Economic War Before the Shooting Starts: The Unseen Taiwan Playbook

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China has mastered a subtle blend of economic coercion and cyber grey-zone tactics aimed at undermining Taiwan’s resilience—without ever firing a shot. Yet Taiwan, aware of what might lie ahead, has devoted itself to an asymmetric defence strategy that complements its conventional armed forces. Meanwhile, the U.S., Japan, Australia, and Europe are each struggling with their own limitations of doctrine, legality, and political will.

Beijing’s pressure campaign against Taiwan is multi-layered: China systematically employs trade bans, targeted sanctions, and regulatory pressure—especially around election cycles—to intimidate Taiwanese businesses and political influencers. Think-tanks such as the Foundation for Defense of Democracies (FDD) have modelled how these tactics could expand into sophisticated cyber-attacks and critical-infrastructure blockades, leaving Taiwanese society under siege without a single shot being fired.

The Rhodium Group paints a dire outlook: even a localised military escalation would wreak havoc on global supply chains, escalate shipping costs, and threaten recession. Fortunately, EU‑US co-ordination on sanctions could help counter Beijing’s economic aggression—a strategic lever Europe has yet to deploy fully.

China’s Amphibious Ambitions and Subversive Pressure

3D model of the Chinese Shuiqiao-class amphibious assault barges. (Image: Naval News)

By all appearances, China’s long-term strategy toward Taiwan is intensifying in both scale and sophistication. Beyond rhetorical claims to sovereignty, Beijing’s activities across military, technological, and information domains suggest a deepening commitment to create not just the capacity but the operational framework for a potential forcible unification with Taiwan. While conclusive intent remains formally unproven, the range of preparations underway—from amphibious infrastructure to electoral interference—indicate that China is not merely posturing.

One of the more striking developments is the quiet emergence of the Shuiqiao-class amphibious assault barges. Constructed by the China State Shipbuilding Corporation, these modular platforms have been observed undergoing trials near Nanshan Island. Analysts have noted their ability to interlink and form floating causeways, echoing Mulberry harbours used by Allied forces during the D-Day landings in 1944. Unlike traditional landing ships, the Shuiqiao-class enables a direct, port-independent beach landing of armour and heavy transport, precisely the kind of engineering required for a cross-strait invasion.

This effort is not taking place in isolation. The People’s Liberation Army Navy (PLAN) continues expanding its fleet of Type 075 and Type 076 landing helicopter docks. These amphibious assault ships carry rotary-wing aircraft, landing craft air cushion (LCAC), and mechanised infantry—collectively forming the backbone of any hypothetical joint-forces beachhead operation. Satellite imagery and open-source intelligence have increasingly revealed exercises simulating such scenarios, including mock island landings and the construction of replica Taiwanese terrain at training grounds in Fujian province.

These maritime preparations are matched by corresponding investment in logistics and bridging capabilities. The People’s Liberation Army Ground Force has been testing a suite of mobile bridging units and amphibious armoured vehicles designed to secure supply continuity once ashore. While a full-scale invasion remains logistically daunting, the development of these overlapping capabilities paints a clear picture: Beijing seeks optionality, not theoretical capacity.

Psychological Operations and Maritime Gray Zone Pressure

Simultaneous to these naval preparations is the persistent application of grey zone tactics, especially in Taiwan’s near seas. The deployment of Chinese coast guard vessels—often in civilian camouflage—near the median line of the Taiwan Strait serves to normalize Chinese presence in contested waters. On occasion, civilian fishing boats have been used in coordinated incursions, blurring the line between law enforcement, militia, and maritime militia.

More provocatively, there have been multiple confirmed instances of Chinese nationals illegally landing on Taiwanese beaches in unmarked boats. While typically dismissed as isolated incidents or smugglers, the timing and precision of some landings suggest they may be low-grade psychological operations—testing Taiwan’s coastal surveillance and sowing unease among the population.

Hybrid Warfare: Taiwan’s Electoral System Under Siege

Beijing’s tactics extend well into Taiwan’s digital and democratic infrastructure. In the run-up to Taiwan’s 2024 presidential election, over 2 million pieces of false information were disseminated through social platforms. These included AI-generated content, fabricated polls, and even deepfake videos impersonating U.S. officials and Taiwanese political candidates.

One video, widely circulated in late 2023, showed a synthetic version of U.S. Congressman Rob Wittman falsely endorsing a particular party, suggesting imminent U.S. military intervention. Another clip depicted DPP candidate Lai Ching-te accused of scandalous personal behaviour via an AI-generated news anchor. Fabricated audio of opposition candidate Ko Wen-je further muddied the information space.

Taiwan’s own data points to a dramatic rise in espionage: from 2022 to 2024, 64 individuals were prosecuted for conducting intelligence activities on behalf of Beijing, often involving attempts to penetrate Taiwan’s military and political infrastructure.

The volume of cyberattacks has similarly surged. In 2024 alone, Taiwan’s government reported an average of 2.4 million attempted intrusions per day—targeting everything from utilities to transportation grids. Attribution points consistently toward Chinese-affiliated actors, including those linked to state-backed operations such as APT41 and RedDelta. Chinese state media, often functioning in tandem with official disinformation campaigns, ran fabricated polls showing pro-Beijing candidates in the lead, despite independent surveys suggesting otherwise. AI-generated news anchors, dressed to mimic Taiwanese broadcast professionals, were used to lend false credibility to these narratives. These efforts represent not just meddling but an attempt to systematically discredit democratic institutions from within.

Grey-Zone Escalations: Cable-Cutting and Cyber Coercion

While China flexes its military, its first real strike is digital. Since 2023, multiple undersea cable disruptions near Taiwan have raised alarm. In early 2023, two cables to the Matsu Islands were severed. In January 2025, a vessel known as Shunxin‑39—registered in Cameroon but crewed by Chinese nationals—was implicated in cutting a cable off Keelung Harbour; weather hampered inspection. In February, Hong‑Tai 58 allegedly cut the Penghu cable before Taiwan detained the crew.

Taipei suspects orchestrated sabotage: vessels with obfuscated ownership names, flags of convenience, lingering near cables, and home‑grown cable‑cutting tools, e.g. anchor devices built for that very task.

Undersea lines carry over 95 % of global internet traffic. Disrupting Taiwan’s cables threatens the economy, military coordination and emergency services—even before China makes its move.

This latest grey-zone tactic echoes Baltic Sea sabotage attributed partly to Chinese and Russian vessels, suggesting a broader campaign. Taiwan now monitors near‑100 suspect vessels.

Taiwan’s Guerilla-style Asymmetric Defences

The Taiwanese indigenous Narwhal-class submarine. (Image: Wang Yu Ching / Office of the President)

Taipei has wisely combined traditional military hardware with guerilla-style asymmetric defences and a mobilised civilian population. It has pursued a strategy of “porcupine defence,” leveraging mobility, precision, and decentralisation to counterbalance China’s numerical advantage. Recent acquisitions include the HIMARS rocket system and Harpoon coastal defence cruise missiles from the United States. Domestically, Taiwan has accelerated production of the Tien Kung III surface-to-air missile and the Hsiung Feng II and III anti-ship missile systems. In 2024, Taiwan unveiled its first indigenous submarine, the Narwhal (Hai Kun).

Conventional and asymmetric capability:
  • Advanced U.S. systems—including Abrams M1A2T tanks and HIMARS rocket systems—now patrol Taiwanese regiments.
  • The indigenous Narwhal-class submarine is in sea trials, with eight boats planned by 2027.
  • National Chung-Shan Institute boosts domestic production of missiles, drones, radars and more.
  • Military conscription has been extended to one year, with reserves placed under a new All‑Out Defence Mobilisation Agency.
Asymmetric tactics:
  • Swarm drone operations: Small, agile drone units capable of overwhelming missile and radar systems, offering both intelligence gathering and kamikaze strike potential.
  • Mobile coastal missile units: Rapidly deployable anti-ship missiles hidden in rugged terrain, designed to complicate PLA targeting calculations.
  • Electronic warfare & jamming: Home-grown capacities to disrupt PLAAF communications and GPS, with portable jammer kits supplied to special forces units.
  • Sea-mine deployments and maritime denial zones: Covert minelaying operations to threaten invading vessels before they reach Taiwan’s shores.

Taiwan has mobilised 420,000 civilian volunteers via urban bunker networks and community-based training by organisations like Kuma Academy. Han Kuang war games, modelled on lessons from Ukraine, now include scenarios for cyber sabotage, command breakdowns, and civilian evacuations, ensuring both chains of command and everyday society are hardened for crisis.

Cybersecurity and Disinformation Defence

Faced with millions of daily cyber intrusion attempts—largely attributed to Chinese state-backed actors—Taiwan has developed a robust cybersecurity ecosystem. The National Institute of Cyber Security (NICS), formed in 2023, centralises threat monitoring, response coordination, and public-private cyber intelligence sharing.

To counter deepfakes and disinformation, the Taiwan FactCheck Center and the Ministry of Digital Affairs have worked with major platforms to debunk falsehoods rapidly. During the 2024 elections, this network identified and neutralised several viral disinformation campaigns, including fabricated polls and AI-generated videos targeting presidential candidates.

Recognising that modern warfare extends into the psychological domain, Taiwan has invested in media literacy programmes, community-level drills, and “digital hygiene” campaigns. Civil defence initiatives have expanded to include blackout preparedness, first aid, and mobile alert training, particularly in areas identified as potential amphibious landing zones.

US Pressure Towards its Allies

The Pentagon—led by Elbridge Colby and others—has pressed allies to commit to a Taiwan defence role, but uncertainty remains rife. U.S. strategic ambiguity, while a deterrent, also creates confusion. The “America First” doctrine, driven by Trump-era policies, prioritises homeland defence and Indo-Pacific denial strategies—and this has sparked a debate among strategists about whether burden-sharing aligns with broader global commitments.

Tokyo remains cautious. Its 2015 law relaxed its post-war pacifist stance, allowing “collective self-defence” in emergencies “surrounding Japan.” Yet what counts as “surrounding Japan” is vague—and Taiwan clearly sits outside that sphere. Any push to recalibrate Japan’s constitutional limits would require intense domestic debate and a referendum, raising questions about the country’s appetite for military entanglement.

Canberra states it would act only under its own sovereign discretion—emphasising independent decision-making. This reticence leaves its allies guessing about Australian commitment in a Taiwan crisis.

Although Europe lacks combat power in Asia, it wields influence through economic leverage, diplomacy, and defence industrial support:

  • European drone and artillery manufacturers could supply Taiwan or bolster allied forces.
  • EU sanctions, if coordinated with Washington, would increase the price of aggressive moves by Beijing.
  • UK officials, such as former civil-service chief Simon Case, are urging elevated defence spending through NATO to face China’s challenge.
ScenarioActions & ThreatsRoles & ResponsesDeterrence Gaps
Grey‑Zone Economic BlockadeRisk of public fatigue, supply constraints, and fractured Western political willTaiwan (resilience), China (coercion), U.S/EU (sanction shields)U.S. ambiguity; Japan/Aus inactive; Europe needs unity
Flash Military StrikePrecision missile or naval strike on Taiwanese military or civilian sitesTaiwan (HIMARS, subs), U.S. (air/sea presence?), Japan (legal questions), Australia (political hold-back)U.S. unclear; legal constraints for Japan; delayed messaging from AU/EU
Full-Scale PLA InvasionAmphibious landing supported by air, missile strikesTaiwan fights, U.S. responds from Pacific bases, Allies support diplomatically and economicallyCyber disruption, trade bans, and infrastructure targeting
Stalemate & Sanctions SpiralProlonged conflict, economic collapse, international recessionEU and U.S. coordinate to cushion Taiwan, China tests resolveRisk of public fatigue, supply constraints, fractured Western political will

The Crux of Deterrence

China’s slow-burning economic war and cyber coercion represent a prelude to kinetic aggression. Taiwan has responded with a credible, imaginative defence strategy—combining U.S. weapons, indigenous platforms, asymmetric tactics, and fortified citizen resilience. Yet the broader coalition stands on uneven ground: U.S. doctrine remains unsettled; Japan cannot yet act; Australia hedges its position; and Europe must overcome internal divisions to wield its diplomatic and economic power effectively.

If deterrence is to hold, synchronised clarity, legal readiness, and multilateral unity aren’t optional—they’re essential. China is already probing. How the West responds next may determine whether Taiwan faces economic siege, limited strike— or far worse.

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