'The sky has not fallen' following Pelosi's Taiwan visit: George Yeo

The move sets a new direction for all parties, adds Yeo, and a new chapter has opened.

He comments: “You may be surprised to hear me say this: The US played it very carefully. It was a provocation but it was very carefully done, so the US cannot be accused of being ‘offside’.”

Speaking at an Aug 3 event, Yeo adds: “Biden said he doesn’t think the visit is a good idea; the Pentagon said it was a bad idea, but Nancy Pelosi is a power in her own right. As Speaker of the House, the US has to support her when she goes overseas.”

In retaliation, China announced live-fire military drills around Taiwan starting Aug 7, well after Pelosi is set to leave the region. The superpower also halted fish and fruit imports from Taiwan, while suspending the export of natural sand to the island.

See also: China unleashes economic curbs on Taiwan with sand, fruit bans

Both sides are playing a long game, says Yeo, and it is not in China’s interest to escalate matters. However, the reverse is not true, he adds. “For the US, [it is] better to fight tonight. If you fight a year from now, China will be stronger. If you fight 10 years from now, China will be stronger still.”

Yeo adds: “I have no doubt that when Pelosi flew into Taiwan, the [US] Indo-Pacific Command was all prepared for war. China was also prepared for war. Neither side wanted it, so they contained it.”

From here, Yeo expects the US and China to oscillate between “a cold war and a cold peace”. “Hopefully, there will not be war, but there will be anxious moments.”

See also: Taiwan rushes to prevent China from cutting internet, phones

According to Ker Chien-ming, a senior member of Taiwan’s ruling Democratic Progressive Party, Pelosi also spoke with Mark Liu, chairman of the Taiwan Semiconductor Manufacturing Corp (TSMC), about the American Chips and Science Act passed a day prior. Neither Ker nor TSMC have confirmed if the meeting was conducted virtually or in-person.

TSMC, dubbed Taiwan’s “Silicon Shield”, accounts for a fifth of the world's chip production, including 90% of the most advanced types, putting the company in a pivotal yet delicate position when it comes to geopolitics.

The US$52 billion ($71.8 billion) package is designed to boost US semiconductor manufacturing. Some US$39 billion is meant for direct financial assistance to companies building chip-manufacturing plants in the US, while US$11 billion is earmarked to advance chip-manufacturing research and workforce training. Finally, US$2 billion is set aside to move lab innovation into other areas, including the military.

As economic competition between the US and China hots up, the decoupling of technology is inevitable, says Yeo. “But a complete decoupling, like between the US and the Soviet Union, I think is impossible.”

He quips: “The sky has not fallen. For the time being, your investments are safe.”

Asean’s expectations

Speaking at a sustainable investing event organised by a global investment management company, Yeo says China has to live with the weight of its aspirations. “It has to manage a new reality and exercise a degree of leadership without seeking to displace the US, which is feeling insecure.”

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From China’s admission into the World Trade Organization in 2001 to the pre-Covid-19 era, China’s economy grew seven times in real terms, nine times in renminbi-denominated terms and 11 times in US dollar terms, says Yeo.

“Some say China should have followed what Deng Xiao Ping said and kept a low profile. I don’t think that’s possible; China is just too big,” Yeo adds. “It has to accept that some people will feel uncomfortable, while others expect much of it.”

Asean nations, for one, will increasingly look to China to drive domestic growth, says Yeo. “Kingdoms and municipalities in Southeast Asia have seen China in its earlier incarnations. Each time China was unified, its market became enormous and it benefitted Southeast Asia… In the same way, China’s growth now will bring prosperity to Southeast Asia.”

Since 2009, mainland China has overtaken the US and Europe to become Asean’s largest trading partner. “Even though we want to be neutral and omnidirectional, China will be a big factor in Asean,” says Yeo.

This extends to the private sector as well. “China will become the number one economy, the biggest market in the world and the biggest importer in the world,” says Yeo. “For many multinationals, including those in the US, China will be a more important market than their own countries.”

Globalisation has reached its peak and the pendulum is swinging back to increasing localisation, he adds. “Covid-19 has accentuated that trend. Even in Singapore, we are talking about self-sufficiency in vegetables.”

In 2019, Singapore announced its “30 by 30” goal to produce 30% of the country’s nutritional needs locally by 2030.

‘The next round’

Pelosi’s visit is not just an example of toothless brinkmanship. Rather, both sides are studying their opponent’s plans and processes, says Yeo.

“[In] every crisis, each protagonist gathers intelligence on what other parties will do in times of crisis. I have no doubt that China has studied carefully how the US and its allies are acting in Ukraine,” says Yeo.

According to Yeo, China is watching how Russian assets have been seized and how sanctions have been carried out. “China knows that if there is a war, it must face a similar menu or even a bigger menu of sanctions and actions.”

He adds: “In the run-up to [the visit], China would have been monitoring, and the US would have been gathering intelligence on what China is doing on the mainland and in the sea. In the event of an actual conflict, this is the SOP [standard operating procedure].”

Both sides are gathering intelligence and thinking how to counter each move “the next time round”, says Yeo. “That’s what makes it so exciting.”