One China or Two?

29 April 2021

The One China policy was basically the recognition of reality. Mainland Communist China won the revolution in 1949, and when China got its economic act together the world needed to trade with it as it was far more economically significant than Taiwan.


Chiang Kai-shek, the Kuomintang leader, was defeated by Mao Tse Tung and fled to the island that had previously been called Formosa, now Taiwan. He maintained the idea that he would lead a counter-revolution, so there was One China.  This counter-revolution became increasingly ridiculous with time, but was not abandoned.  The Communists claimed Taiwan and treat it as a rebel province, and they stated that there is One China and that the price of trading with them was to have Taiwan excluded from the UN and other international bodies. That has been the situation for many years, and almost all countries accepted the One China policy, and stopped recognising Taiwan, even if they traded with it.

By definition, if there is One China, who governs Taiwan is an internal Chinese matter. We may not like what China does in Hong Kong, with the Uighurs or in Taiwan, but it is the US that has accepted the One China policy for years. 

After WW2 at Bretton Woods it was assumed that free trade would allow countries that were competitive to rise, and those that were not competitive to fall. This was so that there would not be war over markets.  But the system that the West set up gave an advantage to countries with lower wages, and if they were smart enough to get the fruits of their labour rather than stay as colonies with foreigners owning their industries, they rose.  So China rose and is now a world power and the US are now seeking to intervene in Taiwan and re-create a two-China policy. One can hardly expect China to accept this massive loss of face. 

The assumption was that Taiwan would eventually solve its differences with mainland China peacefully.  After recent events in Hong Kong, this has become less likely in the short and medium term, but is still viable or even inevitable in the long term, which has always been China’s position.

China has done some sabre-rattling with flights over Taiwan and obviously the recent events in Hong Kong have made everyone nervous.

This article looks at the similarities of the Chinese way of doing business to capitalism.  It could be said that the model of an intelligent government cooperating with industry is more successful than a few large industries competing.  Competition works if there are many small producers competing in a market.  When there are a few oligopolies using trademarks or patents to make more money and not to share knowledge, the old adage that ‘private competition is the best way to run things’ starts to break down.  It may not just be cheaper wages that is allowing China to out-compete the US.

Starting a war because you are losing the peace seems a very unwise course of action. 

Australia has to stop being the US lapdog. We are not taking the right path.