China-Taiwan Weekly Update, August 16, 2024

Data Cutoff: August 12, 2024 at 5pm ET

Editors: Dan Blumenthal and Frederick W. Kagan of the American Enterprise Institute

The China–Taiwan Weekly Update is a joint product from the Institute for the Study of War and the American Enterprise Institute. The update supports the ISW–AEI Coalition Defense of Taiwan project, which assesses Chinese campaigns against Taiwan, examines alternative strategies for the United States and its allies to deter the Chinese Communist Party’s (CCP) aggression, and—if necessary—defeat the People’s Liberation Army (PLA). The update focuses on the Chinese Communist Party’s paths to controlling Taiwan and cross–Taiwan Strait developments.

Key Takeaways

• The PRC released four members of a Taiwanese fishing boat on August 13, whom it detained near Kinmen on July 2. The crew’s release does not indicate a change in the PRC’s long-term coercion campaign against Taiwan, however.
• The PRC exempted Fujian residents from a travel ban covering Taiwan’s Matsu islands, possibly to make decoupling from the PRC a politically unpopular policy among Matsu residents.
• ROC officials warned that PRC outreach to religious groups in Taiwan is a national security risk.
• The PRC’s Ministry of Foreign Affairs accused the National Endowment for Democracy of carrying out subversive activities against the PRC under the guise of democracy promotion.
• The PLA Air Force conducted unsafe and unprofessional maneuvers while intercepting a Philippine military transport plane over Scarborough Shoal. This was the first time that the Philippine–PRC disputes in the South China Sea led to an aerial confrontation.
• The PRC reiterated its support for Iran and called for Israel to end the war in Gaza following the assassination of Hamas leader Ismail Haniyeh.

Cross-Strait Relations

Taiwan

The PRC released four members of a Taiwanese fishing boat on August 13, whom it detained near Kinmen on July 2.[i] The crew’s release does not indicate a change in the PRC’s long-term coercion campaign against Taiwan, however. The PRC continues to hold the Taiwanese captain of the crew and the boat, with no confirmed date for their release. The Chinese Coast Guard (CCG) detained the crew and boat for fishing in PRC waters during a seasonal fishing moratorium. The crew’s release comes after the PRC and ROC made progress in resolving the handling of the February 14 capsizing incident, in which two PRC fishermen died while fleeing from a Taiwanese Coast Guard pursuit near Kinmen. Kinmen is a group of Taiwan-controlled islands with a large military garrison roughly 3 kilometers from the coast of the PRC. The July 30 deal concludes lengthy backchannel negotiations that stalled in early March, resulting in the ROC returning the bodies of the deceased and paying restitution to their families. The PRC released a Taiwanese former soldier that it held for nearly five months on August 7 after the deal.[ii]

Since the February 14 capsizing incident, the CCG has conducted frequent violations of Taiwan’s maritime jurisdiction in the waters around Kinmen, which peaked in May around President Lai’s inauguration. Several commercial PRC drones have also flown over Kinmen in recent months.[iii] This phenomenon has previously occurred during periods of high cross-strait tensions, which suggests that it is a PRC-directed gray zone warfare activity.[iv]

The capsizing incident triggered the PRC’s aggression around Kinmen, but its coercive actions are part of a broader campaign to exert pressure on Taiwan after the election of President Lai Ching-te. Since Lai’s election, the PRC has conducted large-scale military exercises that encircled Taiwan, nearly brought Air Defense Identification Zone (ADIZ) incursions to an all-time high, and announced legal guidelines that threaten severe punishment for Taiwanese “separatists.”

The PRC Ministry of Foreign Affairs (MFA) lodged diplomatic objections to Japan’s detention of two ROC-registered fishing vessels on behalf of Taiwan and denied the ROC government’s legitimacy. The Japanese Fisheries Agency vessel detained an ROC fishing vessel on July 5 for illegally fishing 1.5 nautical miles past a “designated enforcement line” near Amami Oshima.[v] The Japanese Coast Guard detained a second ROC fishing vessel on July 28 for illegally fishing inside Japan’s territorial waters near Yonaguni.[vi] Japanese authorities subsequently fined and released both vessels within two days of detention.[vii]

The PRC Ministry of Foreign Affairs (MFA) stated on August 9 that “Japan has no right to take law enforcement measures against “Chinese fishing vessels,” citing the China-Japan Fisheries Agreement.[viii] The PRC and Japan signed the agreement in 1975, which outlines procedures for dispute settlements and fishing regulations in agreed-upon waters.[ix] The ROC Ministry of Foreign Affairs (MOFA) rebuked the PRC’s interference and said that this case is a maritime matter between Taiwan and Japan. MOFA stated that the matter has been resolved in accordance with international maritime regulations and bilateral mechanisms. [x]

The PRC uses international dialogue to act as a voice for Taiwan and deny the legitimacy of the ROC government.[xi] The PRC Deputy Permanent Representative to the UN Geng Shuang thanked the international community for its “sympathy and concern” on April 3 after Taiwan experienced a damaging earthquake.[xii] The ROC MOFA condemned “China’s shameless behavior” and stated that “only Taiwan’s democratically elected government can represent Taiwan’s 23.5 million people internationally.”[xiii]

The PRC exempted Fujian residents from a travel ban covering Taiwan’s Matsu islands, possibly to make decoupling from the PRC a politically unpopular policy among Matsu residents. Matsu (officially Lienchiang County) is a Taiwan-controlled group of islands 10 kilometers off the mainland coast at their closest point and home to roughly 13,000 people. The first mainland tour group since 2019 arrived in Matsu on August 9. The PRC suspended individual tourism to Taiwan in 2019, citing poor cross-strait relations.[xiv] It then suspended group tours to Taiwan in 2020 during the pandemic and maintained the restrictions on Taiwan despite resuming group travel to more than 70 countries in August 2023.[xv]

Matsu is the target of a series of PRC economic integration programs that likely aim to foster the islands’ economic dependence on the mainland and build political support for cross-strait integration. The Fujian provincial government in the PRC announced on April 28 the “Fuzhou-Matsu City Pass,” a 300 RMB (approximately 42 dollars) benefits card that facilitates the travel and settlement of Matsu residents in Fuzhou, the capital of Fujian province.[xvi] The card offers Matsu residents discounted rides on transportation and hotels in Fuzhou, free tours of Fuzhou's major cultural attractions, housing benefits, and dedicated hotline consultation for children's education, employment, and entrepreneurship. The Fujian government also announced that it will promote the construction of transportation and industrial infrastructure, such as airports, high-speed rails, highways, and ports, to increase connectivity between Fuzhou and Matsu. The PRC announced another batch of policies on May 16 that aim to strengthen economic integration with trade, investment, and employment incentives.[xvii]

Tourism is an important source of revenue for Matsu to offset lesser military presence after significant force reductions in the past two decades, which shrunk the county’s military garrison to just 2,000 people from 20,000.[xviii] Lienchiang County Director of Transportation and Tourism Liu Hsing-chien stated Matsu received approximately 22,000 tourists from the PRC in 2019, representing approximately 10% of total tourist arrivals.[xix] Professor Huang Cheng-tsung of Providence University’s Department of Tourism in Taiwan estimated that the potential daily tourism revenue would be 260,000 USD if the islands’ hotels reached full capacity.[xx]

ROC officials warned that PRC outreach to religious groups in Taiwan is a national security risk. President Lai Ching-te spoke at a Buddhist temple in Taichung on August 9 and warned that the PRC is using religious pretenses to lure Taiwanese people to the mainland.[xxi] Lai stated that the exchanges are a risk to national security and urged people not to let the PRC swindle them. Taiwan’s Ministry of Interior (MOI) warned on August 10 that an account on the popular messaging platform LINE may be a CCP front carrying out United Front activities.[xxii] The United Front is a whole-of-government and society effort to advance the CCP’s ideology and win the hearts and minds of Chinese-ethnic people by forming a thorough alliance between the CCP and the rest of society. The MOI stated that it contacted the Taiwan Taoist Provincial Church, the supposed parent organization, which denied that it had established a cross-strait youth league. Former Mainland Affairs Council (MAC) Minister Chiu Tai-san stated in October 2023 that religious exchanges enable the CCP to collect information on Taiwanese people and learn which people hold influence in certain communities.[xxiii]

The PRC Ministry of State Security (MSS) claimed it destroyed Taiwanese espionage networks in the PRC. The MSS posted on the social media WeChat on August 13 that it discovered over 1,000 instances of Taiwanese espionage during major operations in recent years. It said that it severely punished “spies who carried out intelligence theft, infiltration, and sabotage activities.” It specifically mentioned Taiwanese political activist Yang Chih-yuan, who was detained in August 2022 in Wenzhou, Zhejiang province, and charged with secessionism in 2023. The MSS accused Yang of being a “Taiwan independence” leader and claimed his arrest was a “heavy blow [and] a strong deterrent” to Taiwanese pro-independence “separatists.”[xxiv] The MSS post is part of a trend of PRC crackdowns on Taiwanese “separatism” following Lai Ching-te’s presidential election victory in January and inauguration in May. The PRC released an authoritative “legal opinion” in June that threatened “Taiwan independence diehards” with penalties up to life imprisonment and death. The Taiwan Affairs Office and Ministry of Public Security added website sections on August 7 with information about Taiwanese “separatism” and how to report it to authorities. They included the names of ten Taiwanese political figures that the PRC designated “Taiwan independence diehards” in 2021 and 2022.

China

The PRC’s Ministry of Foreign Affairs (MFA) accused the National Endowment for Democracy (NED) of carrying out subversive activities against the PRC under the guise of democracy promotion. The MFA released a report on August 9 entitled “The National Endowment for Democracy: What it is and what it does,” accusing the NED of implementing US government-supported infiltration, subversion, and sabotage operations around the world.[xxv] The NED is a US non-governmental organization focused on promoting democracy around the world that receives a portion of its funding from the US Congress. In 2019 the MFA released a report accusing the NED of being a front for US intelligence operations and funding anti-PRC groups in Hong Kong.[xxvi] The NED was one of several US NGOs to be sanctioned by the PRC for “instigating extremely violent criminal activities” in Hong Kong.

The most recent MFA report accuses the NED of instigating “color revolutions,” cultivating pro-US forces in foreign countries, interfering in foreign elections, and working to undermine stability in foreign states. The MFA accuses the NED of working to “incite division” within the PRC by supporting Taiwan independence forces, colluding with anti-China forces in Hong Kong, providing support to a number of Uyghur activists and organizations, and meeting with the Tibetan government-in-exile. The MFA accuses the NED of engaging in subversion utilizing a number of capabilities in the information, economic, diplomatic, and political domains for the purpose of inciting change in unfriendly regimes. Representatives from the NED have not released a statement responding to the MFA’s accusations.

Southeast Asia

Philippines

The PLA Air Force (PLAAF) conducted unsafe and unprofessional maneuvers while intercepting a Philippine military transport plane over Scarborough Shoal. This was the first time that Philippine–PRC disputes in the South China Sea led to an aerial confrontation. Philippine military officials stated that two PLAAF aircraft flew very close to a Philippine Air Force (PAF) light transport plane that was on patrol near Scarborough Shoal on August 8 and launched at least eight flares in the flight path of the PAF plane, putting the plane at risk.[xxvii] The Philippines’ National Task Force for the West Philippine Sea condemned the PLA’s “irresponsible, unprofessional, illegal and dangerous acts” and called on the PRC to cease “all forms of provocative and hazardous acts that could undermine the safety of Filipino military and civilian personnel in the waters or in the skies, destabilize regional peace, and erode the trust and confidence of the international community in the PRC.”[xxviii] The Philippines filed a diplomatic protest against Beijing on August 13 over the incident.[xxix]

PRC Ministry of Foreign Affairs Spokesperson Lin Jian claimed the Philippines intruded into the “adjacent airspace of Huangyan Dao” (Scarborough Shoal) on August 7 and August 8, which infringed on PRC sovereignty and international law. He claimed the PLA took “necessary and lawful measures in response” and called the PLAAF maneuvers “professional” and “consistent with Chinese and international law.” Lin accused the Philippines of sending its aircraft into Scarborough Shoal’s airspace as a “deliberate provocation” during a joint patrol with US, Australian, and Canadian forces in the South China Sea.[xxx] A statement from the PLA’s Southern Theater Command, which is responsible for the South China Sea, likewise accused the Philippines of illegally intruding into PRC airspace and said that the incursion disrupted a PLA training exercise.[xxxi]

The PRC and the Philippines both claim Scarborough Shoal as their territory. The PRC has maintained de facto control of the shoal since 2012 but has not built any infrastructure on it. The PRC conducted a joint air and sea combat patrol around Scarborough Shoal on August 7 on the same day as the Philippines, United States, Canada, and Australia held joint drills in the Philippine Exclusive Economic Zone (EEZ).[xxxii] The Philippine government said the PLA Navy sent three ships to tail its joint exercises with its partners.[xxxiii]

The aerial confrontation is the first since PRC–Philippine hostilities in the South China Sea began to heat up in 2023.[xxxiv] Some Philippine and other Southeast Asian analysts assess that the PRC may begin to employ military harassment and gray-zone tactics against the Philippines in the aerial domain, in the latest escalation of the two countries’ territorial disputes.[xxxv] Philippine Undersecretary of Foreign Affairs Maria Theresa Lazaro said the Philippines will review a provisional agreement the two sides reached on July 22 regarding resupply missions in the South China Sea. The provisional agreement, which Lazaro helped negotiate, was aimed at de-escalating tensions in the South China Sea after a series of violent confrontations surrounding Philippine missions to resupply soldiers at Second Thomas Shoal, another South China Sea maritime feature that both countries claim.[xxxvi] The PRC observed but did not impede a Philippine resupply mission to Second Thomas Shoal on July 27.[xxxvii]

Indonesia

The PRC is taking steps to deepen diplomatic and defense ties with Indonesia, likely to counter Western influence with the Association of Southeast Asian Nations (ASEAN). The PRC held its first “2+2” diplomatic and military dialogue with Indonesia in Jakarta on August 12. PRC Vice Minister of Foreign Affairs Sun Weidong and Deputy Director of the Office for International Military Cooperation of the Central Military Commission Zhang Baoqun met with their Indonesian counterparts Abdul Kadir Jailani, Director General of Asia-Pacific and African Affairs at the Indonesian Ministry of Foreign Affairs, and Brigadier General Oktaheroe Ramsi, Secretary of the Directorate General for Defense Strategy at the Indonesian Ministry of Defense. Sun also met with Indonesian Foreign Minister Retno Marsudi and Deputy Foreign Minister Pahala Mansury on the same day. A PRC readout said the two sides discussed diplomatic and defense strategic cooperation and reached a series of “common understandings.” They also discussed issues of common concern including management of differences in the South China Sea through peaceful negotiations. The readout also said this inaugural 2+2 dialogue marks a new level of strategic mutual trust between the two countries.[xxxviii]

The PRC also has proposed naval sales to Indonesia in recent months. Representatives from the China State Shipbuilding Corporation (CSSC) have traveled to Indonesia to propose discounted offers on PRC S26T diesel-electric submarines (SSK) and guided-missile destroyers. The South China Morning Post (SCMP) reported that the offer is in the “proposal” stage but would be Indonesia’s largest purchase of PRC defense equipment if it goes through. Indonesia has procured anti-ship missiles, drones, and self-propelled air defense systems from the PRC. It has procured most of its military equipment from France, Italy, Sweden, Belgium, the United States, and South Korea, however. PRC-produced equipment has made up less than 0.1% of Indonesia’s defense acquisitions since 2014. The SCMP cited analysts who said Indonesia has been “lukewarm” about developing a defense partnership with the PRC, even as its defense minister and president-elect Prabowo Subianto has pushed for military modernization.[xxxix] 

Some PRC media and analysts are presenting PRC–Indonesia cooperation as a model of PRC–ASEAN relations in contrast to the hostile PRC–Philippines relationship. PRC state-owned media Global Times cited Chen Xiangmiao, director of the World Navy Research Center at the National Institute for South China Sea Studies (NISCSS), who said the PRC and Indonesia were likely to discuss negotiations on the South China Sea Code of Conduct. NISCSS is a government-affiliated think tank. Chen said Indonesia was concerned that tensions in the South China Sea, particularly between the PRC and the US-aligned Philippines, may force members of ASEAN to choose sides in the US–PRC geopolitical contest. He said Indonesia may wish to play a mediating role in the South China Sea.[xl] Indonesia is a minor player in the multinational South China Sea dispute, as its EEZ extending from the Natuna Islands overlaps with the PRC’s Nine Dash Line claims that cover most of the South China Sea.[xli] 

Russia

The PRC and Russia may begin barter trade to evade payment issues related to Western sanctions on Russia. 98 percent of PRC banks are rejecting payments in Chinese yuan from Russia. Reuters cited three unspecified Russian sources who are closely involved in Russia–PRC trade and payments, who claimed that the PRC and Russia expect to reach deals involving barter trade as soon as this autumn. The sources said that Russia is developing regulations for barter trading and assumed the PRC is doing the same. One source said Russia is discussing ways to export food products to the PRC using a barter system. Another source said companies were discussing trading metal from Russia for machines from the PRC. Barter trade circumvents the use of payment systems that Western regulators monitor, allowing traders from the two countries to do business without fear of stopped payments or secondary sanctions. Unspecified Russian sources said that Russian President Vladimir Putin’s visit to Beijing in May helped to facilitate alternative payment means between the two countries to some extent, but major difficulties and political problems remain.[xlii]

The PRC and Russia’s attempts to implement barter trade show both the effectiveness and the limits of Western-led sanctions on Russia over Russia’s war in Ukraine. The PRC is Russia’s largest trading partner and faces criticism for its support of Russia’s defense industrial base. However, PRC banks have increased restrictions on trade with Russia since at least December 2023, after the European Union imposed its 12th sanctions package against Russia and the United States authorized secondary sanctions on financial institutions that help Russia evade sanctions. Three of the PRC’s “Big Four” state banks and many smaller PRC banks began rejecting payments from sanctioned Russian financial institutions since the start of 2024. Russian newspaper Izvestia reported on August 12 that 98% of PRC banks are now rejecting yuan payments from Russia.[xliii] Russian business newspaper Kommersant reported on July 29 that around 80 percent of payments in Chinese yuan are being returned to Russia.[xliv] Besides bartering, Russian companies are being forced to use "trading houses” as intermediaries or to make use of small local banks or PRC-based subsidiaries of Russian banks that are not significantly involved in trade with the United States. These workarounds enable some trade but increase the cost and difficulty of trade compared to normal transactions without sanctions.[xlv]

Iran

The PRC reiterated its support for Iran and called for Israel to end the war in Gaza following the assassination of Hamas leader Ismail Haniyeh. Israel killed Hamas Political Bureau Chairman Ismail Haniyeh in Tehran on July 30. The PRC condemned the assassination and expressed concern that it would result in further regional upheaval.[xlvi] PRC Minister of Foreign Affairs Wang Yi called acting Iranian Foreign Minister Ali Bagheri Kani on August 11 to reiterate the PRC’s support for Iran’s defense of its sovereignty.[xlvii] Wang condemned the assassination, blaming those responsible for undermining ceasefire negotiations and increasing tensions. Bagheri Kani stated that he hoped the PRC would play a bigger role in de-escalating tensions in Gaza.

Wang’s comments are part of a broader PRC effort to more closely align itself with Iran. The PRC’s rhetoric has remained consistent since the start of the war, centering on calls for a ceasefire in Gaza and blaming Israel for the increase in regional tensions.[xlviii] PRC responses to attacks on Israel have thus far been muted. Following Iran’s April 13 strike on Israeli territory, the PRC MFA did not condemn Iran’s strike, instead calling for Israel to bring an end to the conflict in Gaza and avoid further spillover of conflict.[xlix]

The PRC has used the Israel–Hamas war to build better relations with the Arab States, likely to cement the PRC as a key player in the Middle East and present itself as a potential economic and diplomatic partner for states seeking to distance themselves from the US due to its alliance with Israel. The PRC has been working to foster negotiations and peace deals since the outbreak of conflict, with the most recent instance being the July 23 signing of the Beijing Declaration between Hamas and Fatah.[l] The Arab League (AL) expressed support for the Beijing Declaration and the PRC’s peace efforts. The AL stated that the PRC’s support for Palestine was commendable and showed the strength of relations between the Arab States and the PRC.[li] Wang also had similar conversations with leaders in Egypt and Jordan, calling for joint efforts to pursue de-escalation and ceasefire in Gaza.[lii]