Taiwan: A Risk Analysis through the Lens of Hong Kong

Introduction

Those of us who have long advocated for Hong Kong often stress the importance of our city’s freedom to the rest of the world. Hong Kong, in our view, has never been a “boutique” issue, a local concern with few implications for the wider world. Rather, we have urged the world to see Hong Kong as a bellwether for freedom in the Asia-Pacific region. If Hong Kong fell—and clearly, it has fallen—China would soon turn its eyes to Taiwan.

A little more than a year after the introduction of Hong Kong’s National Security Law, Taiwan does indeed seem to be the next target of an increasingly assertive Chinese foreign policy. The People’s Liberation Army (PLA) now regularly sends more than 150 warplanes in a row to breach Taiwan’s air defense identification zone; at the same time, Taiwan has invited U.S. marines to help shore up the island’s military forces. Throughout all of this, the rhetoric surrounding these issues is becoming increasingly aggressive.

When examined in the context of what has happened to Hong Kong, there is no way to interpret these events except to realize that the status quo in Taiwan, built on a foundation of the “1992 Consensus” and American “strategic ambiguity,” is soon coming to an end, if it has not already ended. This will likely have major ramifications both geopolitically and for international businesses.

Our intention in this paper is not to imply that the Hong Kong and Taiwan situations are identical or that the dynamics in each situation will play out in the same way. Taiwan has been a frozen conflict for decades, and there are many elements unique to the island’s politics that do not have direct parallels in Hong Kong. However, we perceive there to be several key lessons that those watching Taiwan must draw from events in Hong Kong.

First, Hong Kong provides a window through which to understand the modus operandi of Xi Jinping’s Communist Party. In Xi’s China, political priorities trump all others—the Party’s actions make sense within the system, but they may confuse outsiders. Xi’s words should be taken literally and seriously. His intentions are more avowedly nationalistic, and he has brushed off the “hide your strength, bide your time” mantra, which guided the foreign policy of his predecessors and their approach in both Hong Kong and Taiwan. These changes have profound ramifications.

Second, the dynamics of Taiwan’s domestic politics are beginning to mirror the dynamics of the democratic movement in Hong Kong, with Taiwan facing similar dangers of polarization and internal divisions. Hong Kong’s democratic camp traditionally sought a democratic future within China, but it takes two to tango, and the Communist Party was never willing to accommodate Hong Kong’s moderates. Polarization followed and the middle ground evaporated. A similar process is playing out in Taiwan, with the KMT’s platform appearing increasingly untenable and anachronistic, especially in light of the collapse of the “one country, two systems” model in Hong Kong.

Third, Hong Kong has changed the geopolitical landscape of the Asia-Pacific region in ways that have profound ramifications for Taiwan. Just as those analyzing the situation in Taiwan must look at Xi’s actions in Hong Kong, they should also look at the behavior of the United States and its allies. The fall of Hong Kong consolidated the bipartisan consensus about China in Washington and (less so) in Brussels and London, giving senior administration officials and members of parliament the chance to assemble the full range of economic and financial policy options in their arsenal if the situation goes south in Taiwan. And given China’s open breach of an international treaty over its commitments in the Sino-British Joint Declaration, questions are now being raised about how the international community should see China’s commitments to international law across a range of issues, from Taiwan to trade and climate change.

Finally, the changing political situation in Hong Kong has been a direct result of the rising power of red capital—i.e., mainland businesses—and the corresponding weakening of the hand of international and local business elites when negotiating with Beijing. This has two implications: First, Taiwan must be careful not to give red capital a foothold nor allow it to assist United Front interference in Taiwanese politics and media, something which was especially rampant during the previous KMT administrations. Second, international businesses conducting risk audits should seriously consider how trends in Hong Kong revealed their dependencies on China and acute vulnerabilities to the kind of geopolitical shock that may be around the corner as a result of ratcheting tensions in Taiwan.

Read the full report at the Harvard Kennedy School Ash Center, where this article was originally published.