The naval exercises in the area last week by the US were an interesting move, there is no way I can see either side letting it get to war, the stakes are too high.
Economically the war would be a disaster for everyone, Taiwan is a major manufacturing base for a sweet fuckload of electronics, those facilities being destroyed or taken offline for weeks or months would play havoc, not to mention the cost of a US/China war and what that could bring about.
The other factor is that China really only has a very limited 'blue water' naval capacity, this is changing but it's nowhere near a scale where it could match the US in a sea war, it's airforce is not there either.
In short, I don't doubt China's ability to turn Taiwan into dust I doubt it's ability to launch a full scale invasion and hold it against US forces, possibly including a US blockade after such an invasion. Taiwan itself also has a very and growing capable navy that could play havoc with the kind of merchant naval capability China would use in such an event, I know that China could afford to lose 20-30k troops at sea without real worry but their amphibious capability is not amazing and a lot dates back to the 60/70s. The requirement to use a merchant naval element to land enough troops would give at least 24hour notice to hostile intel services, long enough to bolster defenses, start moving in US forces, landing bombers and preparing anti-landing defenses.
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