For the past few decades, China’s reputation as a peaceable nation has largely been taken for granted. The country hasn’t conducted a major war since the 1970s, and you would have to go back to 1988 and the so-called Johnson South Reef Skirmish to find the last time its forces opened fire on a significant contingent of foreign military personnel.
Nevertheless, there are signs that this cordial set of circumstances might be under strain. A pacifist China is a historical anomaly, and it’s only because of its attractiveness to international commerce that China has not needed to flex its muscle on the geopolitical stage of late.
Due to its colossal increase in growth, diligent workforce, and capacity to provide outside businesses with an inexpensive manufacturing foundation, China has been regarded as a lucrative opportunity that numerous individuals in the West were unable or unwilling to challenge.
And yet, that could be about to change. While the territory’s ruling organization – officially known as the Communist Party of China (CPC) – might have appeared somewhat toothless in the years gone by, that’s certainly not the case today. The CPC’s general secretary, Xi Jinping, is unlike his more immediate predecessors and, having assumed autocratic control over the People’s Republic of China (PRC), is now seen by the outside world as a potentially dangerous and unpredictable foe.
Given how crucial the role of international trade and China’s domestic economy is to maintaining an amicable status quo, it’s interesting to note the comments of the famed Wall Street maverick Stanley Druckenmiller at the recent Bloomberg Invest New York 2023 conference.
Indeed, having spoken of the long-term allure of AI stocks and the inevitable crashes that always follow asset bubbles, Druckenmiller turned his thoughts to China.
However, rather than singing its praises, the hedge fund manager struck a downbeat note. Acknowledging the previous energy of Shanghai’s entrepreneurial class, he now laments the loss of its dynamic capitalist culture.
More worrying, perhaps, is Druckenmiller’s belief that if China does lose its competitive edge, this will back Xi Jinping into a corner. Fearful over his status as leader of the country, Xi might lash out militarily, as many dictators are wont to do in similar scenarios.
But if this prediction is to come true, there’s likely to be an alternative pretense for violent conflagration than just an economic one. In fact, that catalyst may already be in motion.
Could China Go To War Over The Alternative To Oil?
The potential for conflict between China and the United States has always loomed ominously in the collective imagination, with many scenarios envisioning a Chinese move against Taiwan as the eventual trigger.
That said, despite years of severe but nonviolent hostility, Taiwan and China have lived together without the implicit cold war escalating into a genuine one. Therefore, what circumstances would prompt China to initiate an authentic military expedition?
Surprisingly, the answer lies not in issues like human rights violations or matters of corporate espionage but in a vital economic resource of the 21st century: semiconductors. The semiconductor problem and China’s increasing vulnerability to supply chain constraints are what could drive China to consider armed action against Taiwan.
Drawing an apposite historical parallel, Japan in 1941 found itself in a similar situation when its military aggression was driven by the requirement to secure the country’s oil supply. Desperate to address its vulnerability, Japan invested in new technology but failed to achieve energy independence. Consequently, it resorted to military expansionism to secure access to oil-producing regions.
Likewise, China’s tech economy heavily relies on semiconductors, which it buys from outside China or produces domestically with the help of foreign manufacturers. China’s position in the global industry is limited, with the United States dominating nearly 50% of the market share.
The qualitative gap is even more significant, with China lacking a presence in the high-value fabless integrated circuit sector, which is a prime driver of innovation and shapes the broader digital economy. The foundry business – responsible for manufacturing those integrated circuits – also poses a challenge for China, as its fabrication capabilities lag four to five technology generations behind leaders like Taiwan.
China’s inadequate investment in semiconductor technology exacerbates the problem. The United States invests twice as much as Chinese enterprises, both quantitatively and qualitatively. This structural inability to compete and close the technology gap creates a significant vulnerability for China, especially as the US and Europe continue to pour billions of dollars into semiconductor development.
The Chinese government’s attempts to solve this problem through direct public investment have fallen short. Despite grandiose plans and initiatives, China’s semiconductor industry struggles to keep up, and current US policies targeting unfair trade, technology theft, and national security risks have further tightened the noose. Denying Chinese companies access to American semiconductors – as seen with Huawei – has significantly impacted China’s capabilities.
Consequently, China finds itself in a position of acute strategic vulnerability, which clashes with its geopolitical ambitions. The semiconductor crisis has become a tipping point that might push China towards military action against Taiwan. With Taiwan’s dominant position in the global semiconductor ecosystem, capturing the island could alleviate China’s supply shortage and enhance its geopolitical position.
While the risks and consequences of such a move are enormous, the semiconductor issue might be the catalyst that compels China to take a drastic step after seven decades of restraint.
Needless to say, it remains to be seen whether China’s ambitions for semiconductor dominance will drive it towards an open conflict with the United States, reshaping the dynamics of the tech world and the balance of power in the process.
Nothing Is Set In Stone
According to former Australian ambassador Colin Heseltine, China doesn’t want a war because, as Xi Jinping noted in 2015, no country has ever achieved its aims through violent force alone.
Backing up this assertion is America’s Chairman of the Joint Chiefs of Staff, Mark A. Milley, who believes that war “is neither inevitable nor imminent.“
However, the mainland’s people still harbor revanchist aspirations toward Taiwan – and who can blame them? Sixteenth-century European sailors christened the island Formosa – the beautiful – and the country retains its appeal to this day.
It’s also understandable that China would want to “crush any attempt” at the kind of color revolution that earlier beset once peaceful nations like Ukraine, Syria, and Libya.
But only time will tell whether that means a full-scale war with the US and its allies is really on the cards.
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