[Analytics] As US-China relations sour, Taiwan’s value as a ‘chess piece’ may rise

As the United States and China remain deadlocked in a deepening dispute over trade and technology, some experts say Taiwan’s value as a bargaining chip has increased. The self-governed island — which Beijing deems to be a renegade Chinese province — is one of many flashpoints in the rivalry between the world’s two superpowers. Shirley Tay specially for the CNBC.

Taiwan has always been a “chess piece” that Washington can play with in U.S.-China relations, said Zhiqun Zhu, a professor of political science and international relations at Bucknell University.

“Taiwan’s value to the U.S. will only increase as tensions between the U.S. and China escalate,” Zhu told CNBC.

Under the Chinese Communist Party’s “One China” policy, the self-ruled island is part of mainland China. Chinese President Xi Jinping has said before that China “must be and will be” reunified with Taiwan — by force if necessary.

However, recent military and diplomatic actions from Washington have been seen by Beijing as U.S. support for Taiwan’s independence movement.

At the Shangri-la dialogue defense summit in Singapore last weekend, Chinese Lieutenant General Shao Yuanming said Washington’s support for Taipei has sent “terribly wrong signals to Taiwan’s independence forces, which could undermine regional peace and stability. ”

“If anyone wants to separate Taiwan from the country, the Chinese military will resolutely defend the unity of our motherland at all costs,” Shao added.

‘Upgrade’ in US-Taiwan relations

The U.S. using Taiwan as a card is a new factor in the dynamic of the trilateral relationship that “really did not exist” before President Donald Trump came into power, said Bonnie Glaser, senior advisor for Asia at Washington-based think tank Center for Strategic and International Studies (CSIS).

“Trump is a transactional president and he often seems to be willing to put anything on the table,” she told CNBC.

On the military front, the Trump administration has ramped up arms sales to Taipei over the years, invoking the ire of Beijing. Washington is reportedly preparing a sale of more than $2 billion worth of tanks and weapons to Taiwan.

Diplomatic issues have also come to the fore. In May, high-level security officials from the U.S. and Taiwan met for the first time in nearly four decades, drawing an angry response from Beijing.

Chinese Foreign Minister Lu Kang said Beijing is “strongly dissatisfied” with and “resolutely opposed” to any official meetings between the U.S. and Taiwan.

“I believe we’re inching closer & closer to Beijing’s redline on US-Taiwan senior official mtgs–those that are publicized at least,” Derek Grossman, a senior defense analyst at California-based think tank Rand Corporation, said on Twitter after the U.S.-Taiwan meeting.

Grossman told CNBC on email that his understanding is that such meetings “have been ongoing for some time in private.”

“My hunch is that it was publicized this time via intentional leak from one or both sides to signal to China that the upgrade in U.S.-Taiwan relations is here to stay,” he added.

Taiwan’s next leader is key

Taiwan is set to have its presidential elections in January 2020 — and experts said the polls would likely determine the direction of cross-strait ties.

Grossman said that if the incumbent Taiwanese president Tsai Ing-Wen is re-elected, which is “likely,” cross-strait tensions are likely to escalate further from 2020 to 2024.

Glaser from CSIS echoed that sentiment, adding that if a candidate from the independence-leaning Democratic Progressive Party was elected, China would ratchet up military, diplomatic and economic pressure.

“I think the Chinese would be worried that there’s always this potential for things to go in a very negative direction because the combination of Trump being president and the possibility that Tsai gets re-elected … could really embolden Tsai to move toward the direction of independence,” she added.

According to Grossman, the best hope for keeping tensions under wraps would be if a candidate from the opposition Kuomintang (KMT) party wins the next Taiwan presidential race and recognizes the “One China” policy.

The Taiwanese have been observing how China’s ‘One Country, Two Systems’ approach has worked out in Hong Kong, and it isn’t too inspiring.

That said, Grossman added, public opinion polling in Taiwan has shown that voters will not likely support the opposition KMT in doing so.

“The Taiwanese have been observing how China’s ‘One Country, Two Systems’ approach has worked out in Hong Kong, and it isn’t too inspiring,” Grossman added.

A public opinion survey conducted by the Taiwan’s Mainland Affairs Council in May also found that 83.6% of Taiwan opposes Xi’s “one country, two systems” policy.

A ‘small’ risk of escalation
Asked if an armed conflict was a possibility, Grossman said: “Absolutely a risk — albeit a small one.”

However, he emphasized that he did not want to get anyone alarmed, and highlighted that “those out there saying the risk is very high are probably wrong.”

“I would say the risk has escalated under Tsai from maybe a 1% to 5% chance of armed conflict,” Grossman added. “But that’s still uncomfortably high considering that China has nuclear weapons and the U.S., also with nukes, would likely intervene to save Taiwan were China to invade or attack the island.”

Similarly, Bucknell’s Zhu said that while the possibility of an escalation is always present, in reality, “neither side wants to face military confrontation.” However, economic and diplomatic confrontations are “highly likely,” he added.

That may come in the form of Beijing poaching the island’s allies to ramp up pressure on Taiwan as cross-strait tensions escalate, he said. “Economically, Taiwan is heavily dependent on the mainland market, so China could restrict Taiwan’s agricultural exports to the mainland.”

Washington should “carefully deliberate” its exchanges with Taiwan and ensure the wrong signals are not sent to Beijing, Glaser from CSIS pointed out.

“China could miscalculate and think the United States would get involved in a conflict, and that would really be a very dangerous situation,” she added.