Editor-in-Chief Atul Singh and FOI Senior Partner Glenn Carle, a retired CIA officer who now advises companies, governments and organizations on geopolitical risk, turn their attention eastward to examine the sharp escalation in China–Taiwan tensions over the last few years in general and the Chinese military blockade of its tiny island neighbor at the end of 2025.

Atul sets the framework at the outset:

So, as usual, we’ll have a three-part structure. We are going to first ask the question: What are these tensions? Then we are going to pose the question: Why do we have these tensions? And then we will pose the third question: What could happen next? We will paint some scenarios.

Those three questions — what, why and what next — shape the entire conversation. What appears at first glance to be another People’s Liberation Army (PLA) drill at the end of 2025 becomes an examination of sovereignty and legitimacy of Chinese claims over Taiwan as well as the evolving balance of power between a rising China and a still-dominant US.

What: rising military and political tensions

These tensions are both military and political. Atul and Glenn begin by outlining the former.

At the end of 2025, the PLA staged a massive display of force around Taiwan. The exercise, titled Justice Mission 2025, included ten hours of live-fire drills and effectively encircled the island. It took place just 11 days after Washington approved an $11 billion arms sale to Taiwan, the largest deal to date between Washington and the Taiwanese capital of Taipei.

On December 30, the PLA’s Eastern Theater Command conducted a second consecutive day of large-scale operations involving army, naval, air and rocket forces. Taiwan’s Defense Ministry reported that it “detected 130 Chinese military aircraft and 14 naval vessels.” Of a total of 130 sorties, 90 entered Taiwan’s northern, central, southwestern and eastern air defense identification zone (ADIZ). For defense forces, ADIZ functions as an early warning system — though in a strait only 160 kilometers wide, reaction time is barely a few minutes.

Taiwanese President Lai Ching-te condemned the drills as undermining regional stability through military intimidation. Chinese Foreign Minister Wang Yi criticized Taiwan for continuous provocations, rebuked Japan’s leadership for openly challenging China’s territorial sovereignty and denounced the $11 billion US arms sale.

In some ways, the political tensions are more important. Since Xi Jinping became president in 2012, China’s tone on Taiwan has shifted. Before Xi, China was aggressively pursuing economic integration with Taiwan and boosting travel between the countries. Its goal was to achieve de facto integration over time. Since Xi took over, China has engaged in increasing levels of military confrontation and adopted a much more nationalistic tone on political integration. 

Under Xi, China has adopted increasingly aggressive policies in the South and East China Seas and in Tibet. Beijing has also stepped up harassment of Chinese students in obscure Australian or American universities, as well as engaged in a shrill “wolf warrior” diplomacy that confronts anyone who says anything out of harmony with China’s Taiwan policy. In recent years, Xi has dialled down this aggressive diplomacy, but the Chinese Communist Party (CCP) takes an increasingly hardline stance on Taiwan. 

After saber-rattling against Taiwan, China eased its show of force. Both sides have now signaled interest in stabilizing relations ahead of a planned “Grand Summit” between Xi Jinping and US President Donald Trump this April. At his Florida Mar-a-Lago, Trump responded to news about Taiwan with characteristic nonchalance, saying he has a “great relationship” with Xi. “Nothing worries me,” said Trump.

The immediate danger, Glenn argues, is not a Chinese invasion of Taiwan. The real danger concerns the standard of behavior, which China has successfully shifted. The normalization of Beijing’s coercive behavior — the steady shifting of what counts as routine — has resulted in a gradual erosion of Taiwan’s de facto sovereignty. 

Why: history — bitter legacy of a brutal civil war on Mainland China

To answer the second question, Atul and Glenn turn to history.

The roots of the China-Taiwan tensions lie in the Chinese Civil War, which lasted from August 1, 1927, to December 10, 1949. CCP and the Kuomintang (KMT) fought a brutal civil war for control of China. The KMT, founded by the revolutionary Sun Yat-sen in 1894 and reorganized in 1911, ruled Mainland China, which was then known as the Republic of China (ROC). General Chiang Kai-shek succeeded Sun as the KMT leader, but, bit by bit, he lost on the battlefield, and the KMT lost public support. Why?  

American journalist Theodore White’s reporting answers the question. He captures the story of the civil war in one grotesque scene: White observed miles and miles of dead Chinese peasants on the roadside, as the KMT forces marched to oppose the Communists. They had died to a significant extent not from war but due to KMT corruption, which caused mass starvation. In addition, the KMT, for all its sincere, visceral hostility to the West — KMT leaders were often true nationalists — was tainted as the pawn of the imperial powers. Therefore, KMT leaders could never really escape the perception that they were corrupt warlords beholden to the colonial, exploitative gweilo (foreigner). Meanwhile, the communists, who were equally if not more ruthless, were identified with helping the peasants, not the ruling elites, and were not gweilo-tainted in the minds of peasants. End of story.

At the end of 1949, Mainland China under the CCP became the People’s Republic of China (PRC) as the KMT retreated to Taiwan, which now became the Republic of China (ROC). Both the PRC and ROC claimed to be the legitimate state for all the Chinese people. Both believed in the One China policy and reunification. The CCP wanted to assimilate the ROC into the PRC. The KMT thought that one day the PRC would crumble and the ROC would include Mainland China.

Why: history — another bitter legacy on a small island

Since 1949, the KMT has ruled Taiwan, but never quite forgotten its past. In 1894, Sun had founded the party in Honolulu, Hawaii, as the Revive China Society. In 1919, he reformed the party in 1919 in the Shanghai French Concession and renamed it the KMT. Chiang, Sun’s brother-in-law, succeeded him as leader. Known as Generalissimo, Chiang reunited China after his Northern Expedition against regional warlords from 1926 to 1928. Yet, as mentioned earlier, Chiang’s star faded, and the KMT decamped to China. Chiang was the de facto dictator until his death in 1975, and the KMT ruled Taiwan as a one-party state till 1987. 

Chiang’s son, Chiang Ching-kuo, succeeded him. Chiang Junior lifted martial law and the ban on opposition parties. In 1988, Lee Teng-hui succeeded the Chiang family as president and continued democratic reforms. He won the first direct presidential election in 2016. Chen Shui-bian succeeded Lee by winning the 2000 presidential election. Chen ended 72 years of KMT presidencies, but the party later reclaimed power eight years later with the landslide victory of Ma Ying-jeou in the 2008 presidential election. The KMT lost the presidency and its legislative majority in the 2016 elections, but remains a force in Taiwanese politics. The party won a legislative plurality in the 2024 elections.

Today, Chen’s Democratic Progressive Party (DPP) is the center-left force in Taiwanese politics. Founded in 1986 by Hsu Hsin-liang, Roger Hsieh and Lin Shui-chuan, a year prior to the end of martial law, the DPP is a strong advocate of human rights and opposes authoritarianism. President Lai Ching-te is the third DPP president. Chen was the first DPP president who held office from 2000 to 2008, and Tsai Ing-wen was the second one who held power from 2008 to 2016.

The DPP’s roots lie in the Tangwai movement, which opposed the KMT’s one-party authoritarian rule. The movement opposed the “party-state” system and gathered force in the mid-1970s and early 1980s. In 1979, the same year in which the US ceased its recognition of the ROC, conflict between authorities and the tangwai again turned violent in the Kaohsiung Incident. Also known as the Formosa Incident, the Meilidao Incident or the Formosa Magazine incident, this was a crackdown on pro-democracy demonstrations that occurred in Kaohsiung on December 10, 1979. Note that the KMT imposed martial law from 1949 to 1987. In fact, the KMT rule from 1949 to 1992 has come to be known as the White Terror. This terror is held to have only ended in 1992 when the criminal code changed and the Taiwanese could no longer be prosecuted for “anti-state activities.”

Having lost a bitter civil war to the CCP, the KMT had an anti-communist ideology. It ruled Taiwan through martial law and curtailed civil liberties. Many of the founding members of the DPP suffered greatly at the hands of the KMT. Today, the DPP is a nationalist party that advocates strengthening Taiwanese identity, opposes pan-Chinese nationalism of both the KMT and the CCP, and criticizes China’s claims of sovereignty over Taiwan as a new form of colonialism and imperialism. Unsurprisingly, the DPP harbors bitter memories of KMT martial rule from 1949 to 1987.

Given the country’s past, Taiwanese politics is famously fractious. The Legislative Yuan, as the Taiwanese parliament is called, has been an arena for punching, hair pulling, and the throwing of plastic bottles and water balloons over the years. In one particularly heated fight in July 2017, legislators lifted up and threw chairs at each other as they argued over an infrastructure spending bill. In 2020, legislators threw pig guts and exchanged blows amid a heated row over pork imports from the US.

Right now, the DPP has the presidency while the KMT controls the legislature. The current official position of the DPP is that the ROC is an independent and sovereign country. Its territory consists of Taiwan and the surrounding smaller islands whose sovereignty derives only from the ROC citizens. The DPP’s philosophy of self-determination is based on the 1999 “Resolution on Taiwan’s Future.” The party considers Taiwan an independent nation and finds a formal declaration of independence unnecessary.

Why: tricky question of nationalism and legitimacy

For decades, both the CCP and KMT claimed to be the real representatives of the Chinese people. Both followed the One China policy because they fought a battle for legitimacy and sought to emerge as the unifying force in Chinese politics. 

Over time, the KMT has lost power and evolved into a vibrant Taiwanese democracy. In contrast, the CCP is stuck to its old dogma in an authoritarian system where Mao Zedong seized power through the barrel of a gun.

The core of the CCP’s legitimacy rests on three planks. First, the party offers hundreds of millions of Chinese high economic growth, greater prosperity and rising living standards. Second, the CCP is the standard bearer of Chinese nationalism, which is seen as an antidote to the century of humiliation when foreigners invaded and exploited China. Third, the CCP seeks to absorb Taiwan and reunify China. As a one-party state, the CCP-led PRC sees the ROC multiparty democracy in Taiwan as a threat. 

In fact, the absorption of Taiwan is an article of faith for the CCP. This Taiwan obsession is, in part, irrational. After all, on what rational basis can the CCP claim to be a single-party ruling elite? Be this as it may, Xi has clearly chosen to prioritize Taiwan since he came to power in 2012. Unification would be the apotheosis of two of the CCP’s pillars of legitimacy since 1949. Xi has played the nationalism card with increasing vigor, and now even the CCP sometimes struggles to control the nationalist surges it foments. Even as a DPP-led Taiwan has become increasingly independent-minded, the CCP-led China has become ever more intransigent.

Why: equally tricky question of sovereignty and great power politics

When the CCP set up the PRC in 1949, it sought to deter independence or any prospect of independence, as well as any potential foreign intervention in Taiwan. The CCP was not entirely successful. The First Taiwan Strait Crisis of 1954–55 was an unsuccessful attempt by the PRC to deter the US from signing a mutual defense treaty with the KMT government. The Second Taiwan Strait Crisis of 1958 followed soon after. The PLA bombarded Kinmen, and the US deployed a US aircraft carrier Essex and other naval vessels to the Taiwan Straits.

The Department of Defense recommended and pushed hard for a “massive retaliation” doctrine. This involved the use of nuclear weapons in the event China invaded Quemoy (as Kinmen was known then) and Matsu. US President Dwight D. Eisenhower never conveyed this threat to China, and his response was conventional. He used naval force alone. The “massive retaliation” doctrine later changed to a policy of graduated response under President John F. Kennedy.

The Third Taiwan Strait Crisis of 1995–96 occurred nearly 40 years later. The Chinese wanted to express disapproval of Taiwanese President Lee Teng-hui’s visit to the US. More importantly, the US acknowledged (but did not endorse) the PRC’s One China policy in 1979. Since then, the US policy has been not to take a position on Taiwan’s sovereignty and regard its ultimate status as undetermined. 

In 1979, President Jimmy Carter also signed into law the Taiwan Relations Act (TRA), which commits the US to “make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability.” The TRA also obligates the US to maintain the capacity “to resist any resort to force or other forms of coercion that would jeopardize the security, or social or economic system, of the people of Taiwan.” Note that the TRA, however, does not obligate the US to come to Taiwan’s defense, and for decades, US presidents have refused to say whether they would intervene on Taiwan’s behalf — a policy known as strategic ambiguity.  

In May 2022, President Joe Biden signaled a change in this policy, saying that the US had a commitment to come to Taiwan’s defense. He made at least three similar comments since 2021 — a move from strategic ambiguity to strategic clarity. Seemingly underscoring the changed US policy, Speaker of the House of Representatives Nancy Pelosi visited Taipei in early August 2022 and met with President Tsai Ing-wen of the DPP, the dominant political force of the 21st century, as well as democracy and human rights activists.

In response, the PLA launched a four-day military drill and surrounded Taiwan, simulating a blockade. The live-fire exercises were more extensive than those performed during the Third Taiwan Strait Crisis. Chinese military aircraft crossed the median line over 300 times during the demonstration and continue to cross it on a near-daily basis, effectively erasing the status quo. The CCP applied additional pressure through sanctions, halted exports and cyberattacks.

After Pelosi’s visit, several other US delegations visited Taiwan. Tsai met with Pelosi’s successor, Speaker of the House of Representatives Kevin McCarthy, on a stopover in the US. In response, China has intensified threatening air maneuvers, flying more frequently and closer to Taiwan, and Chinese warships have increasingly joined in the movements.

The end-of-2025 PLA exercises are part of a recent pattern. The PLA has increased military activities near Taiwan in recent years. It increasingly sends jets into Taiwan’s ADIZ as a show of force. Cyberattacks have increased. In 2020, the Chinese attacked ten Taiwanese government agencies to steal information. 

The US Department of Defense’s 2021 Military Power Report highlighted China’s prioritization of “joint long-range precision strikes across domains, increasingly sophisticated space, counterspace, and cyber capabilities, and accelerating the large-scale expansion of its nuclear forces.” Moreover, China has integrated emerging technology into its military strategy through an approach known as “intelligentized” warfare.

Atul and Glenn also mention a key economic and strategic fact: Taiwan is the leading global producer of advanced semiconductors. Taiwan Semiconductor Manufacturing Company (TSMC) produces 65% of the world’s semiconductors and 90% of the most advanced chips. If conflict between China and Taiwan were to break out, global supply chains would be severely disrupted. The US would be severely affected. A potential conflict in the Taiwan Strait also has implications for the territorial dispute between China and Japan in the East China Sea. The PRC views the Senkaku/Diaoyu Islands as a part of “Taiwan province” and may seek to take the islands during a conflict. Atul mentions that he has covered China-Japan tensions in great detail, which erupted in 2025 after Beijing made a big deal of the Japanese prime minister’s comments in parliament.

Given China’s increasing aggressiveness, Washington has acted to contain Beijing. Before Biden took office, the first Trump administration sold more than $18 billion in arms to Taiwan and eliminated long-standing restrictions on US diplomatic engagement with Taiwanese officials in 2020. US officials now acknowledge that a small but expanding contingent of Marines has been secretly training Taiwan’s forces since at least 2021. Tensions between China and the US over Taiwan amount to a classic security dilemma: both are taking actions they view as defensive, which the opposing side views as escalatory. The Thucydides Trap, a term that refers to the high possibility of ruling and rising powers clashing, is trickiest over Taiwan.

What could happen next: three scenarios

Atul and Glenn tease out three scenarios for the future. The first scenario is conservative and extrapolates the status quo. Deterrence proves to be successful after sustained increased effort by Taiwan, the US, Japan and arguably the international community. The goal would be to increase the costs of a Chinese attack on Taiwan, deterring Beijing from military conquest. The status quo would also persist if China softens its demands. This could only happen after Xi has left office. 

In the first scenario, Taiwan continues its de facto independence in the name of “one country, two systems.” The world remains as we know it, and eventual de facto reunification is contingent on China’s political evolution.

The second scenario is moderate and envisages China continuing its slow increase in economic, political and military pressure on Taiwan. The US and other powers fail to demonstrate a commitment to defend Taiwan. Without American leadership, other powers do not come to the rescue of Taiwan, and international support slowly becomes less effective. China continues to extend its influence over Taiwan even as the Taiwanese continue their paradigmatic shift decisively away from being a part of China. Taiwan becomes the Ukraine of the Orient. In this world, Taiwan progressively loses de facto sovereignty, and China achieves de facto reunification. 

The third scenario is aggressive and imagines China taking decisive military action against Taiwan. The result would be uncertain and depend on both the PLA’s ability to conquer Taiwan as well as the Taiwanese forces to defend Taiwan. Hundreds of thousands would die. Taiwan is hilly, the PLA is not battle-tested, its senior officers have just been purged, and the local population would be restive even if China conquered the island. Taiwan’s porcupine strategy might work just as Vietnam gave China a bloody nose in 1979.

The clock is ticking for China. The Chinese century may be difficult to achieve with the demographic balloon fizzing away. China is getting smaller every year at an accelerating pace and will be hundreds of millions smaller in a few decades. Arguably, the time to act for China is now. 

If China acts and invades Taiwan, that would be a disaster. Even as the military result may be uncertain, China’s attack on Taiwan would unleash an international economic tsunami. Trade would plummet, currencies would crash and GDP rates would crater. Taiwan is critical to the global economy as the world’s primary producer of advanced semiconductors, fabricating over 90% of the most cutting-edge chips used in AI, smartphones and defense systems. Led by TSMC, it controls roughly 63% of the total foundry market. As a top-20 global economy and major exporter of electronics, Taiwan’s technological, manufacturing and trade output is essential to the global tech supply chain, which would be severely disrupted.

A Chinese version of the Anaconda plan of the Mainland wrapping around Taiwan and swallowing the island is more rational, but leaders have made rash decisions in similar situations. Atul and Glenn wish that leaders on all sides make wise choices, cheekily invoking the gods and goddesses of myths from around the world to smile upon mere mortals.

The views expressed in this article/podcast are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.