The next big global economic shock could come from a Chinese invasion of Taiwan, a shock which would probably have more extensive economic impacts than the Russian invasion of Ukraine. Joining show host Gene Tunny in episode 146 to discuss China and Taiwan and the Indo-Pacific more broadly is Dr Greta Nabbs-Keller, Senior Specialist in Defence Research at The University of Queensland and the Program Director of the Australian Program Office for Advanced Hypersonics.
You can listen to the conversation using the embedded player below or via Google Podcasts, Apple Podcasts, Spotify, and Stitcher, among other podcast apps.
About this episode’s guest – Dr Greta Nabbs-Keller
Dr Greta Nabbs-Keller is a Senior Specialist in Defence Research at The University of Queensland (UQ). She is also an Affiliate Senior Specialist at UQ’s Centre for Policy Futures where her current research project centres on issues of contestation and coherence in Indonesia’s national security policy making. Greta has extensive professional experience working on Australia’s bilateral relationship with Indonesia and continues to utilise her Indonesia country expertise in consulting, research, and international development roles. She contributes regularly to media and think-tank analysis on regional strategic, political and foreign policy issues, and engages with policy communities through submissions, dialogues, conferences and executive educations programs. Greta’s broader research interests include Indonesian civil-military relations, Indonesia-China relations, politico-security developments in Southeast Asia, and Australia’s regional foreign policy. Greta is an Executive Council member of the Australian Institute of International Affairs (AIIA) Queensland and Adjunct Research Affiliate at Griffith Asia Institute.
Links relevant to the conversation
Greta’s articles at the Lowy Institute Interpreter:
Greta’s articles at ASPI’s the Strategist:
Greta’s conversation article on Australia’s relationship with South East Asia:
Background reading on China and Taiwan:
Transcript of EP146 – China, Taiwan & the Indo-Pacific w/ Dr Greta Nabbs-Keller
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Gene Tunny 00:01
Coming up on Economics Explored…
Greta Nabbs-Keller 00:04
I think Biden has, whether there were slips or not, he’s made it quite clear that the US will intervene, but I think it’s increasingly likely that we would be looking at essentially World War III if China did decide to attack Taiwan.
Gene Tunny 00:21
Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional Economist based in Brisbane, Australia, and I’m a former Australian Treasury official. This is episode 146. On China, Taiwan and the Indo-Pacific.
The Russian invasion of Ukraine has highlighted how geopolitical developments can disrupt global markets and economies. The next big geopolitical and global economic shock could come from a Chinese invasion of Taiwan. The Chinese government claims Taiwan belongs to China. It has an ambition of taking over Taiwan by 2049, the 100th anniversary of the founding of the People’s Republic in 1949, following the Communist Revolution led by Mao Tse Tung. Various actions of the Chinese government and its military in recent years, have raised concerns that a Chinese invasion of Taiwan could happen sooner rather than later. Obviously, this would have profound implications for the global economy, and hence, I feel it’s important to cover the issue on the show.
Joining me in this episode of chat about China and Taiwan, among other geopolitical issues, is Dr. Greta Nabbs-Keller. Greta is a senior specialist in Defence Research at the University of Queensland, UQ, here in Brisbane. Currently, she is the interim Program Director of the Australian program office for Advanced hypersonics. Greta has an extensive background in defence and foreign policy issues with a specialization in Indonesia and Southeast Asia.
I invited Greta onto the show because I thought she’d be a great person to help us understand what’s happening with China and Taiwan, and what China has been up to in the Indo-Pacific region more broadly.
This episode, you’ll learn why foreign policy experts are so concerned about China, because it’s what they call a revisionist power, one with a goal of remaking global institutions and rules for its benefit. In the show notes. You can find relevant links and details of how you can get in touch with any questions, comments or suggestions. I’d love to hear from you. So please get in touch and let me know your thoughts on this episode. This is a big issue we deal with in this episode, and allow him to return to it in the future for a closer look at the potential economic impacts of a Chinese invasion of Taiwan, if that were to happen.
Right on, now for my conversation with Dr. Greta Nabbs-Keller on China, Taiwan in the Indo-Pacific.
Thanks to my audio engineer, Josh Crotts for his assistance in producing this episode. I hope you enjoy it.
Dr. Greta Nabbs-Keller, welcome to the program.
Greta Nabbs-Keller 02:57
Thanks very much, Gene.
Gene Tunny 02:57
Excellent, yes. Good to have you on the show. I thought I’d invite you on; I had a recent conversation with Michael Knox, who’s the Chief Economist at Morgan’s, which is a major stock broking wealth management firm, here in Australia. And I asked Michael about China. And I must say I was rather, surprised by his answer that he was so concerned about a potential Chinese invasion of Taiwan sometime in the future or in the next few years. So that’s, that was the original reason I thought I’ll be good to have you on the show. And then I know you’re also an expert on Indonesia and Southeast Asia. And we’ve got a new government here in Australia. And the first trip the PM made was to Jakarta and he had a bike ride with Joko. So, we got to ask you about Indonesia too.
But before we get into all of that, would you be able to tell us please, what is the Australian program offers for advanced hypersonics? That’s where you’re the interim Program Director. Can you tell us a bit about that, please?,
Greta Nabbs-Keller 04:10
Yeah. Thanks, Gene. Well, my position at UQ on both senior specialists Defence research in our engineering, architecture and IT faculty. And my other hat is the program director of the Australian program office for advanced hypersonics which is probably one of the most exciting titles, I think I’ve ever had Gene. Essentially, the program officer, the APOAH, as we abbreviate to it, it’s fundamentally about bringing Australian university expertise in hypersonics together So, University of Queensland is the world’s largest hypersonics group. And I don’t think many people are aware of that that the southeast Queensland with the University of Queensland and USQ are home to considerable expertise in hypersonics science and technology and indeed, I think really the genesis or the story of hypersonics in Australia from Professor Ray Stalker’s time, for around 35 years is largely been centered on the University of Queensland and the subsequent integration with US hypersonics program.
So, the Australian program offers for advanced hypersonics it’s fundamentally, a team Australia approach to advancing hypersonics research and more blue sky or beyond, you know, near horizon research, things around electric propulsion and plasma field engine. And it’s also fundamentally about workforce pipeline. As you know, Gene, Australia is facing increasing shortage of STEM graduates and the APOAH look at pathways to citizenship and basically developing a nurturing that workforce pipeline that’s in such demand by Defence and industry.
In essence, the APOAH provides a single gateway into the Australian university hypersonics ecosystem to include UQ, USQ, University of New South Wales, and RMIT. So, we’re developing that concept to be ready to provide Australian Department of Defence with hypersonic solutions and capabilities.
Gene Tunny 06:26
Okay, so hypersonic, that’s five times the speed of sound?
Greta Nabbs-Keller 06:30
That’s correct. Mark five and above. And I must say, Gene from a non-science and engineering background, and you introduce me as an Indonesian specialist. So obviously, I have more on international relations or comparative politics background, I’ve been on a steep learning curve about hypersonic about scram jets and various modes of propulsion. And it’s been very, very interesting for me.
Gene Tunny 06:56
Yeah, well, it’s certainly relevant in geopolitics, because one of the things that I’ve heard is that I mean, the Chinese, they’re making great advances in hypersonics. So, and I don’t know whether they’re ahead of the Americans or ahead of us or the British, I don’t know. But I know that that’s one of the concerns that’s out there. I mean, there are these hypersonic missiles that have been developed, or is that the Russians do?
Greta Nabbs-Keller 07:23
It’s both. You’re both right. I mean, the Russians have long had hypersonics technology and other players are India and Japan. And indeed, there may be others because a lot of that is closely guarded. Chinese did fire a advance hypersonic missile last year, which caused some alarm, at least in media reporting, Gene within the Pentagon and Washington. I think one senior US General described it as a Sputnik moment where the US I think, was, fundamentally alarmed at the advances in Chinese hypersonics technology.
Again, I’m not a hypersonics scientist myself, but certainly China’s formidable military buildup and integration of critical and emerging technologies is quite significant. And the rest of the world is looking at that with some unease, of course.
Gene Tunny 08:29
Right, okay. So, we might talk about China now. So, what stunned me as an economist in the last few years, I think it’s the last few years, is just how much that relationship with China has deteriorated. Because there was so much excitement about China joining the WTO in 2001. And I mean, we all saw the economic gains to Australia from the growth of China through them purchasing our coal and iron ore and what that meant for that sector. So yeah, this is all come as a real shock. And it looks like I mean, there’s been a real; it’s a big challenge for our country, and also for our allies, the US and Japan. And I suppose we’re part of this quad group now with India. So, I’d like to ask you about that later. What’s that all about? Because I thought India was not aligned. But now it looks like it’s aligned.
To begin with, could you just describe what’s your assessment of the current strategic environment, the current environment facing Australia and I suppose the US as well in the Indo-Pacific, I mean, how concerned should we about what’s going on?
Greta Nabbs-Keller 09:55
I think it’s deeply concerning, Gene, for those of us who follow international political and strategic developments closely, I think there are real reasons for concern and you know, indeed, in terms of Australia and take Australian strategic guidance and defence and foreign policy documents, you know, they describe the environment as more uncertain, and more complex and more dangerous. You might recall Peter Dutton talking about the drums of war, a beating and being criticized for that. But I’ve seen in my own career, particularly over the last, I’d say, post COVID, particularly Gene that that word war, is being more openly discussed and acknowledged as a real prospect due to the deteriorating strategic environment and rising strategic tensions between major powers.
So, I think in a nutshell, many of the current geopolitical tensions in the Indo-Pacific centre on a rising and a revisionist China and of course, it’s not only sino US strategic rivalry that we can see, you know, playing out, across economics, geo-economics, around technologies, around trade, around human rights, around maritime strategic competition. But of course, one also has to remember that it’s not only US and Australia have difficulties with China, but indeed, many countries even actually, European countries as well. Particularly, you mentioned the Koba particularly Japan and India, of course, as significant Indo-Pacific powers. And they have their own issues, which are probably, to some degree more concerning and more pressure than Australia’s facing, particularly India, on the line of actual control up there on the border. And definitely, India and China have gone to war previously. Over their contested border, they’re in the line of actual control up there in the Himalayas, you see increasing pressure on Japan, particularly in the maritime domain in the East China Sea.
So, China under current president, Xi Jinping and I acknowledge, as you introduced me, I’m an Indonesian specialist rather than a China specialist. But of course, I follow these developments closely. And a lot of these uncertainties centre on China and a more assertive, and aggressive China and decision Jinping’s presidency and how various states in the region are responding to these pressures and constraints. I think particularly with Australia, if you’re an observer or student of Southeast Asian politics particularly, you would have seen some of the coercive and punitive behavior playing out previously on Southeast Asia that was later applied to Australia, particularly once our former Prime Minister, Scott Morrison, called for and rightly so, an independent inquiry into the origins of the COVID 19, the virus.
Indeed, in Southeast Asia we’ve seen for a number of years, very coercive tactics, particularly in the maritime domain, and some implementation of coercive trade practices against Asian states like the Philippines, over tensions in the South China Sea; rival maritime claims in the South China Sea. And if I’m not mistaken, there was some tariff barriers put on Banano, a Philippines banana export. So. there have been a number of precedents here.
I think China, after COVID-19 obviously became more brittle and much more brittle and more sensitive to international criticism over the origins and the management in the earlier days of the COVID 19 pandemic. And I think a number of, you know, even seasoned foreign policy experts and senior Australian public servants are probably shocked by Australia’s treatment by Beijing after calling for that independent inquiry into the COVID 19 pandemic. But also, I think, a number of countries, we saw what was characterized as wolf warrior diplomacy, by Beijing, that list of 14 grievances against Canberra.
But there has been some precedent here in their treatment of other countries and indeed, it’s not just Australia that’s experiencing these problems as I said, countries like Japan are really at the frontline of increasing coercion and intimidation.
I think also China’s willingness to engage in grey zone tactics. And that’s something that Russia has also employed successively in Ukraine. Prior to the actual invasion of Ukraine, and you see, militia groups that, rather than they’re not Russian military forces, per se, but there are militia groups, you see disinformation campaigns, and I think China has increasingly engaged in those grey zone operations or what is termed hybrid warfare. So, their acts of intimidation and coercion, shorter warfare. And I’ll give you an example on that Gene, in the maritime domain. You’ll see China deploy heavily armed paramilitary vessels escorting their fishing fleets in the South China Sea, rather than PLA Navy vessels, for example, increasing cyber intrusion, cyber hacking against Australia, but a range of countries all around the world.
You’re seeing increasingly, aggressive and assertive China that looks to fundamentally kind of reshape the Indo Pacific and probably more broadly the global order; more convergent, with its own interests. So, I think there’s no doubt that, you know, China has achieved particularly, in Southeast Asia, increasing political, economic; in terms of military balance of power, that’s something we can discuss. I think it was quite a shock for Canberra and the Australian public to be on the receiving end of that rough kind of diplomacy and treatment post March 2020.
Gene Tunny 16:56
Absolutely. Well, they applied higher tariffs on many of our products on beef, barley; they restricted the imports of our thermal coal into their ports. I’m going to have to look at those sporting grievances. That’s interesting. And you mentioned Peter Dutton, was he a Defence minister?
Yes, former Minister for Defence.
So that’s why those comments were picked up and he was accused of being, was it sensationalist? It was the right word to describe that. But yeah, there were people who were thinking that sort of commentary wasn’t helpful at the time. Right. Can I ask you what you mean, by revisionist? What do you mean by a revisionist China?
Greta Nabbs-Keller 17:42
The concept of a revisionist power, is a power or a nation state that wants to remake the international order, an international system and the rules. As I said, it convergent with their own interests. Undergraduate students studying international relations and politics, they understand about the post Second World War kind of US led global system, whether and of course, you Gene, you’re more an expert on the international trading order and the WTO, and the basis of rules and norms, and that extends, of course, to international legal norms that govern the maritime domain.
And so, it’s really that post Second World War Bretton Woods, US led system of strategic alliances that emerged out of the Second World War, where the US has largely been the dominant, the preponderant global power and that’s very much been changed. And I give a practical example, because it sounds abstract. So take the maritime domain and on class, the 1982 UN Convention on the Law of the Sea, which governs territorial waters and exclusive economic zones, and indeed, Indonesia, was one of the architects of on class the UN Convention, and as diplomats, played a key role being the world’s largest Arca pelagic state, and a system of rules and governance and norms that guaranteed maritime governance and nation states access to their territorial and the resources within their 200 nautical miles exclusive zone.
So, China has, increasingly refuted international legal norms, Permanent Court of Arbitration ruling 2016 which found in favor of the Philippines on rival maritime claims. China simply chose to ignore that and refute that. So, I think what you’re seeing more generally Gene, in terms of geopolitical tensions, you’re seeing countries like Russia and China who are more willing to challenge those established legal norms and international principles that have largely underpinned prosperity and security and stability in the Indo Pacific. And we’re seeing the erosion of that and that’s creating increasing uncertainty and tension.
Gene Tunny 20:21
Just on those maritime boundaries, is that what you were talking about before and China isn’t respecting what was decided by this international body? What does that mean, practically? Does that mean that they will help their fishing crews go into those waters and fish?
Greta Nabbs-Keller 20:45
Absolutely. The problem in the South China Sea; and you might be familiar with, China’s very ambitious South China Sea claim that takes in around 95% of the South China Sea, irrespective of those maritime boundaries that were decided under the UN Convention on the Law of the Sea in 1982. So, you’re seeing effectively, Chinese paramilitary and fisheries activities inside our state’s exclusive economic zones. You’re seeing increasingly belligerent and coercive behavior against the Coast Guards; more often Coast Guard, sometimes military assets of Southeast Asian states, littoral states that have claims in the South China Sea. So, you basically have a very powerful nation state who’s not willing to follow the rules of the game and has the power and the might to simply ignore that. And of course, the US is not innocent of ignoring international law. Let’s be fair here. But, we’ve also had harassment of regional states like Vietnam and Indonesia and Malaysia with their exploration of hydrocarbons, oil and gas in the maritime domain and harassment of oil rigs and oil exploration activity. So, it’s kind of spans a range of activities in the maritime domain, but again, it undermines the principles of sovereignty, and of course, maritime sovereignty and of course, that’s inherently destabilizing.
Gene Tunny 22:29
Okay, we’ll take a short break here for a word from our sponsor.
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Gene Tunny 23:03
Now back to the show.
I thought it was interesting before you mentioned this concept of grey zone activities. And I mean, they’re also engaging in applying economic pressure in a way, aren’t they? Or that they’re coming into these countries and they’re signing memorandums of understanding or they’re doing deals and then there’ll be some financing. But then what can happen is that if they don’t meet the repayments the country, then the Chinese can take it over or they can apply leverage on those countries. That’s a concern, isn’t it? So, there’s a whole range of things that the Chinese are doing, they’ve signed a deal; there’s some sort of deal with the Solomon Islands, you know what’s going on there? Does that fit in with a sort of a grander or a broader plan to dominate the Indo-Pacific?
Greta Nabbs-Keller 24:01
You’re talking about debt? What’s term debt trap diplomacy. And usually that some understood in terms of China’s expansive infrastructure and connectivity program, the Belt in Road Initiative or the VRI and indeed, there have been legitimate concerns about these massive infrastructure projects, extending from Africa and through, South East Asia, Pakistan, and the Pacific. The problem, particularly of debt exposure of these countries; they’re taking on debts for infrastructure projects that they’ll never be able to repay.
One of the key-case studies there is Sri Lanka actually, and the Hambantota port; I think I might have a pronunciation regret. Hambantota port facility in Sri Lanka, and exposure to too much debt and China can effectively take control of that strategic port facility, which of course, not only has, civil applications and uses, but strategic and military benefits, of course, by buying ceding control of that.
So, I think countries are increasingly aware of some of these risks. And I think the US has even the State Department has done work in some countries, including Myanmar, to revise the terms of those infrastructure projects, which had, incredible interest levels and unfavorable term. And some of them have actually successively, successfully been renegotiated.
I think what you, I don’t know if admires the right word, Gene, but certainly, I think if you’re talking about grand strategy and sweeping strategy, and coherent whole of government strategy from Beijing, using all its policy arms, from military, from economics, from political to technological, and so on. It’s a very strategic approach to, if it’s not dominance, to increasing economic influence and political leverage, and ultimately, being able to project military forces. It’s very sophisticated.
And we’ll turn to Honiara deal for a moment, the Solomon Islands China deal. I mean, that’s deeply concerning on a number of levels. First of all, for the Solomon Islands, people and parliament, it was not a transparent negotiation process. So, that’s been of great concern. There’s also a sense also from looks at Southeast Asia; it’s an indication of what will increasingly happen in the Pacific and some scholars and analysts call it elite capture that you’ll find in Southeast Asia, for example, that, Beijing’s ability to wield significant economic blood, yes, it has some respects, captured some of the region’s elites. But that doesn’t mean that there’s broader strategic distrust in in those countries in Iran. I think you’re seeing the same sort of thing with the Pacific that China can successfully co op some of the region’s elites. But there’s certainly lingering distrust and unease remains around in the region’s politics.
I think on the Honiara deal, what what’s most concerning to Australia as well, that Solomon Islands is only 2,000 kilometers from Cannes and if you look back to your history in the Second World War, and the Guadalcanal, fiercely contested battles between the US and Japan, principally. I mean, that was basically about, preventing Japan from gaining a strategic foothold and strategic access, that would cut the US off from allies like Australia, and indeed, if China was to increasingly base or rotate, military assets and military personnel through Honiara, that’s a deeply destabilizing concerning strategic development for Canberra.
Gene Tunny 28:42
Right. I mean, was that a failure of diplomacy on our part, or on the US’s part? It just seemed to take everyone by surprise that that came up. I was stunned when I heard it.
Greta Nabbs-Keller 28:53
Well, I think, again, about sophisticated grand strategy that I think Washington and Canberra and a number of countries are being outsmarted by Beijing on a number of levels. And there’s a lot in this and I won’t unpack it all, but I think the previous government could have done more. In some ways, I think during the Morrison government’s pacific step up, which I think was announced, if I recall correctly, around 2017, or 2018, was somewhat an admission of neglect. Now, I don’t want to overstate the neglect because obviously, both Southeast Asia and the Pacific have a fundamental, foreign policy importance to Australia. There’s no doubt about that. But I think the step up was a recognition in the context of growing geopolitical tensions Australia needed to do more with our Pacific neighbors, or as Canberra terms it, Pacific family.
I think the US has also realized recently that they need to do more in the Pacific, particularly in response to China. Fundamentally, Pacific countries like Southeast Asian countries want to be taken on their own terms, they want to be considered on their own terms. And they don’t want their relationships with Australia or Washington to be viewed; you’re only within the prism of sino US rivalries or geopolitical tensions. Yeah, they have their own fundamental development concerns, and as you know, Gene, the Pacific with existential threats from climate change, rising sea levels are, an abiding concern for Pacific Island countries.
The other thing I’d say about China and Bina Indonesian specialists have a number of decades, something I note with interest, Gene, is that the China builds the capacity and regional expertise of its diplomats. So, they have Chinese diplomats who are real Pacific hands, they have years of rotational postings through the Pacific, so they become Pacific experts. And they engender that kind of expertise and the context and the relationships that come with that. And I think Canberra could do more, I think, to build again, or rebuild from what’s a generalist type model with our diplomats. And when I say diplomats, I don’t only mean Department of Foreign Affairs and Trade Representatives, I mean, all our agencies that are involved in international engagement and diplomacy. And as you know, treasury and finance as much Defence and Home Affairs, and others are posted into regional capitals. I think we could do more; we need a more sophisticated approach, we need to recalibrate our policy settings and more whole of government approach to regional engagement, and particularly on the Pacific and Southeast Asia.
Gene Tunny 32:01
It sounds like it. The way you were describing it earlier, it sounds as if China has this coherent strategy. So, there’s coordination between the different arms of the government, the different departments with state owned enterprises, perhaps? I mean, is it because they’re an authoritarian country with the President; I mean, is he President for life now or something?
Greta Nabbs-Keller 32:24
Constitutional change; I think there’s some more detail, I think, in the machinations that remain outstanding, whether that’s, guaranteed by the senior leadership of the Chinese Communist Party, but it seems that there were there was some agreement that his tenure would be ongoing, but I don’t know if that’s absolutely guaranteed genuinely in that context. But, it looks certainly a very, very strategic approach. I think you’re right, in an authoritarian kind of party-controlled state, centralized command, it is much easier, of course, to formulate and operationalize a very coherent kind of, strategy as opposed to democracies, where intrinsically, there’s more bargaining, there’s more difference, there’s more debate. And, indeed, the parliamentary system with the government and opposition that’s sort of; the foundations of Westminster democracy. So, I think it is much easier in a centralized party-controlled state to wield power and influence and sort of mobilize all your arms of government, and you mentioned State owned enterprise, for the purposes of very sophisticated strategic kind of policy approach.
Gene Tunny 34:00
Yeah, I found fascinating to that concept of; was it debt trap diplomacy? Yeah. Because I heard about what happened with Sri Lanka. I’m going to have to look more into that and probably cover it on the show. It’s fascinating and disturbing.
Right, my chat about Taiwan. How big a risk do you think that is? I mean, because that would be so disruptive to the global economy. I mean, we’ve seen what’s happened with Russia – Ukraine, but if China did invade Taiwan, I mean, it would have different impacts, but it’d be just as bad, probably worse. I mean, if you think about how much of the world’s industrial production has shifted to China, they make all the iPhones, they make computers. And then in Taiwan, it’s a major producer of semiconductors, I think, the chips that go into computers, I mean, this would be profoundly destabilizing.
Do you have a sense of how big a risk it is? And I mean, what would actually happen? Would the US respond? Would Australia respond? How would it all play out? I’m hoping it doesn’t happen; we’re all hoping it doesn’t happen. My feeling is that it’s unlikely but when I talked to people like Michael Knox, and then I, I listened to people like Ian Bremmer and other global commentators, I realized that the risk is much higher than I understand at the moment that I had expected.
Greta Nabbs-Keller 35:42
I think, again, I’m not a sonologist or China experts. I’m not privy to classified briefings. I’m not privy to the inner workings of the Chinese Communist Party and their thinking, but in broad terms, of course, I follow these strategic developments in the Indo-Pacific.
I think there’s no secret that Beijing, and Xi Jinping is made no secret of seeking, as they term it, to reunify with Taiwan, but of course, Taiwan, strictly speaking, was never part of China. The Republic of China was originally under Japanese controllers; Formosa and then the Shang Kai Shek. After the China’s civil war, the remnants of his army fled to Taiwan. And, if not a country formally, it’s a very successful; indeed, it is a country whether it’s formally recognized as a sovereign country in political terms is another aspect. It’s been a very successful democracy, very dynamically, economically, and of course, it’s a democracy. And I think Beijing’s made no secret, it seeks to peacefully reunify with Taiwan, but they have not ruled out military force to do so.
I’ve been present at the Shangri La dialogue in Singapore, which is the preeminent security defence dialogue in in in the Indo Pacific region based in Singapore at the Shangri La Hotel, every two years and there’s no secret that, senior Chinese officials and generals, speaking at that dialogue, make no bones about it, that Taiwan, is an inseparable part of China, and they will seek to reunify.
Now, the implications of China’s invasion of Taiwan are memes, as you say. I mean, it’s almost difficult to really comprehend the massive implications. I mean, we look at Russia’s invasion of Ukraine, and the flow on effects for the global economy, and indeed, food security for millions of people looks like they’re going to be threatened with food shortages, rising interest rates. And you’ve got the supply chain issues in China associated with COVID 19 lockdowns which are exacerbating that. And of course, you as an economist know very well about this.
Let’s look at some of the key implications, and there’d be many implications. But I think if China successfully invaded Taiwan, it fundamentally changes the Indo Pacific region, it gives China force projection. So, occupation of some of that first island chain, as we see that island chain along the eastern part of the South China Sea, it enables them to forward deploy military forces and to deny the US access, around the Philippine Sea, and more broadly threatens, they’re leaving implications, for us, us force disposition in Guam. Fundamentally, for Japan, this will be a profound concern for Japan because it effectively cut or deeply imperil Japan from US military assistance. So, in strategic terms, it provides Beijing with a forward presence to project military force and potentially control vital sea lanes and air space. So, I think also, it would have broader consequences, as we’ve seen it in Russia’s success in Ukraine, because it means authoritarian states can simply annex and occupy democratic ones. So, it’s more fundamentally a threat to democracies and those fundamental principles and values of democracies that we hold dear.
We hear about European values Gene, in the context of Ukraine, and Ukraine’s potential membership of the EU and NATO. And we talk about European values and what we’re talking about, there are the fundamental tenets of liberal democracy. And I think, more powerfully, in some respects, if the US did not successfully defend Taiwan, it’s the end of that post Second World War order, it’s very profound, it’s the end of basically US hegemony in the Indo-Pacific region, the US would lose credibility with allies and also mean the consolidation of a China centric order. And all that entails; I don’t know about you Gene, it doesn’t feel me, the prospect of living under a China dominated doesn’t fill me with great glee on a range of France from just environmental management. And I talked about maritime and the maritime domain about, exploitation of fisheries, you’ve got seabed mining emerging as a warrying prospect, but also, in terms of political liberties, surveillance, cyber intrusion, and coercion, it doesn’t fill me with confidence that if China could successfully take Taiwan, and then it would fundamentally impact on the balance of power and all that would entail.
I’d like to quote, Malcolm Turnbull actually on this, as what’s at stake here, more generally, with China’s revisionist tendencies, as Malcolm Turnbull, our former Prime Minister said, you, you can’t have a situation where the big fish eat the little fish and the little fish eat the shrimp. And that’s the basis of the international rules-based order, is making sure all sovereign states at least, have some equality in the international system. And I think China’s might and power is fundamentally eroding that rules-based order and this is the danger of highly destabilizing.
It’s hard to imagine; the economic implications are something you wouldn’t be able to talk about. But this would be profound, absolutely profound. And, the US has tripped itself up a little bit, particularly Biden on Taiwan, because there was a deliberate policy of ambiguity by Washington recognizing one China policy and ambiguity around whether the US would actually deploy military force to defend Taiwan. And I think Biden has, whether there were slips or not, is made it quite clear that the US will intervene, but I think it’s increasingly likely that we would be looking at essentially World War 3 if China did decide to attack Taiwan, because that would invoke Japanese involvement. And certainly, we’d be involved as well.
Gene Tunny 43:25
Right. Yeah. I mean, I just wonder what it would look like. Would it look like a block aid? I mean, I’m struggling to think of how they would respond; there’d be diplomatic pressure at first. I mean, we don’t know how it would go. Would the Chinese easily; would they take it over? I’m sure the Taiwanese have, I mean, they’ve probably been training for this, preparing for this. They would have their own military equipment to defend the island. So, it could be like Ukraine. I mean, that’s been a surprise that the Ukrainians have been able to push back on Russia so well. And I mean, the Americans have been supporting Taiwan, haven’t they? They’ve been arming the Taiwanese?
Greta Nabbs-Keller 44:13
Yeah. It’s been a number of congressional acts on Taiwan, the increasing number of US officials, much to Beijing’s consternation flying in into Taiwan. And that’s, of course, in China’s eyes, undermining one China principle. I mean, Taiwan, has some formidable military capability. So indeed, that the Taiwanese and Americans are looking very closely at Ukraine.
What has surprised strategic analysts about Russia’s invasion of Ukraine is that the Russian military was always considered, a formidable, and highly capable military force. But the Ukrainians in asymmetrically have been able to impose significant costs on Russia. You’ve got issues around morale, conscription with the Russian military, the use of drones; successful application of drones and sophisticated anti-tank missiles and anti-aircraft missiles. Ukrainians have; they’re defending their homeland and they’ve done surprisingly well.
You could imagine, Gene, this would be quite devastating. I think the inevitability of war, as sad as it seems, it’s very hard to see this not being on a trajectory towards war, because there’s so much at stake as, as I stated, for the US and other countries in Taiwan. And from China’s perspective, they fundamentally see Taiwan as part of the Chinese mainland and homeland. Again, what makes it dangerous is there’s a sense of domestic political legitimacy in reunifying, with Taiwan for Xi Jinping regime, which perhaps makes it more dangerous and as economic trends and deterioration, the global economic environment will buffets China, as it will other states. Does that make Xi Jinping, more inclined or less inclined to consider an attack on Taiwan?
The longer the US leaves it, China grows inexorably stronger and more military capable as the years tick by. So, there’s very, very high risks at the moment, Gene, of a conflict or regional conflict emerging. And that’s what worries countries in Southeast Asia feel so much, you feel sort of, pawns and caught in the middle of these kinds of dynamics?.
Gene Tunny 47:12
So we’re recording this on the 23rd of June, 2022. On 22nd of June, 2022, CNN reported China sends dozens of war planes into skies near Taiwan. So, it’s acts like this that make people very concerned about the future.
Can I ask about the other sort of players in the region, the major countries, Indonesia and India? So where do they fit in this because they’ve traditionally been nonaligned. We’ve been in, was it Bandung? Did have a famous conference there. We were there on a course for the Indonesian Ministry of Finance and stayed in the Padma on the Gorge there, which was beautiful. But there was, was it the East West Conference? I’m trying to remember it. There’s that old colonial building in downtown Bandung where they had a famous conference back in the 50s.
Greta Nabbs-Keller 48:09
You right Jean, that’s the Asia Africa conference of 1955, still lauded as one of Indonesia’s greatest diplomatic achievements and out of the Asia-Africa conference, which was essentially, that was in a cold war environment, but it brought the newly independent countries of Asia and Africa together. And it was the birth of the nonaligned movement. Of course, these countries who are effectively post-colonial states, didn’t want to be two sides between the US and the Soviet Union; a Soviet bloc in the Cold War, and they wanted to forge an independent path. And out of that, emanated the peaceful principles of coexistence and it was historically a significant development in an international political history.
There’s one thing I just want to pick up from your previous comment about the Chinese planes, PLA Air Force planes are flying into Taiwan border area air identification zone. This is what makes it so dangerous too, it’s not just the rhetoric, and the polemic around Taiwan, It’s China’s increasing willingness to engage in that kind of conduct both in the maritime domain and the air domain that make the risk of miscalculation and escalation so high, you can foresee a situation where, missiles are locked on and in this game of brinkmanship, you can see how something could go terribly wrong and escalate very quickly. And indeed, the ABCs reported this morning on more details of PLA Air Force interception of rafts Australian Air Force planes are flying out from the Philippines over the South China Sea around the Paracel Islands, challenging them in some very dangerous midair maneuvers. Things are escalating.
Now, Indonesia and India, very interesting states – pivotal states, of course. India is the second largest country in the world in population terms. And Indonesia, many people overlook is the fourth largest country in population terms and the world’s third largest democracy. So, India and Indonesia are pivotal states to the Indo-Pacific. And you’ll see India’s been very, interesting and you’d said, of course, they’re both formally nonaligned. India and Indonesia have a lot of historical and cultural similarities.
India, of course, has become increasingly concerned about Chinese actions on its Himalayan border there around Ladakh, in the line of actual control. There’s been physical skirmishes up there between PLA and Indian troops that saw at least, I think around 25, roughly, Indian soldiers killed, and the Chinese China never released the number of their troops killed in the physical skirmish up there.
So, that’s been of increasing concern. And certainly, India’s responded with increasing its military presence at Himalayan border significantly. They’ve banned dozens and dozens of Chinese apps. I’m talking about mobile phone apps around the risks of surveillance and intelligence collection, and intrusion.
And you’ve seen India move; although it’s formerly nonaligned, India has moved much closer to Washington, and indeed Japan and Australia, as those four states of the quadrilateral security dialogue or the quad, look to act in coalition and it’s not a formal military alliance with note, because of the nonaligned status of India. But you see, you’re increasing coordination between the quad members, around vaccine diplomacy and vaccine infrastructure, economic technological cooperation.
Now, the military component of the quad is probably the Malabar naval exercises. There’s sort of a tenuous link with the quad and as I said, the quadrilateral security is a dialogue. It’s not a military path or alliance, but perhaps the Malabar exercises for nation exercises and conducted in the Indian Ocean between those four states. You can see is the kind of the military defence component of the quad.
Now Indonesia, of course, is a country that’s been very much at the forefront of my research and professional interests for decades. Indonesia is an interesting country. It’s again, formerly nonaligned, it’s effectively the largest state in the Association of Southeast Asian Nations and Southeast Asia and effectively the veto actor. Indonesia has a foreign policy doctrine, a free and active foreign policy doctrine, and it seeks strategic autonomy and to manage the influence of what it considers external powers and I mean, the powers external to the Southeast Asian region. Although China’s proximate in Indonesia’s foreign policy conceptions, China, Japan, US and other countries are external to those ASEAN states.
And I think, Indonesia and many of the major Africa; the go back to Bandung Conference were born out. They were decolonized within this Cold War, polarized global political context, and they don’t want to be seen as pawns in great power rivalry. So, this is increasing policy complexity to Jakarta.
You’re acutely worried about rising geopolitical tensions and what that means for decades of stability and growth in Southeast Asia and you know, ASEAN as a bloc is a significant economy collectively. Over around 650 million people in ASEAN; significant collective strength in ASEAN.
So, Indonesia hedges and balances; it has close and constructive relations with China and very close and constructive relations with Washington, and of course, Canberra and Tokyo. Tokyo, and one cannot forget Japan; Japan is still a significant global economic power. And Japan before China was the engine of growth in Southeast Asia, for decades. It was Japanese investment – FDIs, you know, Gene, in Southeast Asia that really spurred, Southeast Asia’s growth there, for decades.
Gene Tunny 55:40
And so now China has taken up that role, has it? Within Southeast Asia, it’s engaging a lot of foreign investment. And so that’s giving them political leverage..
Greta Nabbs-Keller 55:51
Absolutely. As I said, don’t underestimate Japan, as an economic partner and political partner for Southeast Asia. But of course, like China, is a major trading partner of all Southeast Asian states.
It’s much more China and Japan are both very good in comparison to Washington I’d say through ASEAN mechanisms are more integrated than the US is into Southeast Asia, through ASEAN Plus mechanisms and economically. And also, I’d say, Gene, in the context of the COVID pandemic, as young countries turn to Beijing, because Beijing was able to roll out very quickly; the Sinovac vaccine was most readily available and cheaper to Southeast Asia, then, AstraZeneca or Pfizer, and even though Southeast Asian states knew that the efficacy of those vaccines was higher than the Sinovac or the Chinese manufactured variants, China, to be fair, has been able to offer the public, goods and the investment vaccines that the education opportunities that US has neglected to do, and I think you see, increasingly in Washington’s or regional policies that they’re looking to make up ground, and that it’s not only about the importance of military partnerships between Washington and Southeast Asia.
And I must say that for Indonesia, for Jakarta, Washington is a much more important strategic military partner than China. They know they have to do more work in infrastructure, in trade, in economics and climate finance to basically compete with China in the region. The US knows that too. And of course, Australia as well.
Gene Tunny 57:50
I think they’re finally woken up to the threat in the region. Or it’s become more apparent with what happened in Solomon Islands, because they sent one of the very senior State Department officials over, didn’t they? To go and visit Honiara, if I remember. Yes, I just remembered, we’ll wrap up soon. But I just remembered when we’re talking about the FDI, the Foreign Direct Investment, we were talking about Bandung before, there was that rail line; they were going to rebuild that line or was it a fast train high-speed rail from Jakarta to Bandung? That’s a Chinese Indonesian Consortium. But now, that’s been thrown into disarray, because the Indonesians are looking at moving the capital away from Jakarta, because apparently, Jakarta is sinking isn’t it? Do you know what’s going on there?
Greta Nabbs-Keller 58:42
Yeah. That’s been really interesting, Gene. As you know, we both worked on infrastructure courses and finance public policy courses that considered the Jakarta bundle high-speed rail. And, in many respects, I think the problem has been at Indonesia and to be fair, rather than China’s. Their huge problems from the start, I think when President Joko Widodo Giancoli turned over the soil; the groundbreaking ceremony, which was a number of years ago, I think even back to around 2017, 2018 If I’m not mistaken. There have been problems from land acquisition problems, these transport infrastructure corridors. They might identify the anticipation; but the land acquisition has not been resolved, which is one of the fundamental impediments to infrastructure projects in Indonesia, more generally.
So, there’s been a range of problems with the Jakarta bundle high-speed rail. Part of it is built, I’m not up with the absolute latest, but I know there have been ongoing challenges which are blown out the timeline for delivery of that infrastructure project.
You mentioned about the move or relocation of the Indonesian capital to East Kalimantan Province, which many people know as Borneo, Kalimantan is Indonesian. Borneo, of course, you have Brunei and the Malaysian states of Sabah and Sarawak in the northern part of Borneo. There’s fundamentally some environmental challenges with Jakarta, it’s a capital that is widely understood to be to be sinking. Anyone who’s been to Jakarta knows that there are infrastructure challenges, some of the basic infrastructure has not been updated since the Dutch colonial times. There’re issues around governance and corruption and things.
So, Jokowi, the infrastructure president has announced and that’s been recently legislated to relocate the capital to East Kalimantan, a very, very ambitious project. And I think there are also benefits and risks, although it’s going to be a smart and Green City. I think there are broad implications for the environment and biodiversity and ecology up there. Whether this will be a white elephant project, Gene, which won’t outlast Joko Widodo’s presidency; we know the presidential elections will be in 2024. Whether this capital, I guess what I would say, if you take the, at a micro scale, the Jakarta bundle high speed rail project and extrapolate that to a much more ambitious infrastructure project in the new capital city, how successful and how protracted and how problematic? Will it be? It remains to be seen?
Gene Tunny 1:01:59
Yeah. One of the things that economists have observed over the years is that any mega project brings big risks of cost blowouts. So, you just see it all the time. I’ll have to cover that on the show in the future. Right oh! Greta, this has been fabulous. I think we’d like to wrap up have picked your brain for nearly an hour. Any. Any final thoughts? Before we wrap up? Anything we should we should have covered?
Greta Nabbs-Keller 1:02:27
No, look, I think you could talk for hours about strategic developments and regional dynamics, Gene, and there’s so much going on at the moment. It’s barely possible to keep abreast of all the developments. So, I’d like to thank you very much for having me today.
Gene Tunny 1:02:46
Oh, pleasure. Where can we find more about your work? Do you publish your work on, is it LowE Institute from time to time or SB?
Greta Nabbs-Keller 1:02:56
Yeah, I publish but it’s on that SB’s blog, the strategist and the Low E Institute for International Policy. The interpreter recently I’ve had some analysis published with the conversation and Australian foreign affairs, AFA on Indonesia and particularly the new government, Albanese governments, Indonesia policy settings.
Gene Tunny 1:03:20
Ah, right. Okay, I forgot to ask about that. I guess it’s early days. So, I’ll put a link to your article in the show notes so people can have a read of that.
Very good. Okay. Dr. Greta Nabbs-Keller, thanks so much for being on the program, really enjoyed it. Thank you. Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to email@example.com And we’ll aim to address them in a future episode. Thanks for listening. Till next week, goodbye.
Thanks to the show’s audio engineer Josh Crotts for his assistance in producing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.
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