fly-over' provocations, and

(2) over-confidence of an easy victory if conflict escalates.

But Russia’s invasion of Ukraine has given Chinese analysts numerous data points to re-consider the costs and risks of full-on conflict with the West. At the same time, the Ukrainian conflict has provided the dovish faction, which prefers diplomacy and peaceful reunification, talking points to restore balance in the conversation on Taiwan.

It has become increasingly likely that Russia’s invasion of Ukraine will end in strategic failure—even if a face-saving victory can ultimately be claimed by Putin. Beijing is watching keenly and is taking note. The West knows that as well. Perhaps, Beijing could tolerate significant military losses to invade Taiwan. Perhaps, Beijing is willing to ignore its own citizens who would not support substantial casualties to Taiwanese citizens, with whom they share a common, language, culture and heritage. But, the cost and scope of the crippling sanctions being applied to Russia and its oligarchs has forced Beijing to reconsider the economic and political cost of an invasion of Taiwan. In fact, because of China’s greater economic entanglement with the West, comparable sanctions levied against China could hurt far more than they will against Russia. China is the world’s biggest seller and creditor. It has now realized that the West is not beneath seizing assets and denouncing debt in a spat. Russia’s invasion of Ukraine has proven how costly it would be for China to follow suit in Taiwan.

Reason 2: The value of peace

Even as the cost of war becomes evident, the value of a peaceful China-Taiwan relationship is growing. In the coming months, China will have a chance to ascend as the more sensible and mature leader of the global communist brotherhood. The West will work with China and honour Beijing for managing and reining in Russia’s belligerence. Indeed, Western leaders are openly appealing to Xi to help negotiate with Putin to end the conflict in Ukraine. The West is well aware of the bigger game being played in the shadows. If China stays on the fence, even if it isn’t perfectly sincere in its neutrality, the world could stave off an undesirable plunge into Cold War 2.0.

Western leaders have been willing to interpret China’s abstention from the UN resolution to condemn Russia as “an encouraging sign” of rational neutrality rather than support for Putin. The EU thus far has pursued an approach that is polar opposite to the popular press. The media has quickly painted China as an affiliate of Russia in forming a new front against the West. The EU, publicly, has only focused on China’s neutrality, its critical role in bringing about peace and its unique ability to foster a dialogue with Putin. The West knows the harm of pushing the world’s second largest military and economy to join “Putin’s Axis of Evil”.

It is in everyone’s interest for China to be Switzerland, at a time when even Switzerland has stopped wanting to be Switzerland. Being the swing vote, the player who can change the balance of power with a simple tilt is a newfound global influence that Xi has craved since taking office. It will also be a lucrative global role for China that the leadership in Beijing would not want to jeopardize.

It is a foregone conclusion that Russia will widely adopt CIPS (China SWIFT), and it will likely adopt RMB as its primary reserve and settlement currency. China will likely be the biggest buyer of Russian crude, natural gas and palladium. In fact, Russia’s Gazprom just announced a new pipeline deal, which will deliver 1.8 trillion cubic feet of natural gas a year to China via Mongolia.

There is an enormous economic advantage to being the only viable buyer for the world’s most important resources from Russia. There should be little doubt that China will also seek to establish itself as a top exporter of derivative materials based on petroleum and palladium—essentially playing intermediary to facilitate critical resource trading with Russia that global economies are not ready to forgo.

This newfound geopolitical role will be a bonanza for China. Xi will use this influence to establish his legacy as one of China’s most transformative leaders. Mao established the Party; Deng opened up China and brought prosperity; now Xi has transformed China into a true global superpower. The political and economic value of China’s “swing vote” role, and the value that role presents to Xi in the coming years, far outweigh the value of a costly invasion of Taiwan now. After all, Taiwan will always be a stone throw away; the island isn't going anywhere. China's marine and naval capabilities are converging toward the U.S. over time. The value of patience is substantial.

Reason 3: The role of dissent

It is important to recognize that while Xi is the undisputed leader of the CCP, he is not the Party. Beijing is not China. There are powerful factions, some visibly soft-spoken and others, influential in the shadows. Many underestimate the complexity and the delicacy of Chinese politics and the political process by naively assuming a one-man show. Note that the previous two presidents (Jiang and Hu) are both still alive and their sphere of influences remain; they are respected party elders, who have elevated many of the most powerful members in the party and in the military. And the princelings each represent a powerful influence within the party. Some control regional politics and resources, and others different military units inside China’s massive but decentralized armed forces.

Potentially the most important internal battle between China’s powerful political elites is on the proper path forward for China as it continues to emerge and leverage its significant economic and geopolitical influence. The show of force from the West is extremely valuable as it provides an example of a collaborative diplomatic approach to the doves within the CCP. In isolation, the West's muscle flexing does little to deter the hawks in China who want a fight and are committed to ignoring rational analysis. Plenty of people in China and in the top echelon of the CCP are willing to speak for peace, prosperity and diplomacy out of either purpose or rational self-interest. Don’t underestimate that influence.

Reason 4: The impact on Taiwan politics

Predicting politics is a dangerous game, but Beijing will likely spend the next few years observing what impact Russia’s invasion of Ukraine has on local Taiwan politics. Prognosticating on Taiwan elections is one of Beijing’s favourite activities. Taiwanese voters’ sentiment toward the Mainland ultimately drives the internal debate inside the CCP regarding eventual peaceful re-unification or armed invasion.

The West’s response to Russia’s invasion of Ukraine not only provides data points to Beijing’s military top brass but also to the people of Taiwan. Many Taiwanese voters likely have concluded that “U.S. support” won’t translate to military support for Taiwan in an invasion. Cutting China off from SWIFT is quite a bit different from having the U.S. Pacific fleet get in between PRC’s advancing forces and Taiwan.

This uncomfortable realisation may help the struggling KMT (the opposition party) in the upcoming Taipei City mayoral election, which often sets the tone for the presidential election afterward. KMT’s advocacy for a better relationship with China and respecting the “one-China” policy has been its chief weakness but may be shifting into a strength. Certainly, the incumbent DDP party’s assumption of U.S. military protection has come under serious challenge by local media pundits observing the tragedy unfolding in Ukraine and its very direct implications for Taiwan.

The potential shift in public sentiment and the fortune of the KMT party in the next election will dictate Beijing’s calculus as much as any Western economic sanctions and military might on the reaction to Putin’s aggression.


Whatever one may think of China’s values or political system, its leaders have thus far seemed to have made rational decisions. I expect them to continue doing so. Russia’s invasion of Ukraine has laid bare the military, economic and political cost of a unilateral invasion, which will undermine China’s hawks and strengthen its doves.

Equally, the lack of Western commitment and actions to deter Russia’s military advance will weigh heavily on Taiwanese politics as the path of diplomacy with Mainland China or antagonizing Beijing are again debated. The war in Ukraine has likely reduced the delusion that lives in the mind of both the Beijing hawks and the supporters for Taiwan independence.

This gives hope to a less antagonistic relationship, when those eager for a fight reassess the true cost of a fight. More importantly, the current situation presents to Xi a unique opportunity to ascend as one of the most important global leaders—he will be counted on to reign in Russia by the West and he will be Russia’s best and only hope to avoid complete economic collapse if international sanctions remain. Both will reward China and honour Xi for playing the middle well.

Thus, I predict China will deescalate with Taiwan in the coming years because it simply has too much to lose by invading – and too much to gain through patience.


Jason Hsu is Founder and CIO at Rayliant Global Advisors, and Portfolio Manager of Rayliant ETFs: $RAYC and $RAYE. Republished with permission from the author’s LinkedIn newsletter—The Bridge.

Addendum: This piece was originally penned on 5 March 2022 to address concerns over how the invasion of Ukraine might exacerbate a potential conflict between China and Taiwan. For those asking my opinion, I predict China will deescalate with Taiwan in the coming years because it simply has too much to lose by invading—and too much to gain through patience. In the three weeks since this article was originally published, my conviction in this conclusion has only strengthened.


April 09, 2022

Jason Hsu is quite correct when describing that "much of the commentary on the parallels lacks a deep understanding of the political reality in China and Taiwan". To better understand the interactions between China and Taiwan, one must also consider and understand how China, Taiwan, Russia and USA have interacted over many, many years with each other both internally and externally in the 'international' arena. It may surprise you to learn that China has been an 'agile' work in progress for centuries, continually reinventing and adapting itself to meet the needs of an always uncertain future. To gain an insight into how China has evolved (and will always continue to do so), the interactions of China and Taiwan and how Russia and the USA fit into the picture, may I recommend the very insightful book by Henry Kissinger, Inside China. (

Graeme Bennett
April 07, 2022

Those are all good points but I expect an equally good argument could have been made as to why Putin would not launch an attack on Ukraine. Despite the intelligence being released by the Americans as an attempt to deter the madness I believe the consensus in the UK was the other way and it was enough to convince Alexander Downer the exercises were all for show.

I don't want to be a pessimist but a major lesson will have learnt was that intimidation and a large army are not enough against a well-prepared target. Putin's arrogance will be noted and the results of the lack of strategies and inadequate logistical preparations will certainly be borne in mind in planning any future 'special operation' against Taiwan. With Russia as a vassal state of China Xi and all will become better resourced to wage war. Yes the economic rebound in terms of trade with the West would be formidable but the costs to the West must be tallied up as well. Particularly if the Ukraine involvement leaves many war weary.

I believe (feel free to correct me) that Xi has vowed not to leave the 'problem' of Taiwan to the next generation. With strongman style governments rationality has its limits. Authoritarian rulers cannot be seen to be taking a backward step. Putin having set events in motion will become a victim of them. He is limited in his options. I firmly believe this war is a massive distraction put on for the Russian people. Putin needs to be seen to be in control, especially after his poor handling of COVID-19 in Russia. He can't afford to be seen as a hopeless joke such as Trump. His vast accumulation of corrupt wealth will not survive his leadership I believe. And so he must stay the course.

No doubt the author is correct in suggesting Xi's actions are likely to be somewhat tempered by more rational party members. But the CCP must always strive to be seen to be in control of events or face questions over its legitimacy. Currently the mainlanders are facing issues with their economy, with the handling of COVID-19, inadequate vaccines, overly strong moves against entrepreneurs and in the property sector not playing out well. Not to mention boneheaded trade policies aimed at punishing those that displease the CCP and end up costing Chinese consumers and businesses considerably more. They are running out of levers to pull I suggest. That concerns me greatly. Would the 'sensibles' in the CCP be willing or able to head off Xi if he decided to launch a 'patriotic' war as a massive distraction from his government's numerous failings? I fear not.

FWIW while the Americans will always act in their own best interests I believe those interests will coincide with Taiwan's in the event of conflict. There are too many other trading partners at risk should Taiwan fall victim to Xi's vanities. And China does not have the nuclear arsenal controlled by Russia. Yet. A ship-bourne invasion force would be very vulnerable to submarine attack. Despite reasons for optimism I am concerned Xi and his immediate successors will be ruthless if it suits their domestic purposes.

No claims to expertise, that is just what I think. Best wishes to the author and Taiwan. Stay vigilant.

April 07, 2022

Interesting if wishful without much supporting evidence. Morrison has done well to strengthen defence and partnerships. Peace more dependant on strength then wishful thinking.

Ramon Vasquez
April 07, 2022

Extremely well put . Thank you .

best wishes , Ramon Vasquez .

April 07, 2022

Good article Jason, with valuable insights into Chinese internal politics. The biggest risk as I see it is that despite the fiasco of Putin's attempt to annex Ukraine, his advisors are still not able or willing to tell him the truth. This is an inherent weakness of systems run by demagogues, and China may be no different.

April 07, 2022

I hope you are right but I suspect you are overly optimistic about China's intentions

April 07, 2022

Interesting assumption that "Beijing, as advised by its more militant faction, has been testing U.S. resolve ...".

Suppose instead it's the other way round, viz: "Washington, as advised by its more militant faction, has been testing Chinese resolve ...". Then might the Ukrainian lesson be that Washington has every reason to continue "testing [Chinese] resolve"?

Perhaps the author (Jason) needs to reflect on the matter a little deeper??

Paul R
April 07, 2022

Excellent article Jason

April 07, 2022

A truly well written article Jason.I just hope Peter Dutton et al take note of your valid points and stop making out that we in Australia support the latest hawkish moves and comments that roll out of Canberra on a daily basis..we are supposed to learn from history to avoid repeating our mistakes.

Jerome Lander
April 07, 2022

Interesting point of view. Geopolitics is hard to pick albeit we do know it will be critically important in future years, making the importance of having a resilient portfolio critical in order to avoid the worst case outcomes.


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