China may be planning a different kind of war on Taiwan—one that doesn’t rely on guns and missiles but instead uses economic pressure, cyberattacks, and psychological manipulation to force the island into submission. Recent analysis by the Foundation for Defense of Democracies (FDD) warns that Beijing’s strategy could be to economically strangle Taiwan into surrender without firing a single shot. This is not only a potential disaster for Taiwan but also a major challenge for the United States and its allies who may find themselves struggling to respond.
As tensions have grown between Taiwan and China, the possibility of Beijing using non-military methods to force a takeover is becoming increasingly likely. According to the FDD report, “Modern globalization has created more economic connections that China can exploit to achieve coercive aims,” suggesting that economic warfare might be China’s most strategic option. These tactics could destabilize Taiwan’s society, erode public trust, and force Taipei to make political concessions—all while keeping the international community unsure of how to react.
Economic Tactics: Cutting Off Taiwan’s Lifelines
China’s economic ties to Taiwan are a double-edged sword. While cross-strait trade has enriched both sides, it also gives China a significant amount of leverage over Taiwan. With an estimated one million Taiwanese people living and working in China, the economic connections between the two are deeply entrenched, making Taiwan vulnerable to targeted economic attacks. Experts argue that Beijing could start by banning imports of Taiwanese products or raising tariffs on them, moves that could immediately hit Taiwan’s export-reliant economy hard.
In the simulation conducted by U.S. and Taiwanese experts, Beijing was also found capable of employing more sophisticated measures like freezing cross-strait banking transfers. This move would essentially hold the Taiwanese economy hostage. Imagine the chaos if businesses were unable to process payments across the strait or if Taiwanese investors lost access to their funds held in China. Such moves would not only undermine economic stability but could also erode public confidence in the government’s ability to manage a crisis.
But it doesn’t stop there. China could also manipulate Taiwan’s financial markets by short-selling Taiwanese stocks, spreading panic, and draining investor confidence. As stated in the FDD report, “China could destabilize Taiwan’s financial system to incite social unrest as a precursor to invasion.” This economic coercion would target Taiwan’s resilience, seeking to exhaust the population until they start to see compliance with Beijing’s demands as a way out of the chaos.
Cyberattacks: The Invisible Warfront
Beyond economic measures, China has an even more subtle and potentially more damaging tool at its disposal: cyberattacks. With the digital connections created by globalization, China has an extensive toolkit for targeting Taiwan’s critical infrastructure. Attacks on Taiwan’s energy grid, for instance, could cause blackouts that would cripple industrial operations and disrupt daily life. Cutting fiber optic cables—one of the scenarios considered in the FDD’s simulations—would effectively isolate Taiwan, disrupting communications for businesses and the general public.
A coordinated cyber campaign could extend to Taiwan’s banking and financial systems, causing widespread transaction delays and preventing people from accessing their money. Distributed Denial of Service (DDoS) attacks could bring banking systems to a halt, while ransomware attacks might lock critical financial data, leaving the economy in paralysis. The chaos that would unfold from such coordinated attacks is almost unimaginable—people unable to buy food, businesses unable to operate, and entire sectors shut down.
The report emphasizes that these attacks wouldn’t just be random acts of cyber aggression but carefully planned and executed as part of a broader strategy. “Technological innovation created even more digital connections, offering more possibilities for coercion, including through the targeting of critical infrastructure,” the report states. China could use cyberattacks to cripple Taiwan’s energy and communication networks just enough to create confusion and fear but without crossing the threshold that would prompt a military response from the international community.
Psychological Warfare: Breaking the Will to Resist
Psychological warfare also plays a significant role in China’s strategy against Taiwan. By flooding the information space with disinformation, Beijing could weaken public trust in Taiwan’s government. This could be done through coordinated campaigns on social media, spreading false narratives about government corruption or exaggerated claims about economic instability. Such efforts are meant to sow fear and uncertainty, eroding the population’s faith in their leaders. As Russell Hsiao, executive director of the Global Taiwan Institute, put it, “Beijing has already been ramping up non-military measures against Taiwan, and such efforts are expected to intensify in the coming months and years.”
China could further erode public confidence by using psychological tactics to exploit existing social divisions or create new ones. These measures could include targeted disinformation campaigns aimed at discrediting key public officials or even deepfake videos spreading false information about political leaders. The goal is clear: to create a sense of hopelessness and to make the Taiwanese public feel that resistance is futile.
The pressure China exerts is meant to be insidious. By gradually increasing economic hardship, launching cyberattacks that disrupt daily life, and employing psychological operations that undermine trust in the government, Beijing aims to make Taiwanese citizens weary. In their exhaustion, they may start to see reunification with China—not as a victory for Beijing but as a way to restore stability, peace, and normalcy to their lives.
International Repercussions: A Complex Dilemma for the U.S.
For the United States, Taiwan’s biggest ally, this type of warfare presents a serious challenge. The U.S. has made clear that it would defend Taiwan in the event of a military invasion, but economic warfare and cyberattacks don’t fit neatly into traditional definitions of conflict. They occupy a grey zone that makes it difficult for Washington to justify a military response. President Joe Biden has said he would send troops if China launches an armed attack, but the U.S. government “has yet to formulate a plan to respond to non-military tactics,” giving Beijing flexibility to apply pressure without crossing a red line that would demand direct intervention.
This grey zone warfare poses a major dilemma. Without a clear military incursion, China can effectively undermine Taiwan without triggering the types of international responses that would come with a traditional invasion. The repercussions could be immense—not only for Taiwan but for the broader balance of power in Asia and the world. A weakened Taiwan unable to resist Beijing’s demands would lead to a major shift in regional power dynamics, emboldening China to exert more influence over its neighbors.
The global impact could be profound. Taiwan is a crucial player in the global semiconductor industry, providing essential components for everything from smartphones to advanced military systems. Disruption in Taiwan’s economy and its manufacturing capabilities would send shockwaves through global supply chains, affecting industries worldwide and driving up costs for consumers everywhere.
How This Strategy Could Lead to Taiwan’s Takeover
The ultimate goal for China is clear: reunification with Taiwan. However, Beijing has repeatedly stated that it prefers to achieve this without resorting to war. Chinese President Xi Jinping has promised to make “utmost efforts” to ensure peaceful reunification, but those efforts could very well include a sustained campaign of non-military coercion. By slowly strangling Taiwan’s economy, creating social unrest, and spreading disinformation, China could push the island to the point where resistance seems futile and surrender appears to be the only viable option.
The strategy is not just about creating hardship; it’s about systematically dismantling Taiwan’s resilience. The FDD report describes how “China could destabilize Taiwan’s financial system to incite social unrest as a precursor to invasion.” This means Beijing doesn’t necessarily need a military victory to bring Taiwan under its control—it just needs to make everyday life so unbearable that Taiwanese citizens see unification with China as the lesser of two evils.
Taiwan’s Defense: Building Resilience Against Economic Siege
Faced with these threats, Taiwan’s best defense is resilience. Diversifying its energy imports is a crucial step, as reliance on a single source of energy makes the country highly vulnerable to supply disruptions. Moving Taiwanese businesses away from dependence on the Chinese market is also important. This could involve encouraging firms to open new facilities in other countries or incentivizing them to focus on non-China markets.
Strengthening Taiwan’s cybersecurity defenses is equally vital. Taiwan must invest in securing critical infrastructure like energy grids, financial networks, and communication systems. Partnerships with allies, particularly the United States and Japan, could help bolster these efforts. The U.S. can also play a significant role by creating a playbook of pre-planned responses to Chinese aggression in the economic and cyber domains. This would send a message to Beijing that non-military coercion would be met with coordinated international responses.
The FDD report emphasizes that resilience is key, stating that Taiwan “must strengthen its financial resilience” to withstand economic and psychological attacks. Building resilience is a long-term process—it requires not just government efforts but also coordination across private sectors and civil society. This includes stockpiling critical resources, improving public-private collaboration to secure infrastructure, and investing in counter-disinformation campaigns to keep public trust intact.
A War Without Bullets: The Dark Path Ahead
The potential economic war on Taiwan represents a dark path, where the tools of globalization and technology are turned into weapons of coercion. By waging war without bullets, China hopes to achieve what might otherwise be too costly through conventional warfare—a compliant Taiwan, ready to be absorbed under Beijing’s terms. This strategy doesn’t just threaten Taiwan’s sovereignty; it challenges the very fabric of the global rules-based order, testing the resolve of democracies to stand together against authoritarian aggression.
If successful, China’s non-military conquest of Taiwan could redefine international norms, encouraging other authoritarian regimes to adopt similar methods of economic and cyber coercion. The implications extend far beyond Taiwan, as the world watches how democracies will respond to an attack that doesn’t look like traditional warfare but poses just as great a threat to freedom and stability.
The fight for Taiwan might not involve tanks or soldiers, but it will determine the balance of power in the 21st century. Can the U.S. and the West counter such a move by China?
In 2023, the total trade volume between Taiwan and China reached approximately $267.8 billion, China remains Taiwan’s largest trading partner, making the cross-strait relationship crucial for Taiwan’s economy. On a global scale, Taiwan’s total trade volume in 2021 was nearly $828 billion, with the majority of exports being machinery and electronics, including semiconductors. Taiwan’s trade with Western nations, including the United States and European countries, forms a significant part of this total. A loss of trade with China would have a massive effect on Taiwan’s $780 Billion GDP.
It is not likely that the Biden Administration will have the foresight to protect Taiwan, hopefully whoever is next will see this coming.