Taiwan and mainland China scripted history in their relations, after 60 years, when President Ma Ying-Jeou was elected Chairman of the Kuomintang (KMT) party in power on 26 July 2009.  Chinese Communist Party’s Hu Jintao sent Ma a congratulatory fax.  Ma responded with words, “facing reality, building mutual trust, and putting aside disputes and to create a win-win situation.” On 11 September 2009 former President Chen Shui-bian of the Democratic Progressive Party (DPP) and his wife, who vehemently opposed China, were sentenced to life imprisonment on charges of corruption. On 17 December 2009 President Ma revealed plans of Taiwan’s Straits Exchange Foundation and China’s Association for Relations ‘Across the Taiwan Strait’ and stated that Taiwan’s sovereignty would not be jeopardized by the agreements, but  “only by establishing formal mechanisms for handling cross-strait economic exchanges can Taiwan be assured of receiving a full range of benefits.” As long as economic growth and international prestige remain top priorities for Beijing, China is less likely to threaten Taiwan.

China’s Central Military Commission (CMC) is confident that the US Navy can be challenged by the People’s Liberation Army Navy’s (PLAN) large SSN submarine and surface fleet and Su-27 fighters, if the USA came to the aid of Taiwan. China’s show of might in the 1 October Military Parade and aggressive postures in the South China sea to challenge US survey ships is testimony of this. Additionally, the convergence of interests between Beijing, Washington and Taiwan to restrain North Korea’s nuclear ambitions has led to attitudinal changes. 

Last year’s economic down turn had threatened both economies that groped for stimuli with beneficial effects. There was a realization that if both the Chinas complemented their US$ 3.5 trillion economies, it could provide the mainland Chinese much coveted employment. In a pragmatic move China assured Taiwan that it will never use military force against its own people in Taiwan, and objected mildly to Taiwan acquiring selected US military hardware. China looks to the day it can assimilate Taiwan as a partner, including its military, on the lines of the ‘one nation, two systems’ model.

China is also looking at the advantages of trade in both Chinese Yuan and Taiwanese Dollars, which is being dubbed as trade in ‘Chaiwan’. Haier Group, the world’s fourth-largest home appliance maker, is eyeing growth opportunities in Taiwan following the lifting of restrictions on inbound mainland Chinese investment. The major cross-strait conference in mainland China titled “Forum between the Kuomintang (KMT) and Communist Party of China”, late last year broke the ice. China feels it can take advantage of the situation as Taiwan possesses the technology to take over aspects of manufacturing and business, which have long been South Korea’s domain.
 
China has also questioned the use of the US dollar as the world's reserve currency. Chinese companies have signed a landmark deal to allow trade with Hong Kong, Macau, and Indonesian entities in Yuan, and not the greenback or the Euro. When the People's Bank of China clears this, select companies, based in Shanghai and Guangdong province, will be allowed to conduct business in Yuan on a trial basis. Should the trial prove successful, it will be extended to all of ASEAN.  This will increase China’s influence and offer the Yuan as an alternative to the dollar, though the Yuan is not yet convertible this is a hurdle that will need to be overcome. India needs to heed this economic engineering by China, especially as India has a Look East policy, now an article of faith, which was initiated by then Finance Minister Dr Manmohan Singh in 1991 to gain investments from the Southeast Asian Tigers. The Navy and the DRDO took full advantage of this by signing MOUs with Singapore’s Armed Forces.

China is now making inroads in to ASEAN, to trump India’s moves. China’s peaceful moves have begun with ‘Credible Intimidation’ and deft moves in the Malacca Straits and the Indian Ocean region, which have been articulated in China’s 2009 Defence White paper under, ‘defending China’s interests abroad’. China is investing in Mauritius to match India’s double taxation facility, has asked to be the co-Chairman of the monthly Piracy Shared Awareness and DE-confliction (SHADE) meeting held in Bahrain presently co-chaired by the US Commander Maritime Forces (CMF) and EU. China has requested that piracy areas be demarcated nation wise, offered to provide tankers for fuelling in the Horn of Africa as Japan is withdrawing and China is looking for base in the region.

When Taiwan and China come together, Taiwan’s skilled industrial chain and military will also become ‘Chaiwan’. There is a big ‘if’, but is a possibility, and India’s business and military must be ready with a strategy to meet it.  How India will fare strategically needs thought.  A proposal of C3IC was mooted by K Santhanam and by the author. C3 means that India will have to ‘cooperate’ with China for trade; ‘compete’ for markets and avoid ‘confrontation’.  IC implies that ‘intelligence’ and ‘cyber warfare’ will be the keys to success. India’s strategy will have to be one to ‘cope’ with the rise of China.  Hence the formulation ‘C3IC’.