Modeling Economic Warfare Between the West and China Over Taiwan

Eurasia Group tasked the Capstone team with developing a scenario in which the PRC takes measures to change the status quo of the cross-strait relationship in the year 2024, crossing a perceived red line in the eyes of the United States. Informed by an empirical mapping of the economic, financial, and technological interdependencies between the PRC and the global economy, the team worked to design a geoeconomic response from the U.S. and its allies that sought to advance the following objectives:  

1. Compel the PRC to revert to the status quo ante on Taiwan 

2. Diminish the PRC’s capabilities to conduct further actions against Taiwan 

3. Deter further PRC actions against Taiwan 

4. Punish the PRC’s leadership for its actions against Taiwan 

The team identified a number of bottlenecks and vulnerabilities in the PRC’s economy that could possibly be exploited. The team also designed possible counter-responses from the PRC. The research revealed the existence of PRC economic vulnerabilities and how geoeconomic warfare would have disastrous consequences for the PRC, the U.S., and participating allies. The effects would furthermore not just be limited to participating countries but would have an impact on the global economy. The costs would serve as a driver for increased hostility between the two nations and Taiwan, raising the risks of escalation from an economic conflict to a military one. The team concluded that there are a number of measures against the PRC that the U.S. can take in the case of PRC aggression, even if that may not sufficiently change the outcome.