Rising US-China tensions could have more economic and strategic implications than political

Chinese President Xi Jinping (left) and US President Joe Biden (right). (File image)

In her four-nation tour of Asia, United States House of Representatives Speaker Nancy Pelosi’s visit to Taipei on August 2 has taken US-China relations to a new test. Pelosi is the third-highest official in the US government. This is the second visit after Newt Gingrich — a Republican, in the same official capacity — had his delegation’s last stop on the self-ruling democratic island in 1997.

Since 1949, China has treated Taiwan as a breakaway province, and longs to unify the island with the mainland, not shying away from committing to use force. Such high-ranking foreign official visits encourage Taiwan’s de facto independence. This is more felt when US officials visit Taipei despite endorsing a ‘One-China policy’.

This visit has been a major strategic victory for the US; on the other hand, it has become a new flashpoint for future geopolitical strife in the region. The fallout can already be felt. Following Pelosi’s arrival, China has already taken steps to blacklist Taiwanese traders on August 2, and intends to conduct live-fire military exercises across multiple locations surrounding Taiwan. The movement of PLA troops in Xiamen, the capital city of Fujian province adjacent to Taiwan, also shows China’s disapproval.

The heightened tensions could dominate the upcoming ASEAN Foreign Ministers Meeting scheduled for August 4-5 in Cambodia. US State Secretary Antony Blinken and China’s Foreign Minister Wang Yi are also attending, and will likely skip a bilateral meeting on the side-lines. The 10-member regional bloc has become a significant arena for Sino-US posturing.

Likewise, for India, the US-China tiff on Taiwan can adversely affect India’s Act East policy, and the Indo-Pacific region in particular. India's regional involvement will be stretched beyond the economic and strategic partnerships. As China seeks to militarise the South China Sea further, where more than 50 percent of Indian trade flows, the stakes become higher, affecting India’s economic development, and challenging its status as a regional power. Besides, India’s interactions in security dialogue forums like Quad and Aukus might require more robust and concrete action plans to shape its stakes among other regional powers vis-à-vis China.

On the other hand, India’s relations with Taiwan are based on a shared political understanding, and mutual respect. Although India respects the ‘One-China policy’, and has no formal diplomatic ties with Taiwan, both economies have attempted to reconfigure their bilateral engagement in recent years. India’s Act East policy and Taiwan’s New Southbound Policy complement this deepening relationship.

But any change in the status quo resulting from Pelosi’s visit can sabotage the existing bilateral agreements and the Free Trade Area (FTA) negotiations which began in 2021. This FTA would be beneficial for India’s starving semiconductor chip industry. Therefore, the cost might be in economic and strategic high-technology innovation sectors rather than political.

On the other hand, Xi Jinping is galloping for the third term in the 20th Party Congress this fall. He will give no opportunity to his internal and foreign critics to undermine his political control in China. Despite Pelosi’s visit, buttressed by serious power projection by the US aircraft carrier battle groups — a ‘blatant political provocation’ creating an ‘extremely dangerous’ situation — the Chinese leadership is prudent not to escalate into a full-fledged conflict. However, intensive and frequent military exercises by the PLA navy and air force cannot be ruled out to squeeze Taiwan’s interactions with other powers, at least for now. For now, the US has a chutzpah moment, after the party congress, the outcome might differ.

If the US-China tiff escalates and leads to an imminent Chinese invasion of Taiwan, India cannot afford to choose sides. Taiwan is not Ukraine, but at the same time, given India’s other domestic and security priorities, an ideal case of ‘strategic neutrality’ can be an option.

A more proactive initiative, however, would be to help solve the problem than to be a party to it. In the long run, India must be self-reliant to rapidly modernise and revolutionise its security and defence capabilities without constraining economic growth and public welfare. Just bandwagoning with the powerful will not guarantee our security in the long run in a ‘winner takes all’ global politics.

Bhim B Subba teaches political science at University of Hyderabad, and is visiting researcher at Institute of Chinese Studies, New Delhi. Views are personal, and do not represent the stand of this publication.