Beijing Tightens Financial Control in Preparation for War in Taiwan Strait: Experts

The type 052C destroyer Haikou of the Chinese People's Liberation Army (PLA) Navy participates in a naval parade to commemorate the 70th anniversary of the founding of China's PLA Navy in the sea near Qingdao, in eastern China's Shandong Province, on April 23, 2019. (Mark Schiefelbein/AFP via Getty Images)

Beijing recently set the direction for the country’s financial policies, and some China observers view this as an indication of Chinese leader Xi Jinping’s intent to prepare for a potential conflict in the Taiwan Strait.

The twice-a-decade National Financial Work Conference (NFWC) took place in Beijing from Oct. 30 to 31. Mr. Xi said China’s financial development will “follow the centralized and unified leadership of the Chinese Communist Party Central Committee,” reported state-run media Xinhua.

Experts noted that Mr. Xi is strengthening his authority, positioning the regime to potentially use force to take control of Taiwan and “reunite” it with the mainland.

“That’s the only reason Xi Jinping is pursuing a comprehensive approach to centralize control of economic and political domains,” said Yuan Hongbing, a Chinese dissident and former law professor at Beijing University.

‘Threat to Taiwan Will Continue’

The Chinese Communist Party (CCP) maintains that Taiwan is an inseparable part of China and must be brought back into the fold through any necessary means. Nevertheless, the CCP has never governed Taiwan, and the island has retained de facto independence since the end of the Chinese Civil War in 1949.

Nevertheless, Mr. Xi has tied the unification of both nations to his aspiration of positioning China as the world’s foremost superpower by 2049, coinciding with the 100th anniversary of the CCP’s takeover of the country.

In recent years, the Chinese regime has ramped up its military coercion on Taiwan by sending a record number of warplanes near the island.

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According to Taiwan Ministry of National Defense (MND) data, China sent a total of 1,737 aircraft to Taiwan’s air defense identification zone (ADIZ) in 2022. This is a 79 percent increase from 972 incursions in 2021.

Mr. Xi had ordered his military to be prepared for a potential invasion of Taiwan by 2027, warned U.S. Central Intelligence Agency Director William Burns, “despite him likely being sobered by the performance of Russia’s military in Ukraine,” reported Reuters in February.

Zhang Youxia, vice chairman of China’s Central Military Commission, recently touted that the Chinese military “will not be soft-handed” if anyone attempts to interfere with China’s internal affairs.

Luo Zhengyu, an intelligence officer at the Intelligence Research Center of Taiwan’s Ministry of National Defense, told the Chinese language edition of The Epoch Times that Mr. Zhang’s remarks underscore the fact that as long as the CCP’s defense policy remains, “the threat to Taiwan will continue indefinitely.”

Mr. Yuan believes that if Mr. Xi maintains control over China’s finances, it will provide him with the means to counteract potential economic sanctions from the international community in the event of a conflict in the Taiwan Strait.

“Furthermore, by operating within a closely regulated financial and economic structure, Xi can enhance his ability to implement a rationing system in times of conflict. All of his current efforts are directed toward this specific preparation,” said Mr. Yuan.

A Chinese military jet flies over Pingtan Island, one of mainland China's closest points to Taiwan, in Fujian Province on Aug. 5, 2022. (Hector Reamal/AFP via Getty Images)

A Strategy to Secure Power

During the NFWC, Mr. Xi urged the financial sector to “significantly enhance financial supervision” in order to “mitigate financial risks.” This involves “preventing and diffusing financial risks” and “implementing robust measures to counter unlawful financial activities.”

The accumulation of local government debt over the years has raised concerns about political risks, noted Christopher Balding, an expert in China’s economy, financial markets, and technology.

In an op-ed titled “Beijing Keeps Banks and Provinces Solvent,” Mr. Balding said Beijing’s centralized decision-making power over financial matters indicates “a lack of trust in the leadership and policies.”

“Bankers and central bankers in China tend to be less Party cadres and purely business-focused. This causes fear within Party leadership in which fealty and loyalty to the Party, above all, remains the treasured characteristic,” he wrote.

Since Mr. Xi secured an unprecedented third term as CCP leader in the 20th rubber-stamp legislative meeting in the fall of 2022, his leadership has witnessed a series of crises.

China’s economy, investments, exports, and consumer spending have significantly declined due to the stringent zero-COVID policy. This downturn has led to persistent issues, including a collapsing real estate industry, a sluggish stock market, a struggling foreign exchange market, and a substantial outflow of foreign capital. Additionally, a significant uptick in youth unemployment (for those aged 16 to 24)—reaching a record 21.3 percent in June—has become a major concern that the National Bureau of Statistics said on Aug. 15 it would stop releasing the data.

According to the China Macroeconomic Forum’s (CMF) report, the ongoing youth unemployment crisis could persist for the next 10 years and “worsen in the short term.” “If [youth unemployment is] not managed effectively, it could give rise to social issues beyond the economic realm and potentially ignite political problems,” the report warned.

“It has increasingly been speculated that a combination of any of the massive economic, social, and security crises that confront Mr. Xi may force him out of office within the coming few months and years,” wrote Gregory Copley, president of the Washington-based International Strategic Studies Association, in an op-ed titled “What If Xi Jinping Survives the Present Challenges in China?”

Mr. Yuan believes Mr. Xi aims to tackle his current political and economic challenges by taking a military risk.

“This situation forces Xi to take a more aggressive stance, which includes the risky prospect of initiating a conflict in the Taiwan Strait as a crucial step toward expanding communist authoritarianism worldwide.

“He aims to secure the CCP’s authoritarian rule through wartime control. That’s the purpose of his war,” he said. “Xi’s actions represent a desperate final move by the CCP.”

Mr. Yuan believes the CCP will collapse if Mr. Xi launches a war in the Taiwan Strait.

“If Xi were to engage in a conflict in the Taiwan Strait, he is undoubtedly leading himself to a dead end.”

Mu Qing and Luo Ya contributed to this report.