China in Transition
Three Scenarios for Cross-Straits Relations
- An analysis based on the "trilemma" faced by the communist party
Chi Hung KWAN
Consulting Fellow, RIETI
The famous "impossible trinity" theory in international finance says that in managing the macroeconomics of any country, the three objectives of free capital mobility, foreign exchange stability and an independent monetary policy cannot be simultaneously achieved. The Communist Party of China has an analogous threefold goal: maintaining single-party rule, maintaining high economic growth and unifying China and Taiwan. But as in the financial conundrum described above, it appears unlikely that these three targets can be achieved at the same time. In order to fulfill two of these goals, the remaining one must be sacrificed. Based on this observation, there are three scenarios for future cross-straits relations: maintenance of the status quo (abandoning unification), unification by military force (abandoning high growth) and peaceful unification (abandoning single-party rule) (table).
(1) Maintaining the status quo
Under this scenario, the Chinese government puts the issue of resolving the unification problem on the back burner while placing priority on maintaining Communist Party rule and securing robust economic growth. In fact, so long as Taiwan does not seek de jure independence, Beijing accepts its de facto independence. Although there are repeated political confrontations between the two sides, unification proceeds on the economic front, under a policy of not mixing politics with economics. Taiwanese firms in particular have created many jobs in mainland China through direct investment, and play a major role in its economic development. On the other hand, there are limits to the steps China can take vis-a-vis Taiwan to nudge it toward unification. Attempts to woo the people of Taiwan through military exercises and criticism of the current Taiwanese government are counterproductive; trying to pressure Taiwan through the United States is not a good idea because it may increase Washington's influence over Taiwan.
(2) Unification by force
If the Chinese government tries to achieve unification through the use of military force it will have to sacrifice economic development, even if the current Communist Party regime manages to survive. Any invasion of Taiwan would result in intervention by U.S. forces, and it is questionable whether the Chinese could secure a military victory. Even if China were to win, economic sanctions by the West similar to those imposed after the Tiananmen Square incident of 1989 would be unavoidable, and the damage to the Chinese economy would be immeasurable. If the economy of Taiwan were seized through military might it would collapse, causing a drain of capital and human resources, becoming more of a burden to China than an asset.
(3) Peaceful unification
Peaceful unification means that the residents of Taiwan actively seek to "return to their homeland." As a prerequisite, they would have to be guaranteed the living standards, freedom and democracy they have so far enjoyed. Promises such as the "one country, two systems" model implemented in Hong Kong would be insufficient because the majority of Taiwanese do not feel the wishes of Hong Kong residents have been sufficiently respected by the authorities in Beijing since the territory's reversion to Chinese rule. In the end, in order to achieve peaceful unification, mainland China would have to merge with Taiwan not only economically but also politically. Although most of Taiwan's people feel they are a part of China, they would say "no" to unification if their living standards were to fall. Furthermore, because they do not trust the Communist Party and do not want to lose the fruits of democracy that they have reaped thus far, peaceful reunification would be impossible under the single party rule of the Communist Party.
Of these three scenarios, I believe it is most likely that in the short term the Chinese government will maintain the status quo, while in the long term cross-straits relations will move toward peaceful unification. China has clearly said it is prepared to use military force to prevent Taiwan's independence, but in fact it is not in any rush to unify China and Taiwan through military might. This finely balanced state of affairs, where Taiwan is neither independent nor under mainland rule, is also the best choice for the government of Hu Jintao and Wen Jiabao, which is pursuing a policy of securing China's "peaceful rise" - a policy that will likely be maintained for the time being. In the future, however, as China completes its modernization and becomes a more attractive country, the people of Taiwan will come to feel a sense of pride in being Chinese and calls for joining the mainland will likely mount. Thus, for mainland China, unification with Taiwan is not a goal that should be swiftly pursued at the cost of exhausting the nation's resources, but something that will be achieved as a result of China's modernization.
October 21, 2004
Article(s) by this author
October 10, 2019［China in Transition］
September 19, 2019［China in Transition］
U.S.-China Trade Friction Casting a Shadow over the Chinese Economy—Impact on the supply side becoming a matter of concern
April 2, 2019［China in Transition］
December 4, 2018［China in Transition］
Chinese Economy Slowing Down amid Intensifying U.S.-China Trade Dispute: Reform and opening-up should come before economic stimulus
October 19, 2018［China in Transition］
- Research Areas
- Research/Policy Papers