As tensions continue to rise, the potential for conflict in the Taiwan Strait has once again become a focal point of concern for all parties involved. An American political scientist suggests that by observing three key indicators, it may be possible to assess whether Beijing is likely to embark on such a dangerous war.
Professor Minxin Pei from Claremont McKenna College (CMC) in the United States, shared his views in a commentary published by Bloomberg on Wednesday, July 3. He believes that before any aggression towards Taiwan, the Chinese Communist Party (CCP) would take steps to reduce financial risks, increase food supplies, and bolster petroleum reserves.
Pei noted that the CCP has learned lessons from Russia’s failed invasion of Ukraine. Prior to the invasion, Russia had deposited $300 billion (approximately half of its total foreign reserves) in Western financial institutions, which were quickly frozen once the war broke out.
“Before the outbreak of war, it is foreseeable that China (CCP) would reduce its exposure to financial pressures from the West, sell US Treasury bonds, and use the funds to purchase gold or other assets beyond Washington’s reach,” Pei wrote.
He also suggested that the CCP may consider reducing its holdings of euros, yen, and pounds sterling.
Analyzing China’s ownership of US Treasury bonds, Pei pointed out that the amount had decreased from $1.17 trillion at the end of January 2018 to around $770 billion currently. He attributed this decline to the geopolitical tension.
“So far, these figures indicate a gradual decline rather than a cliff-edge drop,” Pei wrote, indicating that if the CCP were to sell off a significant portion of its assets in a short period, a conflict in the Taiwan Strait could be imminent.
Another critical figure to observe is China’s food self-sufficiency rate. In 2000, China sourced 94% of its food domestically, but by 2020, this proportion dropped to 66%.
In a major conflict, the US Navy may disrupt China’s trade routes. While it is unclear what level of self-sufficiency rate would reassure the CCP, Pei believes that it would need to be significantly higher than 66%.
In the event of a war, the US could obstruct China’s maritime oil imports. As of January this year, China’s total crude oil reserves (including commercial and government reserves) stood at 934 million barrels, which would last about two months.
“Clearly, if China (CCP) intends to wage war, it needs to increase its reserves,” Pei emphasized.
Pei believes that currently, the possibility of a full-scale war erupting over the Taiwan issue is low. The more pressing danger lies in accidental conflict.
“As demonstrated by the recent incident of the Chinese coast guard detaining a Taiwanese fishing vessel this week,” he wrote, “a crisis arising from misjudgment or provocation originating from Beijing, Washington, or Taipei. This is something all parties should be prepared for and work diligently to avoid.”