From the BBC: China has reacted angrily to a US deal to upgrade Taiwan’s ageing fleet of US-built F-16 fighter planes.

This recent development where the US has agreed to a $5.85 billion renovation plan has renewed a long standing dispute between both (The People’s Republic of) China and Taiwan (Republic of China) and China and the United States. Comprehensively explaining the conflict would be both time consuming and needless, there are a variety of great sources on the matter.

Here is a quick summary, between 1945 and 1950 China had a civil war between the Communist Party led by Mao Zedong and the sitting government ruled by the KMT. Eventually the Communist Party captured the entire mainland of China and the KMT was forced to retreat to the Island of Taiwan, no armistice was signed. The US is involved in the hostilities because it supported the KMT both the during the conflict and afterwards by refusing to recognize the Communist controlled mainland as the legitimate government of China for some time. For several decades the ROC (Taiwan) refused to lift its claim over all of mainland China, with many additional countries contained in their claim (see below):

Incidentally, the People’s Republic of China also claims the entire territory of Taiwan, calling it the “Taiwan Province, People’s Republic of China.” As time has progressed, relations between the two entities has been fraught with conflict and frequent military and diplomatic posturing. Currently only a handful of countries fully recognize Taiwan as an independent state, most of them are small states. Despite America’s lack of official recognition of Taiwan it continues to support Taiwan both militarily and politically under the Taiwan Relations Act. Thus the F-16 package recently signed between Taiwan and the US isn’t anything new.

What is new, however, is the regional balance of power and its impact of relations across the Taiwan Strait. While relations have been better in recent history, there have been notable flareups in the past 20 years. These flareups (along with cross-strait relations at large) have been keenly observed by diplomats and academics alike. They watch with particular attention because cross-strait relations are often viewed as a bellwether of China’s military and economic rise and its relationship with the US, who China is now beginning to rival in economic output (using PPP, more on this later). Relative changes in the balance of power between both China and Taiwan and China and the US should be seen as a background for conflicts across the strait of Taiwan.

If one were to use only the Realist or Neo-Realist schools of thought on these relations, one might puzzled by the continued support the US gives to Taiwan. After all, Taiwan is a small country of just 23 million people, which trades less with the US compared to China. But this would be viewing things from an ahistorical perspective. Taiwan’s democracy and historic political ties with the US were once backed by a level of military spending that was closer to China’s than it is now. Without disregarding the current tension over this recent US F-16 deal, I would like to present graphs of relative power that play as a backdrop for the cross-strait relations over the past 20 years, focusing on events in 1995-6 and 2008.

Below is a graph I made using data from SIPRI on military spending from the US, Taiwan and China. (The excel spreadsheet is free if you fill out a small form here):

As one can see, in 1990 despite China seeing substantial growth in the 80s and having a population over a billion, it spent only 46% more on its military than Taiwan. China also had (and continues to have) a large border with numerous flashpoints (Arunachal Pradesh with India, among others) that could have complicated any military deployments near the Taiwan Strait. In 1995 this figure changed only slightly, with Taiwan still spending nearly 50% of what Mainland China spent on its military. This complicates a Realist/Neo-Realist interpretation of the 1995-6 Taiwan Strait Crisis.

During this crisis the then president of Taiwan Lee Teng-hui began moving away from a One China policy towards an Independent Taiwan stance. This angered PRC officials and made his 1995 visit to his alma mater, Cornell, a diplomatic crisis both between China and Taiwan and between China and the United States. In 1995 and 1996 China conducted a series of missile tests and eventually an amphibious assault exercise in the Strait, acts frequently viewed as a tool to intimidate voters in Taiwan from voting for Lee Teng-hui. The US responded with what was dubbed “the biggest display of US military power in Asia since the Vietnam War” sending two battle carrier groups into the region. Lee Teng-hui won the election that year, and tensions remained high for some time afterwards. But if China was willing to threaten Taiwan, perhaps it no longer feared Taiwan’s military. Perhaps instead, China wanted to test the alliance between Taiwan and the US.

Comparing US military Spending to China’s paints an asymmetrical picture:

In 1995 the US military spent almost 20x as much as China on its military! But the reason people are eying the Taiwan Strait as a bellwether has as much to do with the economic rise of China as its military rise. After all, a country can only spend as much on its military as its citizens are willing to sacrifice in money for whatever potential benefits that military might bring. While China’s military spending is still a fraction of US spending, its exponential increase underscores the fast-changing pace Asian political geography.

The graphs below show the GDP (national income) of the three nations using exchange rates only, and does not factor in prices in domestic markets. If you wanted to compare how much bread people could buy this would not be a good source because bread might be cheaper in other countries. But if you’re looking at international trade (or purchasing arms) this is actually a better source than Purchasing Power Parity since exchange rates would come into play.

As you can see, China’s rise has transformed its comparative wealth with both the United States and with Taiwan. It also helps explain how China’s economic growth was partially matched by Taiwan in the early 90s. In 1995 Taiwan’s GDP represented ~38% of mainland China. Now it represents just 7.3% using exchange rates.

Now lets look at a final set of graphs showing GDP using Purchasing Power Parity. This should shore up the differences in cost between both Taiwan and China versus the USA.

The first difference you notice is that both China and Taiwan’s GDP double here. This is because China and Taiwan both partake in a form of currency manipulation. Essentially, by undervaluing their currencies, these countries give their citizens less buying power on the international market, promoting domestic consumption instead. Having an undervalued currency enables these countries to export at a lower cost as well.

This data comes from the IMF, which also forecasts future GDP. They predict that by 2016 China’s GDP will surpass the United States; by then Taiwan’s GDP would represent only 6.3% of mainland China’s GDP. This is all important because it might help to explain the recent detente between Taiwan and China, beginning in 2008. This has included high level talks between the leadership of both countries as well as economic integration, and most notably frequent cross-strait commercial flights.

I have a feeling that this recent policy change comes from a re-evaluation of Taiwan’s security dilemma from within. The term “security dilemma” is used by Realist and Neo-Realist theorists in International Relations to describe a state’s conflicting needs. A state must enough power to repel aggressor states but if that state becomes too powerful it will provoke other states to counter that strength either through alliances or by increasing their own security. A common measure of power/security in Realist theory is money (GDP) or other resources. Using this level of analysis, one would surmise that China’s rise in GDP was always a threat to Taiwan and other nearby states, but that Taiwan’s countering check on Chinese growth depended on US security assurances, as the US was stronger than China. Taiwan might now be betting on the US continuing to being a powerful ally, but wants to prolong the status quo until it can find new ways to counter China’s rise. There are, of course, other interpretations of recent developments. Expect to see more headlines regarding Cross-Strait relations, as the IR community watches with great anticipation.