China after NATO - 2 - politically

A political decoupling from the United States toward allied NATO partners has provided China with opportunities to fill two growing voids: geopolitical influence and a faltering economy(see previous blog post).

For this reason, China has a vested interest in a form of pact with the EU, whose supply chains depend on China and which could assist China in securing investments in developing countries. 

In geopolitics, there are however no permanent friends, only permanent interests.

It has been necessary to crack down on internal unrest…

The economic risks have, at first, led to subtle signs of internal unrest within the CCP.

• For example, in June 2024, Xi Jinping attended a military parade in Yan’an. Yan’an holds great symbolic significance for China’s military and for the CCP. It was here that the PLA established its main base during the civil war after the “Long March.”
  • But immediately following the celebration, Xi Jinping launched the largest “anti-corruption” campaign within the PLA to date. He used the words, “the military must remain loyal to the government.” In other words, there has been a growing crisis of trust.

• Purges typically occur under the guise of “anti-corruption” campaigns and have been steadily increasing over the past four years. They have spread and moved closer to the top.
  • In the past four months, these purges have targeted some of Xi Jinping’s most trusted figures within both the CCP and the PLA. This includes, among others, Zhao Leji, the third-highest ranking official in the CCP. In 2024, it also affected Jin Zhuanglong, head of the Ministry of Industry and Information Technology. In other words, these are the most critical areas for China’s future development (see later).
• More structurally, the CCP’s official media has generally stopped publishing articles that praise Xi’s ideological framework, and the official tone toward, for example, the EU has become more conciliatory.
• This has led to foreign speculation that Xi Jinping’s position within the CCP may be weakening.
  • Particular attention has been directed toward factions allegedly led by Hu Jintao (who was escorted out of the 20th Party Congress), Wen Jiabao, and Hu Deping. Hu Deping is the son of former moderate CCP leader Hu Yaobang. However, all of them were born in the 1940s and are therefore around 80 years old. Although they remain influential, their biological expiration dates, all things considered, are within reach. It would thus be surprising if the three were orchestrating a coup d’état.

… and therefore, Xi Jinping is centralizing power ever more

Overall, these are signs that Xi Jinping is centralizing and streamlining governance into something resembling crisis management. That requires visible and decisive leadership—and this applies broadly. In mid-February, for instance, Xi Jinping participated in a major public conference with China’s tech leaders. This had otherwise been a no-go since the CCP launched its crackdown on the tech sector during the COVID period. The crackdown accused the tech industry of undermining Chinese communism, among other things by offering paid tutoring and “dumbing down the youth” through gaming products. As part of this campaign, Alibaba’s chairman, Jack Ma, was placed under house arrest. Six months later, he relinquished all control over the financial conglomerate Ant Group.

Xi Jinping’s policy shift primarily reflects the necessity for China to ramp up its AI focus. This includes investments in both AI and broader hardware such as chips and quantum computing. China’s sense of urgency has only intensified following the U.S. launch of Project Stargate. For example, DeepSeek is now being rapidly rolled out in everything from chatbots to risk management in the financial sector.

In foreign policy, a multipolar world serves China’s interests…

China is acutely aware that it is the only country capable of challenging the United States as a superpower, especially while the EU lacks internal cohesion. 

American analysts often refer to the U.S.–China relationship as a Thucydides Trap—a concept suggesting inevitable conflict between a rising power and the established hegemon. Chinese analysts spend considerable effort rejecting this comparison. China’s economy depends on continued trade with the outside world. Among other things, China is the world’s largest importer of oil and of food commodities such as soybeans, corn, and pork.

This is why China opposes a “Yalta-style” world order. In a multipolar world, it is easier for China to gather broader support from, for example, BRI countries. Like many ASEAN nations and countries in Africa and South America, they view the United States as an illegitimate power center. The more Trump decouples the U.S. from Europe, the greater the “soft power” (trust potential) China gains. This is why the U.S.'s “peace negotiations” on Ukraine, conducted over the heads of both the EU and Ukraine, received unusually extensive media coverage in Asia.

… as it offers the greatest geopolitical potential …

In the short and medium term, decoupling works to China’s advantage, as the United States stands weakened—especially in relation to China’s ambition of reunification with Taiwan. Europe is less inclined to fully support the U.S. in sanctions and embargoes against China.

• For the same reason, China offered to deploy peacekeeping troops in Ukraine. China is already by far the largest contributor of peacekeepers among the permanent members of the UN Security Council and is therefore well-qualified for the task.
• However, the offer was met with strong opposition from Russia, which saw the risk that a renewed Russian offensive could result in Chinese UN soldiers being killed. This, in turn, could give China a pretext for advancing territorial claims in Eastern Siberia, perhaps even all of Outer Manchuria, thus threatening Russia’s access to the Sea of Japan and the Pacific Ocean.
• China’s proposal prompted Erdogan to jump in and offer Turkish forces as an alternative to fulfill the peacekeeping role. Erdogan’s Turkey is working deliberately to position itself as the global nexus between East and West, “the power in the middle.” Accordingly, Turkey wants to keep China at a distance. 

… coupled with a re-engagement with the EU

China’s economy depends on maintaining high export growth. The decline in exports to, and FDI inflows from, the United States over the past three years has been offset by increased trade with Asian, South American, and African countries. However, if trade with the EU also declines, China may struggle to find new export destinations capable of filling the gap. The CCP’s English-language mouthpiece, Global Times, has for some time published headlines like “Europe needs to think afresh about China ties amid US shock” and claims that “Western media are becoming friendlier to China” (quotes from February 28).

The EU, for its part, is attempting to decouple from its strategic supply dependence on the United States, especially during its current military buildup. In many areas, the EU has no alternative but to rely on deeper trade ties with China. This includes a wide range of high-tech products, such as essential drone components, where Chinese company DJI holds an almost global monopoly, but also broader categories like raw materials and rare earth elements. The EU’s dependence is deeper and more structural. A trade war with China that cuts off supply lines to Europe could severely cripple European industrial production.

In the long term, however, China seeks to prevent deeper European unity. Europe holds enormous untapped geopolitical potential to emerge as a rival superpower. After all, Europe has a population of 750 million and a combined GDP (including the UK) of USD 23 trillion. This compares to USD 27 trillion for the United States and USD 18 trillion for China. But for Europe to realize this potential, internal consensus is essential.

Reunification with Taiwan is central to China’s strategic objectives ...

China’s desire for reunification with Taiwan is driven by both historical and geopolitical motivations.The historical arguments are the most powerful, as modern China’s national narrative is largely built on internal unification after a “Century of Humiliation” inflicted by external enemies. Contemporary Chinese historians often emphasize the justice of restoring China’s borders as they existed under the Qing Dynasty. This includes reunification with Taiwan and reclaiming Outer Manchuria.

• Taiwan was ceded to Japan in 1895 following the Qing Dynasty’s defeat in the First Sino-Japanese War. In 1945, Taiwan was returned to China, but it became the refuge of Chiang Kai-shek, who fled there in 1949 with the remnants of the Republic of China’s army, and the country’s entire air force.
• Today, Taiwan is a global hub for microchip production. Taiwan’s largest company, TSMC, manufactures approximately 90% of the world’s most advanced microchips—those smaller than 60 nanometers (Deep Ultraviolet and especially Extreme Ultraviolet lithography). A Chinese invasion of Taiwan could effectively block the United States’ core ambition of regaining global technological leadership.

… which the United States, by contrast, has committed to defend

Formally, the United States is committed to defending Taiwan in the event of an external attack. The Taiwan Relations Act of 1979 was introduced as a consolation for Taiwan following Kissinger’s détente with China in 1972, which shifted U.S. pressure toward the Soviet Union. One of China’s conditions for this shift was taking over Taiwan’s seat in the United Nations as the legitimate representative of China.

• Since then, the U.S. has built its military credibility in Asia around its security guarantee to Taiwan. As a result, the U.S. sees Taiwan as central to its influence in, and supply chains from, Asia. For example, the U.S. maintains a permanent deployment of roughly 53,000 troops in Japan and about 23,000 in South Korea. In addition, the 7th Fleet, approximately 27,000 personnel, regularly patrols the South China Sea to ensure “Freedom of Navigation Operations.”
• Taiwan maintains a substantial state of military readiness, with between 1.7 and 2.3 million reservists and a defensive “porcupine strategy.” Still, the prevailing assessment is that Taiwan may be able to stall a Chinese invasion, but not repel one. Taiwan depends on imports for 95% of its energy and most of its food. Therefore, China's first move toward invasion would likely involve a prolonged naval blockade and disruption of Taiwan’s energy supplies, crippling global chip supply in the process.
  • China has therefore followed TSMC’s strategic pivot with great interest, as the company is now establishing manufacturing plants in Japan, Germany, and two in Arizona, USA.

An invasion would also enable China to enforce its territorial claims in the South China Sea

Geopolitically, Taiwan is essential to China’s claims under the “Nine-Dash Line,” which would grant China control over nearly the entire South China Sea—allowing it to dominate maritime trade routes between Asia, the U.S., and Europe.

• The only remaining vulnerability would then be the Strait of Malacca. To mitigate this, China has spent the last 15 years building land-based alternatives.
• The South China Sea contains significant oil reserves and rich fisheries. However, these resources are generally of secondary political importance compared to the strategic control over free passage for trade.
• The “Nine-Dash Line” scenario is the most feared among China’s ASEAN neighbors. Free maritime navigation is essential for their imports and exports. This concern is compounded by China’s control over all land-based trade alternatives, except, for now, Thailand’s Landbridge project.

China, however, will decide when to attempt the invasion

There is no doubt about whether China will pursue reunification with Taiwan, but it remains China’s decision as to WHEN this attempt will be made. Until then, China will need to further centralize power AND secure internal cohesion. The former has unfolded over recent years, while the latter will require a stronger adversarial image of the United States than we see today. So far, the measures have been limited to purges and the like.

• Trump’s “transaction-driven” approach is accelerating the timeline for such an attempt. Nonetheless, the rhetoric in China’s official media channels remains relatively measured. “Trump offers” such as postponing an additional 25% import tariff in exchange for voluntarily ceding TikTok to an American buyer do not resonate with Chinese editors.
• Rhetoric against Trump is likely to intensify if the CCP assesses that the risk of an internal financial collapse is drawing closer.
• On the other hand, by then China must have secured its supply lines. It needs to preempt the effects of a possible blockade imposed by the United States and the Quad alliance (India, Australia, Japan, and the United States).
• At the beginning of March, Premier Li Qiang announced that defense spending would increase by 7.2% in 2025, stating: “We will firmly advance the cause of China’s reunification and work with our fellow Chinese in Taiwan to realize the glorious cause of the rejuvenation of the Chinese nation.”

China’s fundamental vulnerability lies in its dependence on imported energy and food. While food supplies can be secured via overland routes during transitional periods and through channels such as the CPEC, Myanmar, and Russia, energy is harder to replace. This is a major reason why China has accelerated its shift toward renewable energy ever since it observed the West’s reaction to Russia’s invasion of Ukraine in February 2022.

Overall, Trump’s initial decoupling has provided China with an opportunity, yet China has its own ambitions

In total, Trump’s decoupling came as a surprise to China. And it arrived at an opportune moment. If the EU extends a helping hand, China’s economic and financial risk could be mitigated for a period. Furthermore, the decoupling has weakened the U.S.’s “soft power” in Asia, and especially in African countries. This vacuum benefits China, even as figures like Marco Rubio and Pete Hegseth promise “ironclad support” to the Philippines in the South China Sea.

On security and foreign policy, the CCP holds that fear is a self-imposed illusion. Deng Xiaoping once advised: “Hide your strength, bide your time, but do what is necessary.”