Tag: xi jinping

Fraying U.S.-China relations and rising tensions over Taiwan have influential business leaders such as Elon Musk and Warren Buffett sounding alarms about a possible invasion – a matter that will likely loom over the 2024 election.

China is already bound to be a major issue in the U.S. campaign as President Xi Jinping pushes to expand his nation’s power. China’s policy regarding Taiwan, the world’s leader in the semiconductor industry, could end up making it an even bigger focus.

The cross-strait strife has already provoked commentary from some top contenders in the Republican presidential primary race who have stressed the need to deter a possible Chinese invasion invasion of the island. Taiwan is also a topic of discussion during this week’s Group of Seven meeting in Japan, which President Joe Biden is attending.

Xi has made Taiwan “reunification” a focal point of his agenda and Beijing has ramped up hostilities against the island, putting a spotlight on its importance to the global economy and conjuring fears of a major international conflict that could eclipse Russia’s devastating war in Ukraine.

“The official policy of China is that Taiwan should be integrated. One does not need to read between the lines, one can simply read the lines,” Tesla CEO Musk said in an interview Tuesday with CNBC’s David Faber.

“So I think there’s a certain — there’s some inevitability to the situation,” Musk said, adding that it would be bad for “any company in the world.”

Tesla just last month announced plans to open a new factory in Shanghai that will build “Megapack” batteries.

Musk’s remarks came one day after Buffett’s Berkshire Hathaway revealed in a filing that it has completely abandoned its recently acquired stake in Taiwan Semiconductor Manufacturing Co., once worth more than $4 billion. The world’s largest chipmaker, based in Hsinchu, Taiwan, produces the majority of the advanced semiconductors used by top tech companies like Apple, Amazon, Google, Qualcomm and more.

Buffett said in recent weeks that the geopolitical strife over Taiwan was “certainly a consideration” in his decision to offload the shares over the last two fiscal quarters. And in an analyst call earlier this month, Buffett said that while the company was “marvelous,” he had “reevaluated” his position “in the light of certain things that were going on.”

“I feel better about the capital that we’ve got deployed in Japan than Taiwan. And I wish it weren’t so, but I think that’s a reality,” he said.

Meanwhile, Ray Dalio, founder of hedge fund titan Bridgewater Associates, in late April wrote a lengthy post on LinkedIn warning that the U.S. and China were on the “brink of war” — though he specified that that could mean a war of sanctions rather than military might.

The apparent worries from the three members of Forbes’ list of the world’s richest people come “a little late to the party,” Longview Global senior policy analyst Dewardric McNeal said in an interview with CNBC.

“It’s frustrating to me,” McNeal said. “We’ve been talking about this for years, and we’ve also been trying to warn against being overly dependent on China as your source for selling products [and] manufacturing products.”

He also noted that Berkshire Hathaway still holds stock in BYD, an electric car maker based in Shenzhen, China. “Quite frankly, it is advantageous for China to scare investors away from Taiwan and damage or taint that economy, because that is one of the scenarios [in which] that they could bring Taiwan to heel without an armed intervention,” McNeal said.

Buffett’s company has sold more than half the stake in BYD it held as of last year.

“I don’t think an attack is imminent, but that doesn’t mean you shouldn’t be using this time to plan,” McNeal said. “And what I often see is businesses sort of talking beyond the point, hoping — hope is not a strategy — that this won’t happen.”

U.S. intelligence officials have said Xi is pushing China’s military to be ready to seize Taiwan by 2027. China is “likely preparing for a contingency to unify Taiwan with the [People’s Republic of China] by force,” the Pentagon said in 2021.

China asserts Taiwan, a self-governing democracy, is part of its territory. It has pushed to absorb the island under the banner of “one country, two systems,” a status rejected by Taiwan’s government in Taipei.

Beijing in recent years has steadily ramped up its pressure over Taiwan on economic and military fronts. It flexed its might as recently as last month by conducting large combat drills near Taiwan, while vowing to crack down on any hints of Taiwanese independence.

China has not ruled out using force to take control of Taiwan.

Taiwan’s recent interactions with the U.S. have provoked aggressive reactions from China. After then-House Speaker Nancy Pelosi, D-Calif., visited Taipei last summer, China launched missiles over Taiwan and cut off some diplomatic channels with the U.S.

A meeting in California last month between Taiwan’s president, Tsai Ing-wen, and current House Speaker Kevin McCarthy, R-Calif., prompted more threats and fury from Beijing.

Even in a political climate where both major U.S. parties have been critical of China and wary of its encroaching global influence, leaders have tread carefully around the volatile subject of Taiwan. The U.S. has officially recognized a “One China” policy — that Taiwan is a part of the mainland — for more than four decades, and China has vowed to sever diplomatic ties with countries that seek official diplomacy with Taiwan.

While Pelosi spoke of America’s interest in preserving Taiwan’s democracy on her trip to Taipei, she stressed in a Washington Post op-ed at the time that her visit “in no way contradicts the long-standing one-China policy.”

Biden was seen to break with America’s longstanding stance on Taiwan when he said last year that U.S. forces would defend the island if it was attacked by China. The White House, however, maintains the U.S. policy on Taiwan is unchanged.

Meanwhile, U.S. lawmakers at every level have produced an array of legislation seeking to reverse China’s growing influence, some of which has drawn accusations of fearmongering. And some of the potential presidential contenders have already weighed in with calls to meet Chinese aggression with strength.

“Xi clearly wants to take Taiwan at some point,” DeSantis said in an interview with Nikkei while in Japan. “He’s got a certain time horizon. He could be emboldened to maybe shorten that horizon. But I think ultimately what I think China respects is strength,” DeSantis said.

DeSantis had drawn criticism for a previous foray into geopolitics when he described Russia’s war in Ukraine as a “territorial dispute.” His views on U.S. policy toward Taiwan, in contrast, were more vague.

“I think our policy should really be to shape the environment in such a way that really deters them from doing that,” DeSantis said of a potential Chinese invasion of Taiwan. “I think if they think the costs are going to outweigh whatever benefits, then I do think that they would hold off. That should be our goal.”

DeSantis, who is gearing up to formally announce his presidential campaign next week, is seen as former President Donald Trump‘s top rival for the Republican nomination.

Trump said last year that he expected China to invade Taiwan because Beijing is “seeing that our leaders are incompetent,” referring to the Biden administration.

Former Vice President Mike Pence, who says he will make his own decision about running for president by next month, said in April that the U.S. should increase sales of military hardware to Taiwan, “so that the Chinese will have to count the cost before they make any move against that nation.”

In an interview Wednesday on CNBC’s “Squawk Box,” Pence cited the cross-strait tensions as an argument against cutting U.S. military spending.

“At a time when China is literally floating a new battleship every month and continuing military provocations across the Asia-Pacific and Russia’s waging an unprovoked war in Eastern Europe, the last thing we ought to be doing is cutting defense spending,” he said.

Former United Nations Ambassador Nikki Haley, who launched her presidential campaign in February, said in a statement to CNBC, “American resolve matters to China.”

“They are watching what we do in Ukraine. If we abandon our friends in Ukraine, as some want us to do, it will only encourage China to attack our friends in Taiwan,” Haley said.

Some CEOs of America’s biggest banks have said they would pull their business from China if directed to do so following an invasion of Taiwan. But Musk’s characterization of the entangled global economy is no exaggeration — and much of the focus has fallen on TSMC.

“If Taiwan were taken out, we would be like severing our brain, because the world economy will not work without [TSMC] and the chips that come out of Taiwan today,” John Rutledge, chief investment strategist of Safanad, said Wednesday on CNBC’s “Power Lunch” in response to Musk’s comments.

David Sacks, a research fellow at the Council on Foreign Relations, said on CNBC that Apple is in a “very tough position” because the most advanced chips it needs are made in a single building on TSMC’s campus in Taiwan.

The company’s technological edge in the production of semiconductors, which are used in all manner of products from cars to washing machines, has led to it being a potential “single point of failure” for many companies, McNeal said.

But he also noted that the global reliance on TSMC — including by China, which reportedly depends on the company to provide about 70% of the chips needed to fuel its electronics industry — could act as a sort of bulwark against an invasion.

A paper from the Stimson Center on Taiwan’s “Silicon Shield” put a fine point on the issue: “Without a doubt, the first Chinese bomb or rocket that should fall on the island would make the supply chain impact of the COVID pandemic seem like a mere hiccup in comparison.”

There are nevertheless efforts underway to diversify the industry geographically, including through a $40 billion investment to expand TSMC chip production in Arizona.

McNeal said the issue should not solely be centered around TSMC and possible supply chain woes.

“For our Taiwan friends, that message says you don’t give a damn about them, their lives, their safety. You’re only in this for what it means for your bottom line,” he said. “For me personally, that’s not a message that I want to send.”

— CNBC’s Amanda Macias and Michael Bloom contributed to this report.

Disclosure: Dewardric McNeal is a CNBC contributor.