War over Taiwan would have a cost in blood and treasure so vast that even those unhappiest with the status quo have reason not to risk it. Bloomberg Economics estimate the price tag at around $10 trillion, equal to about 10% of global gross domestic product ¡ª dwarfing the blow from the war in Ukraine, COVID-19 pandemic and 2007-2008 Global Financial Crisis. China¡¯s rising economic and military heft, Taiwan¡¯s burgeoning sense of national identity, and fractious relations between Beijing and Washington mean the conditions for a crisis are in place. With cross-strait relations on the ballot, Taiwan¡¯s Jan. 13 election is a potential flashpoint.
Few put a high probability on an imminent Chinese invasion. The People¡¯s Liberation Army (PLA) isn¡¯t massing troops on the coast. Reports of corruption in China¡¯s military cast doubts on President Xi Jinping¡¯s ability to wage a successful campaign. U.S. officials say tensions eased somewhat at the November summit between President Joe Biden and Xi, who pledged ¡°heartwarming¡± measures to woo foreign investors.
Still, the outbreak of war in Ukraine and the Gaza Strip are reminders of how long-simmering tensions can erupt into conflict. Everyone from Wall Street investors to military planners and the swathe of businesses that rely on Taiwan¡¯s semiconductors are already moving to hedge against the risk.
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