China’s Missteps Open Up New Avenues for Taiwan’s Values-Based Trade in Europe

China’s Missteps Open Up New Avenues for Taiwan’s Values-Based Trade in Europe

China’s Missteps Open Up New Avenues for Taiwan’s Values-Based Trade in Europe

The Russian invasion of Ukraine is “one of the worst strategic decisions any leader of a powerful country has made in decades,” stated American political scientist Ian Bremmer. Yet, Russian President Vladimir Putin is not alone in his demonstration of poor strategic decision-making. Chinese Communist Party General Secretary Xi Jinping (習近平) has also demonstrated remarkably poor judgment through his inflexible backing for Putin’s “special military operation.” In this article, I will discuss why Xi has supported Putin’s invasion, as well as the long-term implications of this support for People’s Republic of China (PRC) relations with Europe. Given Xi’s ideological commitment to supporting Putin—combined with the CCP’s draconian zero-COVID policies—Taiwan has an opening to wage a wider diplomatic-economic offensive under the concept of values-based trade.  

The goal of such an offensive would not be to earn empty, symbolic victories of official diplomatic recognition. Instead, Taiwan’s goals should be to break PRC elite capture, develop countervailing markets to insulate both Taiwan and its partners from economic pressure, and set conditions for European assistance to Taiwan (as well as sanctions on the PRC) if Xi ever ordered an outright invasion. In short, Taiwan can vastly speed up existing trends within the European Union to favor increased trade and engagement with Taiwan, as opposed to the PRC. On a broader note, Putin’s illegal and unprovoked invasion—as well as the economic decoupling resulting from Western nations rightfully cutting off trade with Russia—provides an opening to restructure the global economy to favor trade between democracies instead of empowering autocracies. To paraphrase one of Xi’s favorite statements, these are indeed “great changes unseen in a century” (百年未有之大變). Yet, with careful Taiwanese diplomatic engagement, these changes need not necessarily favor the Chinese Communist Party. 

Ideology and the War Abroad

The extent to which ideology has hobbled the PRC’s diplomatic apparatus was already clear prior to the Russia-Ukraine War, given the prevalence of “wolf warrior” diplomacy. Yet, analysts were expecting some modicum of moderation given Xi’s call for a “lovable China” (努力塑造可信,可愛,可敬的中國形象) and the public comments by Cui Tiankai (崔天凱), the previous PRC ambassador to the United States, criticizing the state of PRC diplomacy. The war, however, has further demonstrated that the inflexible, ideologically driven nature of PRC diplomacy is clearly being driven from the top. 

In the three months prior to the war, the United States made numerous appeals to the PRC, reportedly including intelligence sharing, in hopes of getting Xi to put pressure on Putin to stop the planned invasion. The PRC not only rebuffed American appeals, but also shared the information with the Russians. On February 4—twenty days prior to the war—Xi and Putin announced a “no-limits” strategic partnership, codified in a “Joint Statement on the International Relations Entering a New Era and the Global Sustainable Development.” This statement is extraordinary in how it laid down a multi-front challenge to the West, and specifically the United States. Ideological competition is prioritized. 

In the very first section, it asserts the superiority of Russian and Chinese “democracy.” The document then heavily borrows from CCP (and not Russian) propaganda, listing first the “protection of their core interests, state sovereignty and territorial integrity, [and] oppos[ing] interference by external forces in their internal affairs,” followed by the assertion that “the Russian side reaffirms its support for the One-China principle, confirms that Taiwan is an inalienable part of China, and opposes any forms of independence of Taiwan.” Finally, both sides mentioned their serious concerns over US bioweapon and chemical activity, a mainstay of the PRC’s COVID propaganda seeking to deflect blame for the pandemic. 

This document has been the core framework for PRC diplomatic actions since the start of the war. One day prior to the invasion, PRC Foreign Ministry spokeswoman Hua Chunying (華春瑩) accused the United States of “creating fear and panic” regarding the threat of war. On April 1, European Council President Charles Michel and European Commission President Ursula von der Leyen held a virtual summit with Xi, urging him to assist in ending the war. Xi’s response was notably hamfisted, stating that the European Union was acting as a puppet of the Americans, while refusing to even acknowledge that there was an invasion or a war going on. Bilateral engagement has had the same result. In Xi’s May phone calls with French President Macron and German Chancellor Scholz, Xi has continued to talk about Europeans taking “security issues into their own hands,” implying that these issues are controlled by others. This theme is rampant within Russian propaganda; but Xi’s repeated use of such phrasing is an indicator that this is not merely shared propaganda, but a reflection of shared beliefs. Extensive PRC propaganda and disinformation support to Russia will not likely change in the future.  

These actions are thus doubly insulting to the Europeans: first, they imply that the PRC views European relations largely through the lens of US-PRC competition, and that Europeans are seen collectively as a US puppet; second, they obviously prioritize the Russia-PRC “no-limits” partnership above that of the EU partnership. Moreover, the inability of PRC diplomacy to come to even a temporary understanding with the Europeans on the issues of interests and values is worsened by the immense supply chain disruptions arising from the PRC’s zero-COVID policy

Ideology and the War at Home

The PRC is currently undergoing its largest COVID outbreak since the beginning of the pandemic, with significant economic disruption across most major cities. Yet the current issues with supply chain disruptions do not arise from the actual virulence of COVID, given the relative mildness of the Omicron variant. Instead, supply chain disruptions are a result of the party’s insistence on a “zero-COVID” strategy involving mass lockdowns. For the party, zero-COVID has political and ideological objectives beyond virus control. These objectives include showing the discipline of the party under Xi’s leadership, demonstrating the independence of Chinese science, and contrasting the discipline of the Chinese people with that of alleged “Western chaos.” Given these incentives, the party will continue the zero-COVID strategy via its existing policy of “dynamic clearance,” aimed at containing and clearing outbreaks at all costs. 

Strict population mobility controls will likely continue past the 20th Party Congress expected this autumn. In Shanghai’s case, despite reported falling caseloads, factory workers and apartment residents were placed into sudden lockdown, and subject to forced-entry disinfection or “silent periods,” in which even food deliveries are banned. Second, the reduced effectiveness against Omicron of PRC inactivated vaccines like Sinovac—and the PRC insistence against using “Western” vaccines—means that the easiest method of reducing severe COVID cases quickly through effective mRNA vaccines is politically off the table (at least until the PRC develops and deploys its own mRNA vaccines).

A third factor is the new strict system of regulations within the PRC economic system. Prior to the latest COVID outbreak, the CCP had begun an extensive crackdown on multiple segments of the PRC economy, including tech, education, and real estate. With the economic disruptions from these regulations and the lockdowns, the party has responded through a combination of loosened monetary policy and a “shadow stimulus” of loosened bank lending and local government spending. All of these factors have made the PRC a significantly riskier and less stable place in which to invest, and Europe is taking notice

Opportunities for Taiwan to Go on the Diplomatic Offense

In the recent past, PRC bullying of Eastern European countries has sometimes allowed Taiwan to push values-based diplomacy and trade with the European Union, as seen in Taiwan’s response to PRC pressure against Lithuania. Yet, Taiwan has had to stretch itself: while Taiwan’s dominance of the semiconductor market is extremely potent, there are limits to what the Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) and an enthusiastic but relatively small Taiwanese consumer market can accomplish—if the European Union simply considered volume of PRC trade to Taiwan trade, with no consideration of other factors such as values and the long-term political risk of economic capture. This was the unfortunate condition prior to February 2022, where despite Taiwan taking extra effort to counteract PRC pressure, the Lithuanian President still felt compelled to state that the fight with the PRC had been a “mistake”, with the EU only providing soft support to Lithuania and Taiwan

However, the confluence of an extremely unpopular PRC “no-limits partnership” with Russia, as well as CCP-induced supply chain disruptions, means that Taiwan has an opening to push not just values-based diplomacy but also values-based trade on a broader scale. For instance, the previous German policy of Wandel durch Handel (“change through trade”) has been badly discredited through association with the similar terms of Russlandversteher / Putinversteher (“Russia understander / Putin understander”) after the Russian invasion. The European Union is now systematically ridding itself of trade with Russia, with considerations of domestic economic disruption fading in comparison to the necessity of punishing Russia as the invasion of Ukraine continues and evidence of war crimes mount. The closeness of the PRC to Russia is now prompting European capitals to at least begin considering how to reduce reliance on PRC trade

Even more importantly, PRC supply chain disruptions and risks to business as a result of autocratic decisions mean that financial incentives also align with the moral incentives. This means there is a relatively short window for Taiwan to advertise itself as a reliable, democratic substitute for PRC trade, or even as a regional middleman to EU attempts to foster greater trade relationships with Japan. Given this rare opportunity, Taiwan should seek to prioritize its diplomatic and economic efforts to focus on Europe.  

To take advantage of this situation, Taiwan should take a systematic, microeconomics-based approach to incentivize the key European companies most badly affected by the supply chain disruptions to move manufacturing or design to Taiwan. For instance, the Taiwan Ministry of Foreign Affairs (MOFA, 外交部) could work with organizations like the Taiwan External Trade Development Council (TETDC, 外貿協會) to develop a series of bilateral trade investment campaigns, both at the national and company level. This campaign could be complemented with a diplomatic push for cooperation similar to what Taiwan previously executed with the New Southbound Policy (NSP, 新南向政策), which included elements of trade, technology, agriculture, medicine, education, and tourism cooperation. At the national level, European firms seeking to off-shore from the PRC could be granted tax incentives, similar to a previous Taiwan Ministry of Finance investment repatriation program

While French and German companies are the most obvious and lucrative targets, it is worth noting that expanded Taiwan outreach to Ukraine would have significant security incentives as well: pre-war, Ukraine was the PRC’s second-largest arms supplier. Economically, 50 percent of the world’s neon supply—critical for semiconductor production—comes from Ukraine. Taiwan and Western involvement in this supply chain is crucial to deterring PRC attempts at using rare-earth blackmail. Finally, the PRC has used Ukraine as a transit point to funnel goods into the EU, especially following the collapse of the EU-China investment deal in 2021. A Taiwan campaign to assist Ukraine with post-war reconstruction, or even during war reconstruction (particularly in places like Kyiv, now outside of the immediate war zone) would have both public relations and economic effects out of proportion with the size of the investment – especially contrasting with the pre-war PRC infrastructure investment in Ukraine. Separating Ukraine from both Russia and PRC economic influence would have significant, positive implications for the post-war world.

Finally, such a level of Taiwanese investment in Europe at the national level will help positively influence and shape the longer-term, multilateral economic discussions with the European Union as well as the United States. Taking advantage of PRC weakness today will greatly benefit Taiwan’s ability to integrate into a post-war economic order, in which economic blocs will play a bigger role than the previous globalized trade economic model. This is particularly true as the PRC will seek to accelerate the development of its own economic bloc and the use of the yuan to ensure that the PRC will not be vulnerable to the now proven ability for the United States and the West to use trade as a method of strategic strangulation. 


Putin’s invasion of Ukraine has forced the European Union and its component nations to drastically re-evaluate the costs and benefits of trade with Russia. With Xi Jinping tying himself to Putin, and the public nature of Xi’s assistance in echoing Russian propaganda, this re-evaluation is now being extended to autocracies in general, and the PRC in specific. PRC economic blandishments are now weak due to the extended disruptions of PRC supply chains. A diplomatic and economic offensive by Taiwan could assist in the re-orientation of Europe away from PRC economic capture, which in turn would bolster Taiwan’s economic and security positions. 

The main point: The CCP’s harsh ideological campaigns prior to the fall 2022 Party Congress have alienated the European Union and seriously disrupted global supply chains. This provides Taiwan with an opening to cooperate more extensively with the Europeans, widen Taiwan’s diplomatic space, and reduce both European and Taiwanese dependency on the PRC market.