Almost every week, reports surface about a new wargame simulating a Chinese attack against Taiwan. Those exercises, carried out by academics, think tanks, and governments, are often meant to test how U.S. and allied forces would respond, stressing them to the limit. As a result, the scenarios tend to focus on the challenges that Washington, Taipei, and others would face in the first days or weeks of a conflict.
However, they seldom examine in detail what would happen if a Chinese military operation against Taiwan were to fail. In a new study published by the German Marshall Fund of the United States, we investigate the consequences of a failed Chinese military operation against Taiwan and find that the costs to China would be massive. China would face challenges across four different, but interrelated, areas: its economy, its military capabilities, its social stability, and international costs.
Almost every week, reports surface about a new wargame simulating a Chinese attack against Taiwan. Those exercises, carried out by academics, think tanks, and governments, are often meant to test how U.S. and allied forces would respond, stressing them to the limit. As a result, the scenarios tend to focus on the challenges that Washington, Taipei, and others would face in the first days or weeks of a conflict.
However, they seldom examine in detail what would happen if a Chinese military operation against Taiwan were to fail. In a new study published by the German Marshall Fund of the United States, we investigate the consequences of a failed Chinese military operation against Taiwan and find that the costs to China would be massive. China would face challenges across four different, but interrelated, areas: its economy, its military capabilities, its social stability, and international costs.
We asked authors to consider two scenarios imaginable in the next five years. In the first scenario, a minor skirmish escalated into a multiweek maritime blockade of Taiwan by China. Although several dozen members of the Chinese and Taiwanese military were killed, U.S. intervention eventually forced China to de-escalate. In the second scenario, a conflict escalated into a full-fledged invasion, with Chinese strikes on not only Taiwan but also U.S. forces in Japan and Guam. After several months of heavy fighting, Chinese forces were degraded and eventually withdrew after suffering many tens of thousands of casualties.
The purpose of these scenarios was not to game out the most likely outcome of a military conflict but rather to assess the longer-term implications for China’s economy, military, domestic politics, and international reputation. The answers were surprisingly dire for Beijing. In the report, Logan Wright and Charlie Vest, experts on the Chinese economy and its global impact who work for Rhodium Group—which has done deep investigation into the economic ramifications of a cross-strait conflict—explain why a major conflict could leave the Chinese (and global) economy devastated.
They find that the costs to China could run into the trillions of dollars and increase nonlinearly due to financial market reactions and shifts in capital flows and exchange rates. Joel Wuthnow, a leading analyst on Chinese foreign policy and especially the People’s Liberation Army (PLA), analyzes the impact on the Chinese military, which would be severe and potentially long-lasting. He concludes that any use of force leading to the loss of PLA personnel is fraught with risk for the Chinese Communist Party (CCP) leadership, potentially not only endangering future operations against Taiwan or other parties but also risking strained party-army relations.
If China’s economy and military were badly damaged in a cross-strait conflict, the consequences for social stability could be treacherous, as described by Sheena Chestnut Greitens and Jake Rinaldi, who do cutting-edge research on Chinese foreign policy, authoritarian politics, and internal security. Finally, one of us, Zack Cooper, who focuses on U.S. strategy in Asia, suggests that the international costs of a major conflict could set China back decades on the global stage. These costs should not be taken lightly by the country’s leaders. Not surprisingly, the consequences of a major war were much higher than those in a more minor conflict, but the economic, military, political, and diplomatic costs exhibit tipping points that would be difficult, if not impossible, to predict.
Importantly, these costs would rise as the conflict became longer and deadlier but not in a linear and predictable way. Various tipping points exist in all four domains, which could quickly and dramatically escalate the risks to Chinese interests in each. For example, China’s economic growth could be further slowed if the international community applied significant sanctions during or after a conflict over Taiwan.
Such a move could also increase concerns about social stability and constrain Beijing’s ability to rebuild the PLA after a conflict ends. Similarly, major military losses could intensify concerns about social stability and drive Chinese leaders to centralize more power and turn away from economic opening and international engagement. The dynamics within the CCP would no doubt be complex and could place President Xi Jinping under significant political strain.
Xi’s risk calculus is crucial to understanding if and under what circumstances Beijing might take aggressive actions against Taiwan because any such decision would carry profound consequences not only for China but also for Xi personally. By tying his legitimacy to his “Chinese Dream” of putting China on an irreversible path toward “national rejuvenation” by 2049, Xi has set high expectations.
Yet a military conflict over Taiwan would risk massive economic disruption, catastrophic military losses, significant social unrest, and devastating sanctions, all of which could turn his dream into a nightmare and undermine his political authority. Xi’s calculus must therefore weigh the perceived benefits of using force to achieve unification against the very real potential costs.
Nonetheless, Xi might decide to act anyway. National leaders often overlook high costs if the expected benefits of doing so are substantial or those choices are dominated by political considerations. Xi might conclude that not acting is more costly for him personally than taking a risky decision that he believes is necessary to demonstrate resolve. Otherwise, he might fear that perceived weakness in the face of Taiwan or the United States could call into question his legacy or even lead to a challenge from hard-liners within the party or army.
Additionally, history is rife with cases of misperceptions leading to conflict, such as the Korean War, when Kim Il Sung misjudged U.S. intentions and believed that the United States would not intervene militarily if North Korea invaded South Korea, and World War I, when European powers misperceived the course of the war as well as their adversaries’ willingness to fight. Given the recent purges in the Chinese military, it would not be surprising if top officers are unwilling to tell Xi that they are incapable of successfully conducting certain military operations against Taiwan. Just as with Russian President Vladimir Putin before his invasion of Ukraine, Xi might underestimate the costs and risks of a military operation.
There are many reasons to worry that deterrence might not hold despite the risks. Chinese leaders might overestimate their own capabilities before a conflict begins—or underestimate either the capabilities or resolve of Taiwan, the United States, and third parties. One challenge in personalist dictatorships is that officials have few incentives to provide bad news to their leader, as Putin discovered upon invading Ukraine. Since the PLA has not fought a major war since China’s brief invasion of Vietnam in 1979, Chinese leaders have little basis on which to judge their military’s effectiveness in a high-intensity and high-stakes conflict. That should instill caution, but inexperience can also breed risk-taking.
Alternatively, Xi or his successor(s) might decide that, although the likelihood of success is low, Beijing has no better alternative and can manage the risks. Actions in Washington or Taipei, such as a Taiwanese declaration of independence or U.S. diplomatic recognition of Taiwan, could convince Chinese leaders that they must act to prevent a deterioration of China’s position. Or leaders in Beijing might decide to conduct a limited military operation against Taiwan to test China’s capabilities, Taiwan’s response, or the United States’ commitment, one that could easily spiral into a wider conflict.
In either case, Chinese leaders might begin a military operation against Taiwan without expecting an easy victory but out of fear that not doing so would have worse downsides. This is especially likely if Chinese officials believe there are numerous de-escalation pathways after a conflict starts and that the escalation risks and long-term costs of a conflict would be manageable.
Yet, for deterrence to hold, policymakers in Taipei, Washington, and elsewhere must demonstrate to Beijing that they are capable of repelling a Chinese military operation, that they are committed to doing so, that the costs of a failed conflict are substantial, and that there are better alternatives to starting a war. This is no easy task, particularly before the outbreak of a conflict.
But the papers in this compendium suggest that the costs to China of a failed military operation against Taiwan would be substantial and long-lasting, particularly in the case of a major conflict. The history of failed amphibious operations is long, and a failed operation would have severe negative consequences for China’s economy, military, social stability, and international standing.
