Don’t Be Fooled, Nobody Has an Interest in a War in Taiwan, Neither China nor America.

The reasons are different, but both giants will do everything to preserve the current status quo.

Nobody has an interest in a war in Taiwan.

I'll say it again, but it's obvious. Except maybe for some ultra-belligerents from the CIA, the Guoanbu (Chinese secret service), and the FSB (ex-KGB), nobody has an interest in a war in Taiwan.

Not only because it could trigger the third world war, which would reduce the planet to nothing and thus solve all of humanity's problems, but above all because, without going to that extreme, it would plunge the world into a recession even more serious than the one of 2020.

Now, after having already been strongly weakened by the pandemic, and then the war in Ukraine, which brought about the return of stagflation (high inflation and economic stagnation), the world economy would not recover from this new shock. This is particularly true because the United States and the Eurozone, which are already in recession for the former and in the process of falling into it for the latter, have already used up all their fiscal and monetary policy cartridges. In other words, in the event of a new crisis, they will have no means of restarting the machine.

China has already taken advantage of the latest crises ...

Faced with this new “descent into hell”, which is very likely in the event of a conflict in Taiwan, some might see this as the perfect opportunity for China to become the world's leading power once and for all, insofar as, unlike the United States and the EU, the Middle Kingdom still has considerable room for maneuver to support its economy, and in particular colossal foreign exchange and gold reserves.

But China is not yet ready to take up this new challenge.

Admittedly, it is already the big winner of the latest crises (whether it be the coronavirus pandemic, the war in Ukraine, or the inflationary surge). However, to become the world's leading economic and financial power, it is not enough to have a GDP higher than that of the United States, which is already the case if we measure China's GDP in purchasing power parity dollars (i.e. by isolating the differences in purchasing power between the United States and China) and will soon be in current dollars.

... But China is not yet ready to become the first world superpower

Indeed, to go further and become the true “masters of the world”, the Chinese need to have a currency capable of competing with the dollar and replacing it within the international monetary system. However, such an eventuality remains impossible as long as China's financial space is closed and, by the same token, the yuan is not an international currency. In other words, the Chinese are not yet “mature” enough, either economically or financially. Moreover, they have no interest at the moment in starting this game, because it would mean creating a strong yuan, which could break their growth.

They will therefore not make the same mistake as the Japanese, who in the late 1980s and early 1990s decided to strongly appreciate the yen, which in a few quarters went from 200 to 80 yen to the dollar. This strategic mistake was fatal, as the overvalued yen simply burst all the Japanese financial bubbles and plunged the Japanese archipelago into deflation, which is still not completely over today.

This underlines the fact that at the level of a country, as well as at the level of a company or an individual, a bad choice can cost a lot of money for a very long time. Particularly pragmatic, the Chinese will not engage in the battle against the United States and the dollar, without having a great chance of winning it.

Both China and America have an interest in preserving the status quo in Taiwan

Moreover, let's not forget that with $3 trillion in foreign exchange reserves and about $1 trillion in U.S. Treasury bills, too much of a decline in the dollar would be a disaster for the valuation of Chinese assets denominated in that currency. A war with Taiwan would also have the same effect and would deprive the Chinese of their two safety blankets (foreign exchange reserves and U.S. Treasuries) denominated in dollars.

Moreover, let's not forget that Uncle Sam is China's largest trading partner, accounting for nearly 18% of its exports. At the same time, 19% of American imports come from China. In other words, if bilateral trade between China and America comes to a halt, both countries will experience a severe and lasting recession.

This is why, despite their apparent opposition, the Americans and the Chinese will do everything to keep things as they are, especially to avoid a war in Taiwan. At least in the short term ...

In the long term, China intends to surpass America

For, let us not delude ourselves, China intends to become the world's leading economic power and to make the yuan the international currency of reference. But only when its economy is strong enough to support a strong currency in the long term. It will then open its financial markets, let the yuan appreciate massively and be able to force OPEC countries and its trading partners to denominate their commercial transactions in yuan.

This prospect will certainly not take place for a good fifteen years. Nevertheless, if it does happen, the United States will become an “emerging country”, riddled with debt, no longer able to print money or finance its deficits thanks to the hegemonic role of its currency. The recession will then take hold on the other side of the Atlantic, but also on the “Old Continent” which, as usual, will suffer even more than Uncle Sam.

In this context, if the dollar definitively falls from its pedestal, the planet will experience a crisis much more serious and lasting than that of 2008-2009 or even that which we have been experiencing since 2020. This is why, unless Washington and Beijing decide to engage in a suicidal strategy, it will not happen immediately, encouraging the Chinese and the Americans to get along no matter what, including on the Taiwanese question.