Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers


U.S.-China Fight over Taiwan Exposes a Perception Gap

Only a few months ago, U.S.-China relations seemed to be enjoying a honeymoon. President Barack Obama, who visited Beijing and Shanghai in November, had made engagement with China one of his top foreign policy priorities. There was even widespread discussion of a new G2 era, with Washington and Beijing coordinating closely to solve key global problems.

But the relationship of the two largest global powers has been constrained by a series of setbacks, ranging from differences over climate change commitments and approaches to Iran's nuclear program to disputes over trade and currency. Last month, the Chinese government reacted angrily to a speech by Secretary of State Hillary Clinton criticizing Internet censorship in China. Now the announcement of $6.4 billion in U.S. arms sales to Taiwan has pushed Beijing to condemn Washington with tougher-than-usual rhetoric and stances.

Treating the arms sales as a serious threat to its national security, Beijing has suspended military-to-military exchanges with the U.S. and postponed the deputy ministerial talks on security, arms control, and nonproliferation. For the first time, China also is publicly threatening to take punitive measures against U.S. companies, such as Boeing, involved in the weapons sales to Taiwan. U.S. observers seem perplexed by China's furious response, saying that the Chinese have known about the sales for months, Beijing insists that it had repeatedly warned the U.S. that selling the weapons to the Taiwanese would have severe consequences.

Arms business as usual in Washington

What is emerging, as reflected in the Taiwan arms sales, is a huge perception gap between the U.S. and China on bilateral relations, among other global issues. According to the U.S. State Dept., the Taiwan sale is no more than an effort to enhance the "security and stability" of Taiwan and the region. After all, the U.S. has been selling arms to Taiwan for decades. Beijing perceives it as a provocation. The sales come at a time of improved relations between Taiwan and the mainland, with strengthened economic exchanges, a Taiwan administration pursuing closer ties with Beijing, and works-in-progress for a potential peace treaty. There is no hostility, no threats from Beijing to use force for a speedy reunification, and no Taiwanese agenda to declare independence. The arms sales, including advanced weaponry such as Blackhawk helicopters, Osprey anti-mining ships, and Patriot antimissile systems, may in fact lead to instability and a new arms race across the Taiwan Strait.

Washington may view the arms sales as mere business. After all, the U.S. tops the world with 41% of weapons sales. Given President Obama's goals to promote economic recovery, create new jobs, and double U.S. exports in the next five years, Washington may expect understanding from Beijing.

But the overall cost-benefit equation of a damaged U.S.-China relationship may not favor long-term U.S. economic interests. If China takes punitive measures against U.S. companies, Washington may lose more in terms of jobs creation, exports to China, and potential concessions by Beijing on allowing its undervalued currency to appreciate. Given that China holds the largest amount of U.S. debt, even a hint by Beijing that it might buy fewer treasury bonds could destabilize global financial markets and undermine the fragile U.S. recovery.

Beijing suspects containment efforts

Arms sales to Taiwan may also signal that the Obama Administration is running out of patience with China, following a year in which the U.S. took what it perceives to be a very accommodating approach. The emerging consensus in Washington is that China is not playing along in addressing core interests and concerns: Beijing snubbed the U.S. at the Copenhagen climate talks, for instance, and resisted tougher sanctions against Iran. Hackers from China might have played a role in the cyber-attacks on Google and other U.S. companies, and the Chinese government has behaved assertively on a range of other issues.

These are exactly the set of issues that cause Beijing to suspect that the U.S. is launching a new, coordinated containment strategy against the China's rise. Beijing's leadership resents being the scapegoat of the failed climate negotiations and regards Washington's backing of Google as a further indication of U.S. "information imperialism" that interferes with China's domestic affairs. For China's leaders, the arms sales to Taiwan raise serious questions in Beijing about U.S. strategic intentions. Such a perception may well underlie Beijing's stronger-than-expected responses.

Both sides also realize that the Sino-American relationship is much broader and more interdependent than any one of these issues. Neither side wants to see an all-out confrontation that could lead to a further deterioration in relations. While Washington hopes China's anger is more about posturing than punishing, Beijing may want to deliver enough disincentives to prevent the U.S. from selling more advanced arms to Taiwan in the future, such as the F16 fighter and sophisticated submarines. U.S.-China relations are too important to the rest of the world to be hijacked by the Taiwan issue. Closing the perception gap on critical issues may serve as the first step toward finding an exit from the current hostility.

Wenran Jiang is the Mactaggart Research Chair of the China Institute at the University of Alberta and the senior fellow of the Asia Pacific Foundation of Canada. He was also a public policy fellow at the Woodrow Wilson International Center for Scholars in Washington, D.C., from September 2009 to March 2010.

blog comments powered by Disqus