U.S. and Taiwan (2009)

Annual Threat Assessment of the Intelligence Community for the Senate Armed Services Committee

Office of the Director of National Intelligence
United States of America

Dennis C. Blair
Director of National Intelligence
10 March 2009

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Rising Asia

As the terrorism and proliferation threats persist across the "arc of instability," East and South Asia are poised to become the long-term power center of the world. China and India are restoring the positions they held in the eighteenth century when China produced approximately 30 percent and India 15 percent of the world's wealth. These two countries are likely to surpass the GDP of all other economies except the United States and Japan by 2025, although the current financial crisis may somewhat slow the momentum. Japan remains the second largest global economy and a strong US ally in the region, but the global economic slowdown is exacting a heavy toll on Japan's economy. To realize its aspirations to play increased regional and global roles will require strong leadership and politically difficult decisions. All together--Japan, the "tiger" economies like South Korea and Taiwan as well as the rising giants of China and India point to the "rise of Asia" as a defining characteristic of the 21st century. China's reemergence as a major power with global impact is especially affecting the regional balance of power.

As in the Middle East, the United States has strong relationships in East Asia--a network of alliances with Japan, South Korea, the Philippines, Thailand, and Australia, and close partnerships with other countries--and a longstanding forward military presence. Countries in the region look to the United States for leadership and for ways to encourage China to become a constructive and responsible player in the regional and global communities. Although China will have ample opportunity to play a positive role, it also poses a potential challenge if it chooses to use its growing power and influence in ways counter to US or broader international interests.

China's Transformation

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Taiwan as an area of tension in US-China relations has substantially relaxed since the 2008 election of Ma Ying-jeou. The new Taiwanese President inaugurated in May has resumed dialogue with Beijing after a nine-year hiatus, and leaders on both sides of the Taiwan Strait are now cautiously optimistic that a new period of less confrontational relations has begun. Many outstanding challenges remain, however, and the two sides eventually will need to confront issues such as Taiwan's participation in international organizations. Beijing has not renounced the use of force against the island, and China's leaders see maintaining the goal of unification as vital to regime legitimacy.

PLA Modernization

Preparations for a possible Taiwan conflict continue to drive the modernization goals of the People's Liberation Army (PLA) and the Chinese defense-industrial complex. It will likely remain the primary factor as long as the Taiwan situation is unresolved.

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Africa: Falling Further Behind

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China's presence has grown substantially over the past decade. Total bilateral trade between China and the continent has increased from less than $4 billion in 1995 to $100 billion in 2008, but the EU and US still remain far larger economic partners for the region. China's objectives are to secure access to African markets and natural resources, isolate Taiwan, and enhance its international stature, all of which it has made progress on. Nevertheless, China's role has generated local resentment as Chinese firms are seen as undercutting African competitors in securing commercial contracts and falling short of standard local labor practices. Moreover, there is little discernible evidence of Chinese investments being used to incorporate Africa into the industrial "global value production chains" that are becoming the hallmark of integrative trade and FDI flows, especially in manufacturing in other regions of the world.

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