Taiwan, the keystone which could bring down the world order: World Reframed 23

In the world of geopolitics, size rarely equates to significance. Nowhere is this more evident than in the case of Taiwan. A "small patch of rock" roughly the size of the US state of Maryland or the Netherlands, this island has become the focal point of intense international scrutiny and a cornerstone of China’s foreign and military policy.

But why does this specific island, separated from the Chinese mainland by the 130-kilometer-wide Taiwan Strait, command such an outsized influence on the global stage? To understand the gravity of the situation, we have to look at Taiwan through four distinct lenses: history, geography, economy, and technology.

A geographic and economic crossroads

Positioned at the edge of the southeastern coast of China and bordering the South China Sea, Taiwan sits at the heart of some of the busiest shipping lanes in the world. This strategic location makes it an essential hub for global trade.

Despite its compact size of roughly 36,000 square kilometers, Taiwan is home to 23 million people—a population density comparable to Florida or Australia, but packed into a much smaller area. This high density has fueled an economic powerhouse; Taiwan currently ranks among the top 20 economies in the world by nominal GDP, outpacing nations like Switzerland and Sweden. With living standards comparable to Western Europe, it is a high-income economy that "punches well above its weight."

Perhaps the most critical reason for Taiwan’s global importance today is its role in the advanced semiconductor industry. Taiwan is the world's primary producer of the high-end computer chips that power everything from smartphones and electric cars to massive data centres and sophisticated military systems.

One company in particular, TSMC (Taiwan Semiconductor Manufacturing Company), produces chips so advanced that many of the world’s leading tech firms simply could not function without them. This "silicon shield" makes Taiwan indispensable to the modern global economy, creating a situation where any disruption to the island has immediate, catastrophic effects on technology sectors worldwide.

The view from China

While its economic and technological contributions are undeniable, the question remains: why is Taiwan so central to China’s national identity and long-term strategy?

To understand the issue, you need to understand the history. Taiwan was occupied by the Japanese as they expanded westwards at the end of the 19th century. Internal turmoil in China allowed the Japanese to expand their empire prior to and during the Second World War. The island was returned to Beijing on its defeat, but to a nationalist government engaged in a bitter civil war with its communist rival. The conclusion of that conflict saw the communists victorious but the nationalists took refuge on the island of Taiwan, with both sides claiming to be the legitimate rulers of a united China.

Initially the United Nations backed Taipei but soon switched to acknowledging the Communist Party of China as the single entity able to represent the country. Almost every other country in the world followed suit, acknowledging the One China Principle in order to establish diplomatic relations with the world's most populous nation. China focused much of its foreign policy on this goal, offering incentives to states and organisations which came on board.

In Taipei, meanwhile, where a multi-party democracy had formed, the policy has largely been to keep quiet and profit from the status quo, neither renouncing, nor demanding an independent status.

Re-enter Japan

A possibly off-the-cuff statement from Japanese prime minister Sanae Takaichi that her country might be forced to intervene militarily if China acted on its long-stated reunification demand caused consternation in Beijing.

Not only has Japan's military been strictly reserved for self-defence purposes, but the scars of its soldiers' behaviour in China still run deep and raw.

Takaichi declared that a Chinese invasion of Taiwan, which has never been ruled out, could constitute a threat to Japan. China views any action across the Taiwan Strait as a domestic matter on which international powers should have strictly no say.

The fallout has had huge economic consequences for Japanese businesses, given the size of the Chinese market. But it also risks having longer term strategic consequences, with America announcing more than $10billion of new arms sales to Taiwan.

Looking forward

While insisting its goal is peaceful reunification, Beijing has been careful to keep its options open regarding its approach to Taiwan. It has avoided any timeframes but responded angrily to any dissent to its world view from Taipei. The prospect of a conflict which could see the world's two superpowers confronting each other for the first time in decades is one which strikes fear into politicians, businesses and hundreds of millions of ordinary people.

Click here to watch our previous episodes

World Reframed is produced in London by Global South World, part of the Impactum Group. Its editors are Duncan Hooper and Ismail Akwei.

ISSN 2978-4891