Taiwan Contingencies and Southeast Asia: Scenarios in the Gray Zone

Since Russia’s invasion of Ukraine, English-language policy discussions on Asia have featured darkening prognoses and increasingly imminent timeframes for a Chinese invasion of Taiwan. Western attention has also focused on potential blockades of the island by the People’s Liberation Army (PLA), after Beijing’s recent military exercises encircling the island.

Taiwan is located in a strategically important area; together with its offshore holdings, the island sits at the maritime crossroads of Northeast and Southeast Asia. Conflict in the area could plunge the region into economic chaos. Regional states, in particular in Southeast Asia, have long been concerned with U.S.-China rivalry, and have begun to grapple with the weighty implications of military confrontation across the Taiwan Strait. Yet these are not the most likely scenarios to worry about.

An outright invasion or blockade would almost certainly bring China into direct conflict with the U.S., and would likely ruin China’s economy – the primary source of the Chinese Communist Party’s power. In the short-to-medium term China’s leadership understands it would be an unwise gamble. But Xi Jinping has other, more plausible options that avoid such extreme risks.

There are at least six locations where Beijing could plausibly act against Taiwan in the “gray zone” below the threshold of military conflict. China has proved itself to be adept at this in the South and East China Seas. In fact, two of these potential targets are in the South China Sea, where Taiwan maintains two key outposts.

One is the large, isolated atoll of Pratas (Dongsha), which provides the only airstrip within a several-hundred-kilometre radius, and arguably constitutes an important node for sea control out to the Bashi Strait. In May 2020, chatter briefly swelled about PLA training drills involving Pratas as the imagined target. In September, the PLA held naval drills in the vicinity. The other Taiwanese outpost in the South China Sea, Itu Aba (Taiping) Island, is the largest naturally formed feature in the Spratly archipelago, claimed in whole or part by Vietnam, the Philippines and Malaysia.

On balance, however, moves against Taiwan-held islands in the South China Sea would make little sense for Beijing. A takeover of Pratas would not likely happen without bloodshed, with Taipei recently strengthening its armed presence there. Besides a reported 500 marines stationed there, military-trained Coast Guard personnel have been equipped with shoulder-launched, armour-piercing rockets that would complicate a Chinese amphibious assault. 

Itu Aba offers little material benefit to Beijing, as it already controls nearly 13 square kilometers of land in the Spratlys — 26 times the area of Itu Aba — thanks to its campaign of island-building in the 2010s. Moreover, any such operation would alarm Southeast Asian claimants that occupy nearby features.

The most appealing targets for Beijing lie in the Taiwan Strait itself, where Taipei occupies several dozen small islands that sit much closer to the Chinese coast than to Taiwan. This offers Beijing significant geographical advantages.

The most appealing targets for Beijing lie in the Taiwan Strait itself, where Taipei occupies several dozen small islands that sit much closer to the Chinese coast than to Taiwan. This offers Beijing significant geographical advantages.

In particular, the little-known Wuchiu Islands are sparsely populated and lightly defended, while many of the Matsu Archipelago’s 36 islands are uninhabited, offering the possibility of a bloodless fait accompli. Aside from new forward positions for reconnaissance and harassment, seizing one or more of these offshore islands would provide General Secretary Xi Jinping with the opportunity to claim progress towards “reunification” and punishment of Taiwanese independence activities.

So what would a PRC move on an offshore island mean for Southeast Asian states?

First, it will result in even greater tension across the Taiwan Strait, and potentially a dramatic economic decoupling. Taipei will likely boost defence spending, mobilise new capability development programmes, and may further expand conscription.

The effect on Taiwanese public opinion and economic relations would be harder to predict, but potentially more dramatic.

Previous Chinese military moves, such as the large-scale exercises encircling the island in the wake of U.S. House Speaker Nancy Pelosi’s August 2022 visit, have been met with a collective shrug by citizens in Taiwan.

But an island seizure could generate inside Taiwan the kind of psychological shock seen in Europe after Russia’s aggression against Ukraine in 2022, which has provided the impetus and ongoing support for a near-total economic decoupling from Russia. If the island’s US$200 billion trading relationship with the mainland was suddenly cut, a phalanx of Taiwanese enterprises would be forced to leave China suddenly.

Under such circumstances, Taiwanese enterprises would be seeking alternative markets and sources of inputs, as well as new bases for their operations. Taiwan is already a major source of foreign direct investment in Southeast Asia. The island’s economy is the 23^rd biggest in the world by GDP, and is behind only Indonesia in Southeast Asia. Taiwan’s industries are well integrated into regional supply chains.

Second, Sino-American tensions will likely surge, generating further economic opportunities for Southeast Asia, alongside heightened security risks.

Although a limited island seizure operation should be relatively easy for intelligence analysts to distinguish from preparations for an invasion, politicians in Washington and beyond would surely frame an island seizure as evidence of an imminent invasion of Taiwan. Such circumstances would likely lead to further changes in Washington’s relationship with Taipei – from weapons sales to military assistance and diplomatic engagement.

If the resulting U.S.-China tensions spiralled into trade decoupling, this could generate further economic opportunities for Southeast Asian states – even as their regional security environment deteriorates.

Thirdly, greatly increased tensions in the Taiwan Strait could also ease tensions in the South China Sea. An elevated risk of great power conflict would likely prompt Beijing to focus on its primary strategic target, Taiwan, potentially affording Southeast Asian claimants greater space for their own activities.

No one can really discern Beijing’s thinking into potential scenarios over Taiwan. But outright invasions or blockades are not the only Taiwan contingencies that regional countries need to think through.

136/2023

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This article is part of the ‘Blue Security’ project led by La Trobe Asia, University of Western Australia Defence and Security Institute, Griffith Asia Institute, UNSW Canberra and the Asia-Pacific Development, Diplomacy and Defence Dialogue (AP4D). Views expressed are solely of its author/s and not representative of the Maritime Exchange, the Australian Government, or collaboration partner country government.