(EST PUB DATE) CHINA-TAIWAN: PROSPECTS FOR CROSS-STRAIT RELATIONS

• Document Type: FOIA
• Keywords: TAIWAN
• Keywords: CHINA
• Keywords: NORTHEAST ASIA
• Keywords: CROSS STRAIT RELATIONS
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0000675791
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 34
• Document Creation Date: June 24, 2015
• Document Release Date: February 22, 2011
• Case Number: F-2010-00738
• Publication Date: September 1, 1999

Se'ret
LChina-Taiwan: Prospects for
Cross-Strait Relations
APPROVED FOR RELEASE^ DATE:
02-07-2011
Secret
NIE99Y3
September 1999
Copy 0 6 4S
 LChina-Taiwan: Prospects for
Cross-Strait Relations
This Estimate was approved for publication by the
National Foreign Intelligence Board under the
authority of the Director of Central Intelligence.
Prepared under the direction of Robert Sutter,
National Intelligence Officer for East Asia. Inquiries
may be directed to the NIO
Je~ei
September 1999
 S ret
This, National Intelligence Estimate (NIE) was requested by the Depart-
merit of State and Pacific Command. It discusses how relations between
Chia and Taiwan will develop in the next three years-toward greater ten-
sio and hostility or toward cooperation and accommodation? We selected
this time frame because it encompasses the presidential election in Taiwan
in arch 2000, the US change of administration in January 2001, and a
new Party Congress in China that should be held in 200
The key assumptions, which we will hold constant throughout the period of
is stimate, include:
ither side experiences fundamental change in its political system or)
m jor domestic upheaval. ____j
(-I
re ion will not change radically.
The ross-Strait military balance has been examined in other Intelligence
o munity studies, particularly NIE 98-05, (S NF) China's Conventional
Mill ary Forces: Current Status and Future Capabilities (1998-2008), June
199& Consequently, we will focus primarily on the strategic political and
econ~?mic factors of cross-Strait relations, noting the military factors when
relev nt to this analysis. Later this year we will publish a National Intelli-
gencr Estimate on China's Strategic Priorities and Behavior FI
In the text when we use the term "China," we are referring specifically to
the People's Republic of China (PRC). When we use the term "Taiwan,"
we ae referring to the authorities on Taiwan, who prefer the term "Repub-
i Sec
September 1999
 S ret
[n assessing the objectives and perceptions of both Beijin and Taipei, we
have used a variety of reporting.
The available information provides a strong evidentiary hasp fnr nnr rnn
Se ret ii
Sep tuber 1999
 Contents
Page
Scope Note i
Key Judgments
v
1
What China Wants I
What Taiwan Wants
2
Divergent Views 3
The View From Beijing
The View From Taipei
Key Drivers
Internal Politics
Desire for Legitimacy and Respect
Legacy
Respective Military Priorities
Perceptions and Expectations of the United States
Regional Factors
The Potential for Conflict 10
Beijing's Options
12
_
Factors That Could Ease Tensionsn 13
Economic Interaction 13
Shifts in Other Key Drivers
Bottom Line n
Timelines
What if We Are Wrong
13
15
 E3
Taiwan ends the "state of rebellion," recognizing that the PRC government controls the mainland.
L A-_uaugc luwIUanon 1.1 J') representing latwan tn,
Strait (ARATS) representing China hold talks in Hong K
SEF leader Koo Chen-fu and ARATS head Wang Daohan meet in Singapore; talks emphasize functional,
not political, issues.
United States issues visa to Lee Teng hui to:accept lr ? ,
Beijing suspends cross 'trait dialogue.,
PRC conducts mtlitary"exercises includtng ballistic m>. aria t
adjacenf to
0
PRC conducts more military exercises, including ballistic missile tests; US carrier battle groups deploys to
Taiwan area; Lee wins Taiwan presidential election.
Beijing proposes political talks under "one China" principle.
During Sirio US Summit, President Clinton urges resumption gf Cross-strait talks
In back-to-back interviews, Lee Teng-hui tells the New York lInies and Washington Post that Taiwan is an
President Clinton visits China; issues declaration upholding "three no's" in US-Taiwan relations.
Koo Chen-fu visits China. "Four-Point Consensus" issued.
SEF-ARATS meeting in Beijing to discuss Wang prospective visit.
Lee Teng-hui during interview says China-Taiwan relations should be "state-to-state".
Taiwan Kuomintang, Congress.
President.Cli
nton meeting with President Jiang at APEC summit.
China October 1 National Day; 50th anniversary military parade scheduled::
Macao reverts to China.
China National Party Congress scheduled, Jiang may step down as CCP General Secretary.
 Key Judgments
China-Taiwan: Prospects for
Cross-Strait Relations
The most likely outcome in cross-Strait relations over the next three years
is a dynamic and tense environment. Tension is likely to remain high or
rise, and rising tension increases the chances of military incidents..
} We judge that, over the period of this Estimate, chances are better than even
tat t China will conduct a major military exercise near Taiwan as it did in
January-March 1996. Also, chances are better than even that there will be
small-scale incidents between the military forces of China and Taiwan
ranging from an accidental air incident to the siezure by Beijing of a lightly
manned offshore island. We judge chances are very low, however, that
Beijing will actually follow through with large-scale combat operations,
such as invading Taiwan or a heavily defended offshore island, conducting
missile attacks against targets on Taiwan, or blockading Taiwan with air or
naval force
Fe assess chances of major sustained conflict are low because-
?LA full-scale military assault presents formidable materiel and human
costs with a large risk of failure for China.
? Pomestic factors on both sides will contribute to a tense atmosphere but
also will bound the risk each side is willing to take to gain its objectives.
Taiwan's new leaders will try to avoid antagonizing China to the point it
would disrupt Taiwan's economy and stability. To avoid arousing criti-
cism within the Politburo, Chinese leaders will appear firm in dealing
with Taiwan, but they will be wary of bold moves that could backfire and
play into the hands of political opponent]
? China's perceptions of international actors-notably the power and influ-
ence of the United States-will constrain China's behavior.(
IW:e see prospects as likely for generally increasing tension because
? China sees trends on Taiwan as unfavorable and is concerned that time
will run out on its reunification objectives. China will be inclined to
 Sec et
r;ntinually weigh coercion as well as military ower as principal means
of dealing with separatist sentiment in Taiwan.
? Taiwan will continue to press its desire for increased international status
and freedom of action from China. The controversy that erupted over Lee
Teng-hui's assertion of a "special stateto state relationship" with the
mainland illustrates Taiwan's approach n
Key Drivers
LWe assess key drivers that will determine relations across the Strait will
include
nternal Politics
Taiwan is a hot-button issue within the Chinese leadership and leaders
Icannot afford to appear "soft" on Taiwan. Leaders on Taiwan would risk
loss of popular support if they were perceived as jeopardizing Taiwan's
security.
Legitimacy and Respect
Beijing perceives the Taiwan issue as an internal matter and expects the
international community to accede to its wishes on Taiwan and adhere to
"one-China" policies (that most countries have formally accepted) because
it is an emerging great power that deserves status, respect, and, on the ques-
tion of Taiwan, deference. Taiwan perceives it should have international
legitimacy because it is a democracy with economic power.
Legacy
Leaders on both sides of the Strait perceive their personal legacies will be)
enhanced if they can make progress on dealing with the other side. But
their key objectives are incompatible.
Perceptions and Expectations of the United States
US policies are significant to the attitudes of both sides. China sees Wash-
ngton as encouraging Taiwan's separatist stance but also calculates that it
an restrain US actions in support of Taiwan. Taiwan perceives it has
trong support in the US Congress and media for its objectives. Both sides
will increase efforts to test the current or a new administration in Washing
on-Beijing by pressing the United States on arms sales, Taiwan by look
ng for additional security guarantees.
Secret vi
 NOU-13-2001 10:10 WHS-DFOISR P.01
 Concerns for the United States
In the situation of worsening ten
sions, we have identified potential
responses to crisis by China including restraint, saber rattling, and punish-
Exercise Restraint
I Military measures range from returning to normal military deployments
along the Strait to conducting small-scale, Taiwan-focused exercises on the
Strait. Diplomatic activity would range from toning down rhetoric against
Taiwan's leaders and maintaining longstanding efforts to limit Taiwan's
international activity. Economic measures would include encouraging Tai-
wan to resume the "three links."
ment of Taiwa
Military measures would range from large-scale force deployments oppo-
site Taiwan to deploying an out-of-area ground, airborne force to Fujian
province (opposite Taiwan). Diplomatic measures would range from can-
celing talks between cross-Strait negotiators to public hints at the need for
a reunification timetable. Economic measures range from warning other
countries of economic consequences of continued engagement with Taiwan
to closing the Strait to shipping with lengthy military exercises.
military action is impending to blockading a key Taiwan port.
Punish Taiwan
Military measures range from bombarding a Taiwan-occupied island to
seizing such an island. Diplomatic measures would include demanding an i
immediate cessation of US arms sales to Taiwan. Economic measures
would range from spreading rumors in the Taiwan business community that,
LLated above.
China could attempt to blockade or invade Taiwan, but Beijing recognizes
this would risk war with the United States. In our judgment, such a war is
highly unlikely during the period of this Estimate because of the reasons
political interaction.
Movement Toward Reconciliation -~~
Less likely, we assess, is a situation in which the various drivers interact to
bring about an amelioration of tensions across the Strait. For example, eco-
nomic interaction is seen by both sides as important, and economic interde-
pendence could create more favorable conditions for political and military
restraint. Also, the desire for legacy could cause leaders on both sides of
the Strait to resume unofficial talks, hold secret talks, or even less likely,
hold a summit to make progress on outstanding differences. In this
outcome, China most likely would reduce its reliance on the military option
and seek to engage Taiwan increasingly through economic, social, and
ix
Reverse Blank
 Discussion
China-Taiwan: Prospects for
Cross-Strait Relations I
Taiwan President Lee Teng-hui's 9 July 1999
declaration that cross-Strait ties are a "special
state-to-state relationship" and Beijing's sharp
verbal reaction-combined with the thus-far
small-scale military posturing across the
Strait-is the latest in a series of moves and
countermoves across the Taiwan Strait ongoing
since 1991 (see inset ). In our view, Lee's state-
ment was as much designed for Taiwan's com-
ing presidential election as for cross-Strait or
international effect. Beijing has interpreted his
statement as a further push for Taiwan's inde-
pendence and has reacted vehemently. The
ensuing crisis could worsen, especially if
Beijing feels compelled to resort to greater mil-
itary pressure to persuade Taiwan leaders to
moderate Lee's statement and to influence Tai-
wan's March 2000 presidential election. II
A key issue for the United States is whether
tensions can be contained in cross-Strait rela-
tions, or whether they will move toward mili-
tary conflict. US interests also would be
affected favorably by a shift toward accommo-
dation, which we see as much less likel
LWhat China Wants
The PRC's long-term objective is reunification.
Within the time frame of this Estimate,
Beijing's goal will be to prevent further
Taiwan steps toward permanent separation
Using Deng Xiaoping's "One Country, Two
Systems" formula, Beijing states that Taipei
can have a high degree of autonomy but must
recognize it is part of "one China." Beijing's
vision of a unified China, however, is not clear.
China tends to identify more clearly that which
it will not tolerate-for example, a Taiwan for-
mal declaration of independence-than pre-
cisely what Beijing wants.
China's strategic objective stems directly from
its perceived "century of humiliation," wherein
superior powers-Western countries and
Japan-carved out spheres of influence and
controlled much of China's economy, politics,
and social affairs. Territorial unification
became a symbol of the Chinese revolution for
both nationalists and communists. Today, the
Chinese Communist Party sees its own legiti-
macy as entwined with its ability to show
progress toward the goal of reunifying Taiwan
with the mainland. Taiwan's status also is a
deeply emotional issue for many Chinese lead-
ers and citizens
yond this, China perceives Taiwan as a secu-
rity problem. Chinese officials fear that Taiwan
might develop closer military cooperation with
a foreign military power such as the United
States or Japan. Some Chinese officials have
stated, for example, that Japan could cooperate
with Taiwan in posing a barrier to China's
regional and global influence. Some Chinese
leaders point to the military alliance between
Taiwan (the ROC) and the United States prioJ
1 \Sret
 :to the normalization of US-China relations on 1
January 1979.' The PRC also wants to elimi-
nate Taiwan as a base for subver ' n in case of
domestic turmoil on the mainland.
Tie assess Beijing over the next three years
will
? dry to limit US support for Taiwan, particu-
larly by pressuring Washington tease, or at
least reduce, arms sales to Taipei. 1
Continue to seek to undercut Taiwan's inter-
national standing by competing with Taipei
for diplomatic recognition, seeking to reduce
even further the small number of states that
recognize Taiwan as a legitimate govern-
ment2. China's approach was clearly manifest
when in February it vetoed a UN Security
Council resolution continuing UN peace-
keeping forces in Macedonia because the
Macedonian Government established diplo-
matic relations with Taiwan
?LBeijing perceives that such US support
encourages the island to assert its de jure
independence; by eroding US support, China
thereby hopes to reduce the potential for Tai-
wan to move toward ermanent separation
from the mainland.! FI
Oppose Taiwan's membership in interna-
tional bodies in which statehood is required,
including the United Nations, and try to~
' As part of normalizing relations with China, the United
States not only ended its official diplomatic relations with Tai-
wan, but also gave the one-year notice required that it was can-
celing the 1954 Mutual Defense Treaty and ending the official
US military presence on Taiwan.0
2 Taiwan has formal diplomatic relations with 28 countries,
mostly small countries in Central America, Africa, the Carib-
bean, and South Pacific. Taiwan's most significant formal rela-
tions-are with Panama. Taiwan has representative offices in 63
countries with which it does not have formal diplomatic
relations.n
t srircumscribe the amount of influence Taiwan
has in otganizations in which it is a nonstate
member
I
tinue to insist on the "three links" (direct
shipping, communications, and air transpor-
tation) with Taiwan as steps toward political
reunification.3 China's leaders also will
encourage rapidly growing economic ties to
Taiwan as both a source of growth and
employment in China and as a means of
developing a constituency in Taiwan favor-
able to reunification. Beijing also insists that
the reunification process begin with "political
talks to end the state of hostilities," in addi-
tion to the "technical" confidence-building
talks between unofficial representatives that
have proceeded off and on since 1992]
-[Use rhetoric, political, and military actions
to seek to move Taiwan leaders and voters
away from taking steps toward greater
independenc]
What Taiwan Wants
Taiwan's principal objective is to determine its
own future, with future options including de
jure independence, or, alternatively, some type
of formal accommodation with China. Taipei
wants to make these decisions on its own with-
out bowing to pressure from China or others.
For the period of this estimate, we assess Tai-
wan will continue to try to maximize its free-
dom of action while benefiting economically
from growing cross-Strait trade and investment.
Taiwan wants to avoid acceptance of the PRC's
concept of "one China" and h offered its own
framework for cross-Strait ties
3 The "three links" were originally proposed by China in 1979
after its normalization of relations with the United States)
 Mina-Taiwan: Divergent Views
on Cross-Strait Relations
China's View
Both sides should adhere to the principle of
"one China."
Taiwan is part of China. China's territory
and sovereignty cannot be separated.
China should be unified under the formula of
"one country, two systems."
Two sides should negotiate peaceful reunifi-
cation step by step beginning with political
talks on cessation of hostilities.
Prefers peaceful reunification but will not
renounce right to use force.
Divergent Views
We assess Taiwan, in pursuit of its strategic
objective will: /
? 'Continue to promote its international identity.
;_.
Besides competing with Beijing for diplo-
matic recognition in developing countries,
Taiwan will use "pragmatic diplomacy" to
seek to enhance ties to the United States,
Japan, European, and other developed coun-
tries. Taiwan will view responsible participa-
tion in the international community as
strengthening its case]
Taiwan's Viewu
There is no "one-China " now.
Taiwan and the mainland are separate and
equal "states."
Unification could come gradually after polit-
ical democratization and economic reform
on the mainland. .
Substantive discussions to improve cultural,
trade, and economic ties are mutually benefi-
cial. Political talks are acceptable if China
accepts Taiwan's "state-to-state " formula.
Mainland must reciprocate Taiwan's 1991
renunciation of force.
-Take into account-while trying to shape-
popular opinion in the formulation of its
objectives. As an emergent democracy, Tai-
wan's leaders are heavily influenced by pub-
lic attitudes, and polls suggest that Taiwan's
people do not favor either unification with the
mainland or a formal declaration of indepen-
dence that would bring down the wrath of
Beijing. Public opinion strongly supported
Lee's assertion that Taiwan's political status
was equal to that of China, but the Taiwan
public remains highly sensitive to threats to
prosperity and stability ^
Sec~sk
 [The View From Beijing
China on balance sees political and social
trends as unfavorable to achieving its objectives
as Taiwan remains separate, and shared bonds
gradually dissolve. Taiwan's democratic evolu-
tion has strengthened Taiwan's de facto inde-
pendence, particularly as Lee Teng-hui has
asserted Taiwan's status
(eijing is particularly concerned that the
United States supports Taiwan's continued sep-
aration from the mainland, as is evidenced by
political and military support, including arms
sales to Taiwan. China, for example, has vocif-
erously decried Theater Missile Defense
(TMD) for Taiwan, especially because Beijing
recognizes the political implications of TMD.
Wang Daohan, former Mayor of Shanghai and
China's chief ne otiator with Taiwan's repre-
sentatives, told a ]delegation that
TMD "would completely change the strategic
equation between the United States, China, and
Taiwan." Similarly, Chinese officials have
observed that China could handle the military
challenge of TMD by building more missiles,
but that TMD would nevertheless weaken the
deterrent that China's missile threat poses to
Taiwan's international activities. Other infor-
mation indicates that China intends to mount an
all-out diplomatic offensive aga' s t TMD, spe-
cifically TMD involving Taiwan.
Despite unfavorable trends, however, Beijing
does perceive that it has been able to arrest to
some degree Taiwan's path to independence.
? Chinese leaders believe the 1996 missile tests
discredited the platform of the Democratic
Progressive Party, which supported an inde-
pendent Taiwan, and that the numbers of
those on Taiwan who advocate a declaration
of de jure independence have declined
?CChina sees its military buildup opposite Tai-
wan as restraining calls for independence on
the island
? (.China has been able to block Taiwan's
attempts to gain formal international recogni-
tion. China was heartened by President Clin-
ton's statement in Shanghai in June 1998 that
the United States would adhere to "three
no's" (no support for Taiwan independence,
no support for one China/one Taiwan, and no
support for Taiwan representation in interna-
tional bodies where state membership is
required) in dealing with Taiwan. China also
reacted favorably to US statements and diplo-
matic efforts reaffirming a one-China policy
after Lee's 9 July statement.
-[Beijing also is pleased with the expansion of
trade and investment across the Strait; Chi-
nese officials believe greater economic inter-
dependence builds a sympathetic
constituency for reunification on Taiwan. fl
(Beijing nevertheless believes its efforts are only
a holding action. Such efforts have constrained
Taiwan's freedom of action, but its sense of a
separate identity grows and its appeals for US
support persist. And, in this view, time is not on
China's side. China's power and influence are
limited, which undermines its ability to achieve
its objectives. Thus, a challenge for Beijing is
to come up with a e effective means of
reaching its goas 7
he View From Taipei
Taiwan's view, as compared to that of China, is
somewhat more optimistic. Taiwan believes
that it has healthy security relations with th
United States and that problems in US-China
Srret 4
 SNP t
relations generally work to Taiwan's advantage
(although Taipei also says that a sharp down-
turn in US-China relations is not good for Tai-
wan because that leads Beijing to harden its
approach to Taiwan). Taiwan also perceives
that its international standing, even in the
absence of formal recognition, is relatively
good
[Internal Politics
No Chinese leader can afford to appear to be
"soft" on the Taiwan question. In the early
1980s, Deng himself came under criticism for
suggesting that Taiwan could be put on the
back burner while China improved relations
with the United States. In the era of no para-
mount leader, Chinese officials must be even
more cautious about any statement that would
lead to criticism and open the door to attacks
from political opponents
still, in Taipei's view, not all trends are favor-
able. Taiwan relies heavily on the United States
but perceives that on important issues, the
United States will side with China against Tai-
wan's interests. Taiwan also recognizes that
Beijing has been able to restrict its international
presence. Taipei knows that it is vulnerable to
punitive PRC missile attacks and that the long-
term military balance is unfavorable, with
much of Beijing's military modernization
aimed atoreeppanng to deal with Taiwan crisis
scenarios.
Key Driversu
U We assess several key drivers will interact in
various ways to produce different dynamics in
cross-Strait relations over the next three years
but primaril will interact to sustain or increase
tension
of the Taiwan issue, there is little divergence
of opinion on the need for progress toward
reunification-1
C On Taiwan, where leaders are democratically
e ected, there is little support for reunification
with the PRC. Rather, polls show strong sup-
port for maintaining Taiwan's current status in
the face of Chinese pressure. Consequently, any
leader who pushed hard for reunification proba-
bly would be defeated in an election. Neverthe-
less, no leader wants to aggravate Beijing to the
point that China decides to strike with military
force. In sum, this key driver is likely to null
China and Taiwan in opposite directions
`Desire for Legitimacy and Respect
Beijing sees itself as an emerging great power
in and a legitimate member of the international
system. It is developing its economy, political
influence, and military capabilities. A perma-
nent member of the UN Security Council,]
 L China deems it deserves status, respect, and,
in the case of Taiwan, deference. Perceived
attempts by Taiwan to separate itself from
China are seen as causing a "loss of face" for
China, a threat to China's sovereignty, and a
possible precedent for other regions of China.
China's leaders will respond accordingly. For
example, China insists that Taiwan not enter the
World Trade Organization before China does.
Meanwhile, Taiwan has achieved democracy
and economic prominence and believes it
is equally entitled to legitimacy in the )
\nternational community. Taiwan declares that
it must be treated as an equal by China and that
it will never consider reunification until China
democratizes. Leaders in Taipei call attention
to Beijing's lack of respect for human rights
while pointing to themselves as responsible
members of world societp
Legacy
Top leaders of both China and Taiwan
see "progress" in their respective views of
the Taiwan question as enhancing their
Secret 6
 NOU-13-2001 10:12 WHS-DFOISR r'Ue
 Esonai reputations. Both incumbent presi-
dents have offered proposals for dealing with
the situation across the Strait. Jiang presented
an eight point proposal in 1995 and Lee
responded with a six- oint r al shortly
thereafter
Jiang probably calculates that his legitimacy
and stature will be best served by making
progress toward the goal of reunification while
trying to avoid major conflict. Lee, however,
sees his legacy as requiring an enhancement of
Taiwan's status. Both want to avoid war, but
beyond that their goals are mutually incompati-
ble. Although Lee will step down as Taiwan's
president, he will remain head of the ruling
KMT. KMT candidates probably will be reluc-
tant to directly challenge Lee's personal legacy;
furthermore, any Taiwan leader may have diffi-
culty taking back some of Lee's declarations
and positions as China has demanded. ^
Respective Military Priorities
eijing has been building its military capabili-
ties for scenarios of conflict on Taiwan. The
Intelligence Community has assessed that
Beijing has begun a long-range program to
develop forces that, in a Taiwan crisis, would
be able to deter or delay US military forces if
US intervention seems likely or inflict losses if
US intervention actually occurs.4 In the
interim, Beijing will use its military capabilities
to intimidate Taiwan, which will maintain a
state of tension across the Strait.
.Taiwan, meanwhile, with US support, has been
building its forces to complicate Beijing's plan-
ning. Taiwan also will conduct modest training,
NIE 98-05, China's Conventional Military Forces: Curre tt
Status and Future Capabilities (1998-2008) of June 1998
ned for political impact that probably will
contribute to tension.
Perceptions and Expectations of the
United States
US policies are significant to the attitudes of
both sides. The perceptions and expectations of
the United States by both China and Taiwan are
likely to continue to contribute to tension
across the Strait. Both expend great efforts to
influence opinion in the United States and are
seeking advantage in the coming US election.
China, on one hand, sees Washington as sup-
porting Taiwan's indefinite separation, includ-
ing through the supply of arms; on the other
hand, China believes it can alternatively
threaten and cajole the United States on the Tai-
wan issue. Taiwan knows that it has strong sup-
port in the US Congress and media and that it
has been effective in exerting influence on the
United States to provide political and military
support. Both sides will try to get at each other
through the United States. For example, Lee
Teng-hui issued his "state-to-state" comments
in part because he believed that the low state of
US-China relations following the bombing of
the Chinese Embassy in Belgrade offered an
opportunity
'Both sides will increase efforts to test the cur-
rent or a new administration in Washington.
Taiwan, for example, could press for US legis-
lation similar to the Taiwan Security Enhance-
ment Act to strengthen its position vis-a-vis
Beijing. Beijing could demand additional con-
cessions by the United States on arms sales.
S\ret
 Regional Factors
any PRC officials believe Japan secretly
plans to expand its influence on Taiwan, and
Beijing will be wary of Japan's approach to the
island. Beijing sees Japan's cooperation with
Washington in the defense guidelines as an ele-
ment of Tokyo's designs. China repeatedly
warns that such US-Japan cooperation will pro-
duce instability in the region.
Moreover, the situation on the Korean Penin-
sula will affect cross-Strait relations. North
Korea's policies are likely to continue to cause
the United States and Japan to worry about
instability in the region and heighten defense
cooperation, including over a regional TMD.
This situation will heighten China's anxieties
about the implications for Taiwan
hina hopes to use Hong Kong as a model of
success in its "one country, two systems" for-
mula. Taipei will point to problems in Hong
Kong as reasons why it should not accept
Beijing's enticements
)The Potential for Conflict
jThe most likely outcome in cross-Strait rela-
tions over the next three years is a dynamic and
tense environment. Tension is likely to remain
high or rise,land rising tension increases the
chances of military incidents. Also, Beijing
could posture for large-scale military opera-
tions in an attempt to intimidate Taiwan.
[We judge that, over the period of this Estimate,
chances are better than even that China will
conduct a major military exercise near Taiwan
as Beijing did in March 1996. Also, chances
are better than evenithat there will be small-
scale incidents between the military forces of
China and Taiwan. We judge chances are very
low, however, that Beijing will actually follow
through with large-scale combat operations,
such as invading Taiwan or a heavily defended
offshore island, conducting missile attacks
against targets on Taiwan, or blockading the
island with air or naval forces. 7
hina has the capability to conduct large
.scale combat operations, but we think the
chances are very low because Beijing knows
such operations would not necessarily be suc-
cessful in achieving its objectives. Such oper-
ations probably would be counterproductive
because they would be costly in casualties,
could destroy Beijing's regional economic
interests, and could invite third-party
intervention.-
pertain circumstances will cause the key driv-
ers to increase tensions leading to incidents of
armed clashes short of win
'Shifts in Internal Politics. To counter domestic
instability in China, especially if caused by
economic deterioration, Beijing could provoke
a wave of nationalism leading to an even harder
line toward Taiwan. Or, in the case of Taiwan,
friction among rival political parties could
cause a leader to calculate that he can gain pop-
ular support by emphasizing Taiwan's separate
status.
 Chinese CSS-6 and CSS-7 Mobile Missile Series
Launchsite Coverage of Taiwan)
Hong Kong
n, S. A. R.
//China
i r SS-6 brigade HQ
Taiwan
A Existing MADS
A Projected MADS
Potential CSS-6 and CSS-X-7
Mod 2 launch zone within 530 km-
of Taipei and Kao-hsiung. /
Province boundary
0 100 Kilometers
JIANGXI
East China
Sea
East China
Sea
Potential CSS-X-7 Mod 1
launch zone within 350 km
of Taipei and Kao-hsiung.
A Chi-lung
ATai~ei
o
L
'T'ai-chung
/ 0 Taiwan
po Q Philippine
PESCADORES Chia-i
?~ 0
Kao-hsiung 4 A
 Stcret
Escalating the Desire for Legitimacy and
Respect. Following the reversion of Macao,
China could decide to press more vigorously on
Taiwan by tightening the diplomatic noose.
China could warn small countries that have
relations with Taiwan that they will suffer con-
sequences in the future, such as loss of trade or
political retribution in the UN. Or, Taiwan
cou I Id issue new statements that infuriate Chin
IMisconstruing US Intentions. China could
misconstrue US statements criticizing Taiwan's
policies as a lack of will to defend Taiwan from
attack. Conversely, Taiwan could misconstrue
pro-Taiwan/anti-Beijing statements
as tacit support for moves
toward de jure independence.
Regional Problems. Several situations would
exacerbate tensions across the Strait, includin
deterioration on the Korean Peninsula
or a decision by
Japan to upgrade ties to Taiwan.
Beijing's Options
In tense cross-Strait relations, Beijing has sev-
eral options
many of which would be
worrisome for the United States:
? Exercise Restraint. Military measures range
rom returning to normal military deploy-
ments along the Strait to conducting small-
scale Taiwan-focused exercises on the Strait.
Diplomatic activity would range from toning
down rhetoric against Taiwan's leaders and
maintaining longstanding efforts to limit
Taiwan's international activity. Economic
measures would include encouraging Taiwan
to negotiate the "three-links."
1
kcret
`Red Lines"
China has established certain "red lines,"
tat if Taiwan crosses, will cause a signifi-
cant change in policy from peaceful reuni-
fication to use of force. These red lines are
general in nature and Beijing's use of
force is likely to vary depending upon the
situation. Amo g the "red lines" cited by
Beijing include:
?~A4 Taiwan formal declaration of indepen-
dence, or Taiwan's holding a referendum
or modifying its Constitution to establish
independence.
,.Eoreign support for proindependence
?1
forces in Taiwan.
?Laiwan's development of nuclear weap-
ons together with a delivery system
capable of threatening the mainlan(
?LWidespread social instability or unrest
on the island
WWe believe that at some point Chinese
leaders would perceive Taiwan participa-
tion in a US-sponsored TMD program as
`foreign intervention in China's internal
affairs." This could become a "red line"
issue that would elicit a military reaction,
 *Rattle its Saber. Military measures would
range from large-scale force deployments
opposite Taiwan to deploying an out-of-area
ground, airborne force to Fujian province
(adjacent to Taiwan). Diplomatic measures
would range from canceling talks between
cross-Strait negotiators to public hints at the
need for a reunification timetable. Economic
measures range from warning other countries
of economic consequences of continued
engagement with Taiwan to closing the Strait
to shipping with lengthy military exercises. 7
?~unish Taiwan. Military measures range
from bombarding a Taiwan-occupied island
to seizing such an island. Diplomatic mea-
sures would include demanding an immediate
cessation of US arms sales to Taiwan. Eco-
nomic measures would range from spreading
rumors in the Taiwan business community
that military action i imp ending to blockad-
ing a key Taiwan port.
china could attempt to blockade or invade Tai-
wan, which Beijing recognizes would risk war
with the United States. In our judgment, such a
war is highly unlikely during the period of this
Estimate because of the reasons stated above.
n
Factors That Could Ease Tensions
Although less likely in our view, several drivers
could interact to bring about an amelioration of
tensions across the StraiiTT
Economic Interaction
economic interaction between China and
Taiwan has been impressive (see chart, page
22). According to Chinese statistics, total trade
has grown to $20 billion annually. More than
14~0,000 Taiwan businessmen have invested in
the mainland, amounting to about 20 percent of
outside investment. Taiwan data indicate that
the PRC is Taiwan's third-largest trading part-
ner and 42 percent of Taiwan's overseas invest-
ment is in China.L i
China sees the investment not only as important
or developing its economy but also for facili-
tating integration between the two entities and
building a constituency for reunification on the
island. Taiwan's view is more mixed. Taiwan
officials stated that, if the PRC share of total
Taiwan overseas investment rises above 60 per-
cent, the PRC would use this dependence to
squeeze Taiwan at the negotiating table. At the
same time, many Taiwan officials see the
island's prosperity resting heavily on cl r
economic interchange with the mainland.
Although we recognize the possibility of eco-
nomic friction, on balance we judge economic
factors will be a force for moderation. Taiwan
will continue to place restrictions on cross-
Strait economic flows, but Taiwan businesses
probably will continue to channel money indi-
rectly to the mainland through offshore banks.
Meanwhile, China will try to pro to reater
trade and investment from Taiwan
Shifts in Other Key Drivers
We assess changes could occur in other key
drivers that would move China and Taiwan
toward greater accommodation
Following Taiwan's presidential election in
arch 2000, domestic politics on both sides
could shift. A new Taiwan leader could soften
Taiwan's approach by agreeing to negotiate
the three links. Beijing could calculate that a
 Despite, a strained political relationship,Taiwan investment continued to flow into
... whcross-strait trade registered its first drop in more than five years.
1.3
199;3 `' , 94.
 after line toward Taiwan was in its interests.
Leaders on both sides could conclude that
resuming ARATS-SEF contacts would
improve communications, confidence, and
predictability between China and Taiwan.
Although we think it unlikely, leaders could
hold secret talks, or, even less likely, agree to
a summit meeting to try to ease tensions.
? 'e two sides could conclude that economic
interest warrant a reduction of military
tensions
?Ereater stability in US-China relations could
improve cross-Strait ties as well. Beijing's
fear that Washington was secretly fostering_
an independent Taiwan probably would ease.
J,,.On balance, we assess that the key drivers are
more likely to combine to sustain and exacer-
bate a tense atmosphere across the Strait.
Important constraints-notably US and inter-
national support for regional stability-will act
against a major conflict, but provocative tactics
and greater use of military signaling will
heighten the prospects for accidental or inten-
tional armed clasheJLI
We doubt that the PRC has set a deadline for
achieving reunification. Nor has it devised a
timetable with specific accomplishments along
the way. Nevertheless, a variety of reporting
indicates that Beijing has become more anxious
about achievin concrete progress toward
reunification
We, assess that Beijing's sense of urgency will
be influenced by China's broader strategic per-
ception of how well it is faring in other key
objectives. Economic growth, greater stability
in US-China relations, international reputation,
and political stability are of importance to
China's leaders, and progress on Taiwan will be
viewed in this context. Chinese gains in these
other areas may cause Beijing to decide that it
has more time to deal with the Taiwan issue.
Taiwan has no timeline, but intends to preserve
its options. Nevertheless, the Presidential elec-
tion next year could produce a departure from
Taiwan's present approach. Although Lee's
preferred successor, Vice President Lien Chan,
is unlikely to deviate significantly from Tai-
wan's present course, other potential succes-
sors, notably former Taiwan governor James
Soong, have raised other options. Soong, for
example, reportedly has discussed the possibil-
ity of moving more directly to negotiate with
China on the three links
What if We Are Wrong?
Our overall view is based on two assumptions:
no fundamental political upheaval in China or
Taiwan and no change in US global superpower
status or alliance structure in the region. Major
political upheaval in China is the more proba-
ble of the assumptions to come under chal-
lenge. Although highly unlikely, China's
twentieth century history suggests significant
political change cannot be ruled out. Over the
next three years, serious economic problems,
combined with a leadership succession crisis in
Beijing, could lead to a popular uprising or a
change in regime. A new, more nationalistic
regime could define Taiwan's liberation a , the
cornerstone of its legitimacy. Such a regime
 et
Outlook Beyond Three Yearr
'he dynamic situation across the Strait over
the next three years, including presidential
change in Taiwan, China, and the United
States, precludes effective estimating about
likely outcomes beyond this time frame. Nev-
ertheless, the Intelligence Community agrees
that some of the trends discussed in this Esti-
mate are likely to persist well beyond
three years covered by his Estimat
r_
Such factors as nationalism, demographics,
face, and the personalities of leaders will
continue to influence developments across
the Strait, as will the perceptions of both
sides that they are entitled to international
recognition and suppor~t.
j We agree that economic links will continue
well beyond three years. We note that even
during past periods of crisis these links have
not diminished. We are uncertain that such
almost certainly would increase the pressure to
resolve the Taiwan situation. Alternatively, a
more democratic government in China could
adopt a more accommodating approach to Tai-
wan. n
Political radicalism in Taiwan leading to a for-
mal declaration of independence or, less likely,
a decision to reunify with China also are plausi-
ble. In either event, the US reaction would be
critical. Such countries as South Korea and
Japan would measure the US response in
assessing the stren th of their alliances with the
f their alliances with the
United State
s
Sep et
Cb-aks would lea political integration in
greater China. dl
LWe think China's power in the region will
grow, but the power of others in the region
including Taiwan, probably also will grow.
',,Although we believe unification between
China and Taiwan is not likely over the next
ten years, we think the possibility of progress
on China's request for three links is good
and perhaps some progress on CBMs,
including military CBMs across the Strait, as
well. All of these can be achieved, however,
without concrete progress toward political
unity. The main issue, in our view, will be
whether Chinese nationalism or Taiwan
assertiveness and manipulation leads to con-
frontation, or whether enlightened states-
manship on both sides decides to ca talize
on the benefits of peace and stability (n
Disruption of the US alliance structure could
occur if the Korean peninsula was suddenly
reunified. A reunified Korea would involve
complex interaction between the United States
and China, as well as Japan, that would influ-
ence developments with respect to Taiwan.
Similarly, situations that undermined the
US-Japan security relationship could affect Tai-
wan's security. For example, Japan, concluding
the United States is withdrawing militarily
from Asia, could decide to create an indepen-
dent nuclear arsenal. Such a decision almost
 Certainly would bring about an unfavorable
Chinese reaction, perhaps including increased
military pressure on Taiwan. Though highly
unlikely, such developments almost certainly
would cause both China and Taiwan to reevalu-
ate their ties to the United States.
Reverse Blank 17 Secre
 19 Sec et
 Sf ret
 21 et
 Suet 22
 23 Secret
 The National Intelligence Council
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incorporating the best available expertise inside and outside the government. It reports to the Director
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Secret 24
 National Security Unauthorized Disclosure
Information Subject to Criminal Sanctions
Information available as of 10 September 1999 was used in
the preparation of this National Intelligence Estimate.
The following intelligence organizations participated
in the preparation of this Estimate:
The Central Intelligence Agency
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