Vol. 2, Issue 41
The Global Taiwan Brief Volume 2, Issue 41
By: Russell Hsiao
Cyber Threats Facing Taiwan and Countermeasures
By: David An
Paving the Way for Broader Economic Engagements between Taiwan and Japan
By: Shihoko Goto
Crux of Ching Fu’s Case Concerns China
By: Shirley Kan
PLA Special Operations Threat to Taiwan
By: Kevin McCauley
Russell Hsiao is the executive director of the Global Taiwan Institute and the editor-in-chief of the Global Taiwan Brief.
Growing Concerns in Taiwan about Potential Chinese Hacking of Elections
The United States is not the only democracy facing the threat of foreign interference in its elections. Russia’s intervention into the United States’ 2016 presidential election, as assessed by three agencies within the US intelligence community, has thrown into sharp relief efforts undertaken by the Kremlin to exploit and undermine the credibility of the US democratic political process through cyber operations and other means. Yet, other authoritarian governments are also employing similar strategies, which are not only directed at the United States but other democracies as part of a broader influence campaign ostensibly aimed at undermining the liberal democratic order.
Taiwan is the primary target of the People’s Republic of China’s (PRC) influence operations, which include overt and covert measures that involve cyber operations to shape political outcomes favorable to its strategic interests. Against the backdrop of the political fallout from Russia’s intervention in the 2016 election that continues to roil US domestic politics, there are growing concerns in Taiwan that China may utilize similar cyber operations, such as those used by Russia’s intelligence services, to conduct espionage against political organizations, intrusions into electoral boards, and disseminate overt propaganda, to affect Taiwan’s 2018 local elections and perhaps also the 2020 presidential election. According to a recent news report in the Financial Times, a spokesperson for the ruling-Democratic Progressive Party (DPP) acknowledged: “We are worried the Chinese government will try to target Taiwan and influence our elections.” According to Bryce Boland, FireEye’s chief technology officer for Asia-Pacific, quoted in the same report: “China-based threat groups have all the technical know-how to pull off a Russian-style hack and leak operation.”
Taiwanese concerns over hacking by Chinese actors for political reasons are not without precedent. Indeed, China has a long history of conducting cyber-attack and espionage against political targets in Taiwan. Most notably, there are consistent spikes in the number of cyber intrusions either in the lead-up to or in the aftermath of significant political events in Taiwan, especially elections. For instance, the first major publicly documented cyber attack took place in August 1999 after then-President Lee Teng-hui (1988-2000) described relations between Taiwan and China as “special state-to-state relations,” and Chinese hackers responded by sabotaging government, university, and commercial sites. The targets of Chinese cyber operations have also evolved over time, in tandem with its growing sophistication.
In December 2015, right before Taiwan’s presidential and Legislative Yuan elections, the e-mail accounts of senior DPP and former senior US officials working on Taiwan were hacked. In April 2016, a few months after Tsai Ing-wen and the DPP won the presidential and Legislative Yuan elections, US-based cybersecurity firm FireEye issued a statement revealing that Chinese hackers had spoofed the website of the ruling party, and was redirecting traffic to a watering hole that was stealing visitor’s information. According to the release: “FireEye believes this operation likely reflects continued efforts by China-based cyber espionage operators to collect intelligence related to the DPP as it moves Taiwan away from pro-mainland China policies.” Intelligence—the scope of which is ultimately defined by Chinese political leaders—may include sensitive data regarding party personnel, internal communications, strategic policy documents, and proprietary polls that are conducted internally to assess public opinion, among other sources.
The 2018 local elections, which are scheduled to take place a year from now, next November are significant, as they will be seen as the litmus test of the DPP-led government and of Xi Jinping’s approach towards Taiwan after the 19th Party Congress. More importantly, they will serve as a bellwether for the 2020 presidential election.
The Tsai government appears intently focused on the cyber threat facing the island. Her administration’s efforts so far include stewarding the passage of new legislation or amendments to existing legislation aimed at enhancing accountability and readiness in cybersecurity, and, in particular, standing up a cyber security command. The new command, which is comprised of 6,000 personnel, was formally launched in June 2017 as the Information, Communications and Electronic Force Command, under the Ministry of National Defense, and headed by Major General Ma Ying-han (馬英漢).
Public awareness concerning the cyber threat facing Taiwan is also increasing, both in the public as well as private sectors. According to a study done by the US Department of Commerce in July 2017, the size of Taiwan’s information security market is growing. Indeed, the market has expanded at an annual rate of 12.2 percent since 2013, increasing in scale from US$926.6 million to US$1.44 billion in 2017. The output of Taiwan information security firms is projected to rise from US$1.12 billion in 2015 to US$1.56 billion in 2019, reflecting an annual growth rate of 8.7 percent.
A robust domestic information security industry is an important bulwark against the looming cyber challenge. Public-private partnerships are an essential component to a comprehensive approach as the government has limited capacity, and a large portion of the infrastructure and expertise resides in the private sector. Yet, according to the DoC study,
[Taiwan’s] domestic information security companies tend to be small in scale with relatively few employees, and there are fewer than 200 domestic firms involved in information security across Taiwan. The government views the relatively small size of Taiwan’s information security industry as a vulnerability, and is planning to boost information security education and training programs.
The Russian interference in the 2016 elections offers a playbook that other authoritarian governments may utilize when seeking to undermine democratic institutions worldwide. To be sure, democracies share similar vulnerabilities to exploitation of their open political processes and democratic institutions, but this apparent weakness can also serve as an asset in countering influence operations through the promotion of greater transparency. A strong public-private partnership can also assist democratic governments in efforts to detect, monitor, and repeal cyber exploits and attacks. The public release of the declassified intelligence study on Russian interference provides a useful case study for democratic countries to use in developing countermeasures.
The main point: There are growing concerns in Taiwan that China may utilize similar cyber operations to those used by Russia’s intelligence services, which include espionage against political organizations, intrusions into electoral boards, and overt propaganda dissemination.
Taiwan’s CI Dilemma: The Thin Line between Soldiers & Spies?
Like social security in the United States, salvaging Taiwan’s nearly bankrupt pension system has been considered one of the most politically toxic domestic reform agenda items in any administration. This is, perhaps, why so many administrations have dared not touch it even though there is a general consensus among the two major political parties that the pension system has long needed to be reformed. The fact of the matter is that there is never a good time to cut people’s retirement funds, especially for people who have committed their careers to government service. The Tsai administration, which made domestic policies her priority, has taken on pension reform head-on—in large part due to necessity. On November 13, the Ministry of National Defense released a notice of proposed reform to military pensions—which are expected to go bankrupt in 2020—including setting a minimum monthly pension payment for retired military personnel of US$1,065 (NT$32,160).
Retired military personnel currently collect monthly pensions of US$1,635 (NT$49,379) on average and civil servants US$1,867 (NT$56,383). The reported average monthly earnings for regular workers in Taiwan for September was US$1,328 (NT$ 40,116).
In the past two decades, government debt has surged tenfold to US$187 billion (NT$5.67 trillion) while the working population has decreased. A combination of lower economic growth and a rapidly aging population have placed huge strains on the pension system, which is nearly bankrupt. According to a retired lieutenant general from Taiwan quoted by the South China Morning Post: “The biggest problem we are facing with the [pension] reform is fear. It is making everyone anxious and uneasy … [w]hen soldiers cannot focus on their duty, it weakens the effectiveness of Taiwan’s military forces.” He added, “It would then be easy for China to take Taiwan without even getting blood on their knives.”
While the debate over pension reforms has reasonably focused on its economic and political impacts on certain groups, little attention has been paid to its national security implications. Specifically, whether it creates softer targets for Chinese intelligence operations. It is no secret that many of the known targets of Chinese intelligence operatives have been retired soldiers. According to a testimony given by a former counter-intelligence official in the Federal Bureau of Investigation (FBI) before the U.S.-China Economic and Security Review Commission:
Between 2002 and 2016, 56 individuals have been charged in Taiwan as clandestine agents of the MSS or PLA. There have been 23 espionage plots of which all but 6 involve more than one individual. Five (5) of the individuals arrested are flag officers. An additional 17 are officers in the Army, Navy, Air Force or Marine Corp, and 15 are members of one of three ROC intelligence services.
The recent release of convicted spy, retired Major General Hsu Nai-chuan (許乃權), has shown a spotlight on Taiwan’s counter-intelligence dilemma and how it may relate to pension reforms. Hsu was convicted in 2015 of working with PLA officer Zheng Xiaojiang (鎮小江), in what was characterized by the Taiwanese-media as one of the PLA’s biggest spy ring cases. However, the convicted spies and their associates were handed relatively lenient sentences (a four-year term and a two-year-and-10-month prison term, respectively). The reason, according to lawmakers, for the light sentences was because even though Taiwan’s current laws stipulate a prison sentence of three to 10 years for people disclosing national secrets to a foreign state, “China” does not fall into the category of a foreign state due to the complex nature of cross-Strait relations. Yet, adding insult to Taiwan’s legal quagmire injury, Hsu is still entitled to monthly pensions of up US$2,483.
Earlier this month, military veterans in Taiwan again took to the streets to protest the government’s plan to cut military pensions. Protesters argued that the minimum pension for retired soldiers should be higher than that for civil servants. While the government’s motivation to enact pension reform is driven by the need to keep the system solvent for future generations, national security professionals must be mindful of the potential impact that the pension cuts may have, and must take effective countermeasures to minimize the potential effects of making retired soldiers softer targets for Chinese intelligence operations and united front activities. It stands to reason that, if previous pension rates could not provide sufficient incentives for some to withstand Chinese enticement, then a reduction in pension rates could potentially worsen the problem. Indeed, “these are people whose economic livelihoods and careers depend upon China, making the threat implicit when intelligence officers approach them.”
The main point: The Tsai government’s motivation for pension reform is driven by the need to save the pension system for future generations, but national security-minded professionals should be wary of the potential impact that the pension cuts could have in making retired soldiers softer targets for Chinese intelligence operations.
 For a good study on how the Chinese understands intelligence, see, e.g., https://www.cia.gov/library/center-for-the-study-of-intelligence/csi-publications/csi-studies/studies/vol.-56-no.-3/pdfs/Mattis-Understanding%20Chinese%20Intel.pdf
Cyber Threats Facing Taiwan and Countermeasures
David An is a senior research fellow at the Global Taiwan Institute and was previously a political military officer at the US Department of State.
A multinational criminal ring pulled off an ATM heist in Taiwan in 2016 when it surreptitiously implanted malware inside Taiwan’s First Commercial Bank’s computer networks, and then brazenly sent individuals to travel throughout Taiwan to collect from ATMs that spewed cash. A report on this incident by Taiwan’s Ministry of Justice Investigation Bureau (MJIB)—Taiwan’s equivalent to the US Federal Bureau of Investigation (FBI)—added that approximately US$ 2.6 million were stolen in that heist from 41 ATMs at 22 bank branches throughout Taiwan, involving 22 suspects from nine mostly Eastern European countries. Though losing millions of dollars is itself a significant loss due to cybercrime, Taiwan faces far graver threats, such as the exploitation of sensitive information and kinetic cyber attacks, especially considering Taiwan’s unique cross-Strait circumstances and the challenging regional security situation.
Taiwan can guard against these threats by protecting its own vulnerabilities, while looking for opportunities to exploit the vulnerabilities of its potential adversaries. In cyber security, a key vulnerability is people, acting as insider threats who intentionally work against their own company or government, such as Edward Snowden or Chelsea Manning, yet also includes users who are the victims of phishing or spear-phishing who unintentionally click on malware attachments that infect their computer networks. Though some are intentional and others unintentional, the outcomes can be similar in causing irreparable harm to one’s company or government. Therefore, it should be a top priority to guard against one’s own insider threats and spear-phishing, while working to exploit such vulnerabilities in any potential adversary.
Cyber threats as financial crimes, exploitation, and attack
Taiwan is not only victim to hacking by criminals for cash as in the earlier example of the ATM heist, but also from state actors such as North Korea. On October 16, 2017, the cyber-intelligence chief at government contractor BAE Systems identified that the North Korean “Lazarus” hacking group is the “most likely culprit” of recent attempts by hackers to steal $60 million US dollars from Taiwan’s Far Eastern International Bank; fortunately, almost all of the money has been recovered. Earlier, Bangladesh was not as fortunate, since the same BAE Systems, along with Kaspersky Labs and Symantec Corporation, also linked the Lazarus group to a successful $81 million US dollar cyber heist at Bangladesh’s central bank.
When state actors make hacking attempts, it can be much more serious because they generally seek classified and other protected information. The United States is famously a target of hacking for secrets, with news of the latest hacking attempts broadcast on a regular basis. With higher stakes than financial crimes, hacks against the United States have been for military secrets such as plans for the F-35 aircraft in 2007 and 2008, and the detailed SF-86 security clearance information of US government officials in 2015.
The previously mentioned cases are examples of financial cyber crimes and forms of computer network exploitation (CNE), which differ from kinetic computer network attack (CNA). Computer network attacks are severe enough to be interpreted as an act of war, since they involve “actions taken through the use of computer networks to disrupt, deny, degrade, or destroy information resident in computers and computer networks, or the computers and networks themselves.” Along these lines, National Geographic created a fictional documentary-like video about what a cyber “attack” on critical infrastructure such as electricity would look like, and how chaotic society could become out of fear and desperation.
Such attacks against critical infrastructure could lead to major social unrest, but potential cyber attacks against Taiwan’s military would also be disastrous. A successful cyber attack on the military’s communication network could disrupt command and control structures (C2)—with commanders unable to communicate electronically with officers or subordinates, aircraft unable to communicate with ground stations, or hackers spoofing a commander’s emails and sending out contradictory instructions to troops. In this sense the consequences are hard to predict and prepare for, since any adversary’s plans could be virtually indiscernible until they are implemented.
A cyber attack is on the extreme side in terms of severity, but there are also ways to exploit normal computer and information system processes short of an attack. Hackers can coordinate distributed denial of service (DDOS) disruptions by taking over an average user’s computer, often without the person even knowing it. The person might have accidentally clicked on a malware attachment in an email, or clicked on a link that led to a “watering hole” website that then installed malware on their computer. That person’s computer could then be centrally controlled by a hacker and directed to join a flood of simultaneous requests that are sent to a website to view its pages. This causes the web server to crash or simply become inoperable, making other users unable to access that website. Yet another variation is the ransom denial of service (RDOS) used to extort money under threat of DDOS attacks, demanding ransom in bitcoins, with a threat to organize a DDOS attack against a victim if they do not pay.
Red team/blue team exercises for the digital sphere
In my previous Global Taiwan Brief article, I discussed how the United States could work with Taiwan to deter hackers by apprehending them and sending them to face court trial in the relevant jurisdictions. In addition to setting up such extradition agreements, the United States and Taiwan should cooperate on cyber threats and countermeasures that target any potential adversary’s weakest cyber security link: people.
To protect one’s own vulnerabilities in cyber security involves finding holes in one’s website security before others can, and a military analogy is useful here. In the military, this is generally done by training through utilizing red team/blue team exercises to internally challenge oneself to improve one’s abilities. This sets up a team as an adversary within one’s own military. One team’s success is to bring about the other side’s failure, so the military will learn from its mistakes and grow stronger without facing conflict against a real adversary.
In cyber security, the red team/blue team opposition would be what are commonly called “white-hat” and “ethical” hackers, who are also known as penetration testers. These white-hat, ethical hackers are hired by the organization to test its own websites, trying to crack passwords, or sending out spear-phishing emails to a company or government office’s own employees—to make sure that the websites and information systems cannot be penetrated by outside “black-hat hackers,” which refers to malicious actors.
Companies or government offices might be hesitant to allow such penetration testers to test their systems in case the testing disrupts normal operations. However, it is possible to test one’s own system without disrupting regular operations of a website through “sandboxing.” This involves loading computer programs onto an isolated computer, introducing malware, then observing to see the outcome as if in a controlled laboratory environment.
Guarding against intentional and unintentional threats
In addition to testing one’s own systems for vulnerabilities, protecting information systems also means preventing insider threats. These individuals inside company or government organizations act purposefully and intentionally to harm their own company or government, and can do so by leaking classified information electronically by copying and sending files as did Snowden and Manning. They could also load malware onto their own computer networks through a USB vector by plugging an infected USB into their work computers. However, it is likely that these insider threats can be deterred if a computer network administration is so robust that these insiders can expect to be caught in the act, and when they are caught can expect heavy criminal legal consequences.
People can unintentionally be victims of phishing or spear-phishing when they inadvertently click on malicious email attachments. However, regular computer hygiene training such as mandatory cyber awareness training even if held once a year for as little as one hour would make people better at spotting fake emails and prevent them from becoming victims. Companies can also hire “ethical” hackers to purposely send fake emails to their own employees with fake malicious attachments that don’t actually deploy a computer virus when clicked, but would keep a record of who fell for the fake email. Then these individuals would be invited back for additional cyber awareness training, which nobody wants to do. Over time, those in the company or government office will become more cautious and smarter about maintaining good digital hygiene.
Though Taiwan’s banks were victim to the $2.6 million ATM heist, they were fortunate to have successfully guarded against North Korea’s Lazarus group’s attempts to steal $60 million. Since all advanced technological states face similar cyber threats, knowing how to protect one’s own cyber vulnerabilities—whether in finance, government information, or even to guard against cyber attack—will not only strengthen a nation’s people and information systems, but will also shed light on how to exploit similar vulnerabilities in any potential adversary. It is therefore important to continually focus on digital hygiene training for company and government employees, and to test one’s own systems often by using penetration testers in a similar way as the military uses red teams and blue teams.
The main point: Taiwan faces cyber threats like any other technologically advanced society, but also deals with additional challenges, due to its unique cross-Strait circumstances and regional political factors. Taiwan’s companies and government can strengthen its cyber defenses through continuous digital hygiene training, but also through penetration testers to find vulnerabilities in their systems before others do, and actively discern vulnerabilities in a potential adversary.
Paving the Way for Broader Economic Engagements between Taiwan and Japan
Shihoko Goto is the senior associate for Northeast Asia with the Woodrow Wilson Center’s Asia Program based in Washington DC.
The United States has pulled out of the most ambitious global trade pact to date, but across Asia, the appetite for multilateral deals that would encourage greater regional economic integration remains high. The growing consensus that the Trans-Pacific Partnership (TPP) will likely be moving forward, albeit without the United States, is undoubtedly good news for Taiwan, as it opens up the possibility for Taipei to become a member of the trade deal down the line. But, while the possibility of a thriving TPP-11 has increased Taiwan’s odds of eventually joining a multilateral agreement, how Taipei moves forward in enhancing its global economic standing in the meantime will be the more immediate challenge.
President Trump’s whirlwind tour of East and Southeast Asia made clear that, when it comes to trade, Asian nations are prepared to move forward without the United States. Moreover, Washington is untroubled by being the odd nation out in the global bandwagon to deepen trade ties. Another post-presidential trip revelation has been that there is a distinct lack of appetite among Asian countries, and especially in Japan, to pursue a bilateral free trade agreement with the United States. The White House’s focus on enforcing existing rules, coupled with worries about economic nationalism taking center stage, has decreased the allure of reaching a deal with Washington.
For Taiwan’s leadership, however, prospects of bilateral trade deals, not just with the United States, but with other countries including Japan, remain alluring as much for political as well as for economic reasons. The question is how best Taipei can ensure its competitive edge in pursuing such a deal.
With Japan, Taiwan is steadily moving forward in opening its markets and enhancing broader relations with Tokyo as a result. At the latest Japan-Taiwan trade and economic conference in Tokyo in late November, the two sides moved even further forward since lifting a 16-year ban on importing beef from Japan back in September with the signing of two memorandums of understanding on law enforcement cooperation and cultural exchange. Expectations run high that the resumption in exports of Japanese beef to Taiwanese markets will be the harbinger of a broader economic engagement; and, perhaps more importantly, there is growing anticipation that the latest trade deal will also lead to closer political ties at a time when tensions across East Asia continue to rise.
The challenge, however, is how Beijing might respond to such warm relations across its own shores, and whether Tokyo can pave the way to help Taipei carve out, not only new trade agreements with potential partners, but also help supporting Taiwan’s footing in a newly emerging Asian order.
There is no doubt that allowing Japanese beef back into the Taiwanese market has been a diplomatic achievement as much as an economic one. Stories of luxurious Taipei restaurants serving up marbled Miyazaki beef from October in spite of it being more than twice as expensive as its US or Australian counterpart have been touted at length by the Japanese media, furthering public interest in one another on both sides of the East China Sea. As Japan makes headway in establishing itself as an exporter of high-end agricultural products in a region hungry for food safety, Japan has also found it difficult to shrug off concerns about foods produced at home, following the Fukushima nuclear disaster of 2011. Meanwhile, the outbreak of mad cow disease two decades ago had already hurt demand for Japanese beef, and led to the shutout of Japanese cattle from Taiwanese markets in 2001. Being welcomed back into Taiwan has certainly been a boon for the beef farmers of Miyazaki, and it is expected that beef from other areas of Japan, including the Kobe region, will be let back in again soon.
Yet as the lifting of the beef ban breeds greater success, the question that looms ever larger is what the next steps can and should be. For Taipei, lifting the trade ban has certainly been seen as one step closer toward establishing a more comprehensive bilateral free trade agreement with Japan, especially given the political goodwill it now enjoys. At the same time, there are expectations that a bilateral trade deal with Japan could pave the way to achieving a bilateral investment treaty, if not a full trade agreement, with the United States down the line as well.
There are clear benefits on both sides to closer economic relations, even if Taiwan and Japan do not have formal diplomatic ties. After all, Japan is Taiwan’s second largest trading partner, and Taiwan is Japan’s fifth largest. Their greater mutual interests, though, lie in the political realm, especially when the markets on both sides are relatively limited. Bearing in mind that, even without official trade agreements, Taiwan and Japan are closely intertwined economically, the corporate gains to be made from an official economic trade agreement are relatively few. That is particularly the case when Japan grapples with a rapidly aging population and struggles to remain the third largest economy in the world, and there are likewise limits to boosting Taiwan’s domestic demand for imported goods and services.
The political calculus for enhancing bilateral ties, on the other hand, is much more expansive. It is in Taipei that Tokyo finds its biggest supporter in Asia, as Japan has been able to skirt much of the tension over its occupation of Taiwan and the legacy of World War II, unlike in its dealings with South Korea or the People’s Republic of China (PRC). At the same time, both Japan and Taiwan have struggled to deal with China’s ever-increasing ambitions to be both a wealthy and powerful nation that would be the undisputed hegemon of Asia. Many, of course, would argue that Beijing has already reached that status, at least within the Asia-Pacific region. But, should the PRC act as a hegemon, it would not only jeopardize the foundations of Taiwan, but it would also marginalize Japan in the region as well. The question is: to what extent can the cross-Strait status quo be maintained, while relations between Taipei and Tokyo—and with others in the region—grow?
Japan’s official position is that it does not support Taiwanese independence per se, and it has focused on deepening economic and cultural ties. Yet, even within those limitations, the two sides have been able to ink 28 bilateral agreements during the previous administration in Taiwan alone (2008 to 2016). The most significant of those was the 2013 fisheries deal that allowed fishing boats from both sides to be exempted from the jurisdiction of each other’s law enforcement. It was a success insofar as it helped avert conflict between the two sides over the Senkaku/Diaoyou islands in the East China Sea, thus averting an escalation of tensions as a result of territorial disputes. Moreover, it preempted an alignment between Beijing and Taipei against Tokyo over the islands. Nonetheless, the striking fact of the deal was that there was little protest from the PRC against the agreement. In addition, it gave Taiwan a bigger platform on the international stage as a regional peacekeeper, with President Ma touting his East China Sea Peace Initiative.
The possibility of Japan and Taiwan striking a similarly broad, strategic deal on the economic front will likely prove to be more difficult. For one, cross-Strait relations have become less certain under the new Democratic Progressive Party government, and any move by Taipei now to bolster relations with either Japan or the United States could lead to a backlash from the PRC. Another factor is that the economic landscape of the Asia-Pacific region, too, has become much more uncertain. The US withdrawal from the Trans-Pacific Partnership agreement has not killed the TPP altogether, but as the remaining 11 TPP members mull over how to move forward with a regional trade framework, China’s own economic vision for the region has become increasingly attractive. Under the current climate, concerns about Beijing’s backlash against a deal will undoubtedly stave off any proactive move by Japan or, indeed, the United States.
On the upside, prospects for a TPP-11 remain bright, and with them the possibility of Taiwan joining the multilateral trade agreement down the line. As the biggest economy amongst the 11 members, Japan will continue to shepherd the other countries to remain committed to reaching a successful conclusion to the deal. It will also be expected to ensure the TPP’s success, so that if and when the United States is ready to return to multilateral discussions, it will be the ambitious, high-standard agreement that it had initially set out to be. Japan will also play a key role in ensuring that article 30:4 on accession is adhered to, namely that the TPP would be open to accession by “any state or separate customs territory that is a member of APEC,” which would include Taiwan.
Remaining open to potential multilateral trade deals will certainly be critical for Taiwan to remain competitive in the longer term. In the meantime, deepening trade relations with Japan as well as the United States will not only enhance Taiwan’s growth prospects, but also its political standing amid a rapidly shifting regional order. Taipei must, however, resist being lured into the trap of pursuing trade agreements as a means to secure its status, given the political realities of the region. A trade deal is no guarantee of future success, especially when such agreements can be unexpectedly revoked. Continued economic strength will remain key to ensuring Taiwan’s standing in the world, and that will come from an ability to adapt more nimbly to the rapid changes brought about by increased globalization and technological disruptions.
The main point: Remaining open to potential multilateral trade deals will certainly be critical for Taiwan to remain competitive in the longer term. In the meantime, deepening trade relations with Japan as well as the United States will not only enhance Taiwan’s growth prospects, but also its political standing amid a rapidly shifting regional order.
Crux of Ching Fu’s Case Concerns China
Shirley Kan is a retired specialist in Asian security affairs who worked for Congress at the nonpartisan Congressional Research Service (CRS) and a Member of GTI’s Advisory Board.
Since October 2017, Taiwan has seen a media frenzy over a scandal involving domestic Ching Fu Shipbuilding Company (慶富造船), which won a defense contract in 2014 to build minesweepers for Taiwan’s Navy. This case has raised numerous concerns that involve: US and European security interests (including Lockheed Martin); President Tsai Ing-wen’s policy of “self-sufficient national defense;” Taiwan’s military and its arms procurement; predictable partisan finger-pointing between politicians; defaulted loans from local banks; and blame laid on bankers and senior officers in Taiwan’s armed forces. On November 22, President Tsai even personally publicized her statement specifically on this criminal case. However, what seems lost in the numerous remarks and media frenzy is that the crux of this case concerns Ching Fu’s suspected compromises in the People’s Republic of China (PRC).
From Contract to Criminal Case
In 2014, Taiwan’s Ching Fu Shipbuilding Company won a contract to supply six minesweepers to Taiwan’s Navy. The contract, reportedly valued at about NT$35 billion (US$1.2 billion) until 2024, entailed a consortium that also included US defense contractor Lockheed Martin and Italian shipbuilder Intermarine SPA. The minesweepers were to incorporate an Italian ship design and hull, US combat systems and integration, and Taiwanese weapons and shipbuilding. The worthy program is part of a bolder plan of numerous domestic acquisitions to modernize Taiwan’s Navy for defense against the PRC threat. In late 2015, the Obama Administration notified Congress of a Direct Commercial Sale worth $108 million by Lockheed Martin.
In August 2017, however, the already-brewing controversy at Ching Fu became public when prosecutors in the southern city of Kaohsiung raided the company’s offices and questioned Chairman Chen Ching-nan (陳慶男), his son, and other executives. The case involved alleged abuse of the naval contract to obtain additional funds through fraudulent applications for loans from a consortium of nine domestic banks. Taiwan’s Navy declared that it would cancel the contract if the charges were proven, potentially delaying the procurement of the needed minesweepers.
In October, a media frenzy ensued along with attention by top politicians and officials to Ching Fu’s criminal case. Allegations appeared about activities that might have involved the Presidential Office under then-President Ma Ying-jeou (2008-2016) or President Tsai. Premier William Lai (賴清德) testified to the Legislative Yuan (LY) that Taiwan’s Executive Yuan (EY, Taiwan’s cabinet) would investigate the contract and “cut its wrists” by ending it if necessary to prevent more losses.
The LY also formed a group to investigate Ching Fu. The LY’s Foreign Affairs and National Defense Committee requested reports from the Ministries of Finance and National Defense, and Financial Supervisory Commission. A Vice Minister of Defense, Admiral Pu Tze-chun (蒲澤春), testified that options included canceling the contract (delaying delivery of the first minesweeper to 2023), contracting with another company, re-starting the procurement process, or ending the program.
Ching Fu’s scandal also affected the Ministry of Foreign Affairs, which denied any involvement in the company’s contract and loan to build a ship for Tuvalu, a country in the South Pacific.
Investigations and Discipline
In November, Taiwan’s Executive Yuan reported its investigation of Ching Fu’s case. The report blamed Ching Fu’s funneling of funds through five shell companies in Hong Kong, Macau, and Singapore; problems in the Ministry of National Defense (MND)’s procurement process; and flaws in the approval of loans by state-run banks led by First Commercial Bank. Deputy Premier Shih Jun-ji (施俊吉) asked for “accountability,” including removal of First Commercial Bank’s Chairman Tsai Ching-nain (蔡慶年). In mid-November, the director of Kaohsiung’s Marine Bureau, Wang Tuan-jen (王端仁), resigned over a reported meeting in October 2016 with Ching Fu’s vice president about building a shipyard. Then, the Finance Ministry replaced the heads of three state-run financial companies.
After Defense Minister Feng Shih-kuan (馮世寬) reported on the scandal, the military was under pressure to name officers for alleged flaws in awarding the contract to Ching Fu, despite its reportedly inadequate financial and technical resources, and for alleged inaccuracies in a status report to the LY last November. On November 22, the MND issued a list of 24 senior military officers for discipline, including Navy admirals and captains. They included: Vice Minister of Defense Admiral Pu Tze-chun; Chief of General Staff Admiral Lee Hsi-ming (李喜明); Chief of the Navy Admiral Huang Shu-kuang (黃曙光); Director of the Procurement Office, Army Lieutenant General Huang Hsi-ju (黃希儒); Director of the Armaments Bureau, retired Vice Admiral Mei Chia-shu (梅家樹); and former Vice Minister of Defense, retired Admiral Chen Yeong-kang (陳永康).
On the same day that MND issued its list of senior officers, President Tsai personally publicized her video and statement devoted to Ching Fu’s criminal case. Tsai focused on her responsibility to share the military’s “burden” in this controversy, saying that “as commander-in-chief, I expect the armed forces to meet the problem head-on, and rectify errors. That’s the significance of military reform. Anything less is unworthy of the armed forces of the Republic of China.”
President Tsai promised a rigorous investigation of “clear irregularities.” She also promised correction of mistakes and resolution of problems, including MND’s review of naval procurement and reforms to exclude unqualified defense contractors. Third, Tsai insisted on indigenous shipbuilding as part of a continued policy of “self-sufficient national defense.”
Concern about compromises with China
However, President Tsai’s statement did not mention the PRC. What seems lost in the numerous remarks, demands for accountability, and media frenzy is the crux of the public’s concerns. Ching Fu’s alleged intentional misconduct not only raised a criminal case about defaulted loans but also risked compromises in Taiwan’s security through that defense company’s suspected diversion of funds to invest in the PRC.
Questioning Premier Lai at the LY in October, the Executive Chairman of the New Power Party, Huang Kuo-chang (黃國昌), commented that Ching Fu, as a Taiwanese defense contractor, invested in a deal with a PRC local government. Huang expressed a concern that “the shipbuilding technology we learn from the Italian manufacturers will end up in the hands of a contractor that has signed an investment agreement with a Chinese local government.”
Did Ching Fu extend dangerous leverage to Taiwan’s adversary instead of helping Taiwan’s defense? Did the company suffer suspected bad investments and large losses in the PRC so that the company desperately needed to raise funds even from fraudulent financing? Did Ching Fu potentially jeopardize not only Italian technology but US and Taiwanese technology as well?
The Tsai Administration and the LY need to reassure Taiwan’s people and partners of protection of defense information and more—not less—support for Taiwan’s armed forces against the PRC.
The main point: The crux of the concerns about Ching Fu’s criminal case is compromises that it made in China.
PLA Special Operations Threat to Taiwan
Kevin McCauley has served as senior intelligence officer for the Soviet Union, Russia, China and Taiwan during 31 years in the US government. His publications include: Russian Influence Campaigns against the West: From the Cold War to Putin, and PLA System of Systems Operations: Enabling Joint Operations. Mr. McCauley writes primarily on PLA and Taiwan military affairs, and is an Adjunct, RAND Corporation.
Taiwan takes the People’s Liberation Army special operations forces (PLA SOF) threat seriously. In early October, Taiwan’s Ministry of National Defense confirmed that a special unit exists to prevent a PLA SOF decapitation attempt (反斬首) against Taiwan’s leadership. Additionally, they confirmed that there are crisis plans in place to rapidly evacuate the president to the underground national command post. While much of the public attention has been on the growing sophistication of PLA air force and naval exercises, a survey of authoritative Chinese-language sources appears to indicate a targeted mission for the PLA SOF that defense planners in Taipei and Washington should not take lightly.
The PLA’s SOF execute strategic and operational combat missions other forces are unable to accomplish, serving as a key force multiplier in operations against Taiwan. According to an authoritative Academy of Military Science (解放軍軍事科學研究院) publication, special reconnaissance is the primary mission; however, direct action missions are important for striking key targets, affecting morale, and disrupting enemy plans. Currently each group army has a SOF brigade, while Tibet and Xinjiang Military Districts, the Navy, Air Force, and Rocket Force each have SOF units. Army maneuver units also contain small special forces units.
Campaigns Against Taiwan
Possible PLA operations against Taiwan include a blockade campaign, joint fire strike campaign, or an island landing campaign—or more likely a combination of campaigns. SOF forces would conduct important reconnaissance and direct action operations against Taiwan. The PLA is currently capable of a joint fire strike campaign and likely a blockade campaign, but does not possess the requisite amphibious and airlift capabilities for an invasion of Taiwan. Additionally, the PLA would conduct an air defense or anti-air raid campaign to defend the mainland, although this operation would include offensive actions against enemy airfields. The table below identifies SOF combat actions specific to the campaigns.
|Campaigns and SOF Combat Actions|
|Island Offensive||Island Blockade||Joint Fire Strike||Air Defense|
|Seize and Control||X|
|Search and Suppress||X|
SOF infiltration could begin prior to the conflict, with insertions continuing during the various phases of an operation. SOFs could infiltrate undercover as businessmen or tourists using civil transportation. PLA publications report the employment of “underground Party organizations,” agents, and fellow travelers supporting intelligence operations, posing a dangerous counterintelligence problem to Taiwan’s security forces. These controlled networks in Taiwan could disrupt Taiwan internally, as well as assist SOF infiltration with local intelligence, safe houses, transportation, and cached weapons and equipment. Infiltration methods could include paradrops or landings by fixed or rotary wing aircraft or sea methods including delivery by submarines, fishing boats, civilian merchant ships or small specialized craft. SOF troops also practice parachuting into water, and use powered parachutes and ultralights.
SOF troops are formed into groups for operations, usually from three to 15 soldiers. Smaller groups conduct reconnaissance missions or provide guidance for precisions strikes, while larger groups perform direct action missions. Multiple SOF groups, each with a specialized assignment, execute larger direct action missions.
While air defense operations are primarily defensive and would be a part of any operation, SOF actions emphasize offensive, proactive measures against enemy air bases and forces. Other SOF missions include countering enemy special forces and anti-terrorist actions against groups working with the enemy.
China could implement large scale air and sea blockades as an independent campaign or a component of an island landing campaign against Taiwan. Joint fire strikes would support a blockade campaign by neutralizing Taiwan air and naval forces threatening the blockade forces. Small scale blockades could isolate Taiwan-held islands. The PLA understands the sensitivity of blockades involving airline routes and international shipping, subject to international laws and conventions, as well as the possibility of outside intervention. The PLA recognizes that blockades will need to be lengthy to obtain the desired effect.
Important SOF actions include special reconnaissance of counter-blockade forces and preparations; guidance and assessments of joint firepower strikes on ports and airfields; attacks on communications, air defense, and targets affecting the enemy’s war potential, including power grids, economic and other civilian objectives that can exhaust the enemy, weaken morale, create social tension or unrest; boarding, search or capture of targeted vessels; and rescue of pilots or naval personnel.
PLA doctrinal publications discuss a large-scale landing and on-island offensive campaigns against Taiwan. Smaller scale landings could attempt to seize Taiwan-held islands. The PLA considers reconnaissance and direct action missions critical to the success of such a campaign, effectively opening a second front in the enemy’s rear area. Large scale SOF employment would be continuous beginning prior to the start of operations providing direct support to key campaign phases including seizing and maintaining sea and air superiority, rapid landing and establishment of the beachhead, and delaying or defeating counterattacks.
Important combat missions include guiding firepower strikes; setting beacons or visual signals to identify amphibious landing zones, airborne drop zones, or air assault landing zones; attacking forces that threaten a landing zone; clearing mines and obstacles from amphibious or airborne landing zones; seizing control of vital objectives including command posts, government buildings, media, airports, ports, and key lines of communication or choke points; capturing or assassinating key political figures, scientific and technical experts, and other key personnel; hard or soft destruction or interference with the command network; and psychological warfare to collapse morale and the will to resist.
Special reconnaissance groups collect critical intelligence that other assets cannot provide to support planning, decision-making, and targeting. Groups conducting reconnaissance missions likely will not engage in direct action missions to maintain concealment. However, if a high priority target is discovered, the group could attack the objective or guide fire strikes. Special reconnaissance can include tracking and monitoring key targets including placement of technical surveillance means. Collection means can include UAVs, high tech monitoring equipment and sensors, capture and interrogation of enemy personnel, or surreptitious entry into enemy facilities.
Guidance for joint long-range strikes is another important mission. Accurate guidance is time sensitive, requiring rapid location and transmission of targeting data to the fire unit. Accurate positioning data is provided using the Beidou satellite navigation system, laser designation, or visual signals such as markers, lights or smoke. SOF groups also provide damage assessments including target recovery to support decisions on subsequent strikes.
Sabotage operations target key enemy command posts; precision strike systems; military airbases and ports; early warning sites; civilian transportation systems and power grids; logistics; and other strategic or operational targets, including the political and military leadership.
SOF groups will seize an objective when the action could significantly impact operational success, and when other units cannot accomplish the mission. Such missions must be carefully chosen, as they could result in high casualties on valuable SOF assets. Objectives include major transportation hubs to disrupt supply and movement of forces; key strategic or operational areas such as mountain passes, high ground, towns, airfields, ports or smaller islands; and key systems such as water supply, communications, energy, financial institutions, and media facilities that could weaken the public’s will to resist or the enemy’s war potential.
Harassing operations disrupt and cause chaos in the enemy depth to divert enemy forces, attrit, exhaust, deceive and confuse the enemy. These operations can employ hard or soft attack; psychological, electronic or network attacks; destruction of supplies or equipment; snipers striking key personnel or equipment; and feints to support other operations.
Search and suppress missions aim to capture enemy political or military leaders to cause chaos, lower morale, obtain information, and eliminate remnants of enemy forces. Targeted enemy leadership could include officials of political parties, mass organizations, and religious groups.
SOF psychological attack missions are a component of the overall psychological warfare plan, designed to cause chaos and lower enemy morale. Psychological missions could include decapitation strikes and attacks against key military targets or civilian infrastructure.
In 2015, CCTV video showed PLA troops assaulting a building mockup resembling the Presidential Office in Taipei. However, the Taiwan military has plans to evacuate the Taiwan president by helicopter or a Military Police armor unit to the underground National Political-Military Command Center in a crisis. In addition, a Marine battalion was recently deployed to Taipei to prevent an attack on the capital.
The main point: PLA publications provide a unique, detailed, and authoritative insight into SOF missions in various campaign scenarios including those forming important components of any likely PLA operation against Taiwan. SOF forces would not only provide critical reconnaissance and battle damage assessments on the results of fire strikes, but also conduct direct action missions against objectives that other PLA forces cannot perform.
 Lectures on the Science of Special Operations (LSSO) (Beijing: Military Science Press, 2013), 202-214.
 Theater Joint Operations Command (Beijing: National Defense University Press, 2016), 170-172; Precision Operations (Beijing: National Defense University Press, 2011), 136-137; LSSO, 46, 109, 195-198.
 LSSO, 100-106, 118 and 155.
 LSSO, 195-198.
 LSSO, 181-186.
 LSSO, 107-112.
 LSSO, 112-116.
 LSSO, 116-120.
 LSSO, 121-125.
 LSSO, 130-135.
 LSSO, 135-139.
 LSSO, 142-148.