Transcription
Shirley Lynn, here. You're from Taiwan. We have people from all over Asia here, uh, today, which is wonderful. Uh, Shirley is the founder and chair of the Center for Asia-Pacific Resilience and Innovation, and she's a research professor at the Miller Center of Public Affairs at the University of Virginia and a non-resident senior fellow at Brookings. Um, so, uh, we're going to talk about Taiwan. And, and before we start, I just want to say that Asia Society France has decided to launch a new research project on Taiwan. I'm just back from Taiwan myself, and we, we believe it's a very important, uh, issue. And I was delighted to see Shirley in Taipei, and I'm going to ask her first, how she feels as a, as the founder of a new, uh, relatively new think tank in Taipei? I have to say, a little bit different from the others. What would be the main, uh, uh, um, um, cliches about Taiwan that you hear about as a, as a think tanker, as a Taiwanese, somebody who travels a lot? Uh, because I spent two weeks in Taiwan and, and, and everybody told me something different about Taiwan, but mainly that, that, uh, similarly to Beijing, in fact, people tell you that the, the story they hear about Taiwan is not the accurate one. So I'd love to hear your view on this.
Thank you, Philipe. It's so great to see you outside of Taipei. That's where I always see you. Uh, I rarely come to, uh, Paris, but I spent the last week, uh, walking 100 kilometers on the, uh, coast of, uh, English Channel, and I learned that French are also very different. They didn't say anything that I expected about France, about Asia, and they said that Chinese food was terrible. Only Vietnamese food is real Asian food. It was a real shock to my system. But, uh, then, of course, I realized people don't go to restaurants in Brittany. There are so many other options.
So, um, there is no one story about Taiwan, but there are so many misconceptions because the last three years, the relationship between Taiwan and Europe and France has dramatically changed. So now we see so many European leaders. In fact, Capri is honored to have invited Jose Manuel Barroso, our founding advisor, to Taipei as the highest-level European actually, um, uh, politicians to Taiwan. And, uh, before that, I saw a group, uh, actually our group hosted, uh, a group of French parliamentarians. I was very surprised not by the misconceptions, but by the priorities that people talked about when they visited. So I think the two things that people all know about, and everybody in the room knows about, is that we make chips. We used to make bicycles, Christmas lights, then China took over with Taiwanese capital, and now it's all about chips and data centers. We provide 90% of the world's advanced chips and the world's data center actually components. You probably didn't know that. So without Taiwan, there is no AI. You're not going to use any AI if, actually, Taiwan stops. In 2020 and 2021, in fact, it stopped because of COVID. The factories couldn't run, and everybody was going crazy because cars could not be produced in Detroit. So, that's number one. Um, but that's very new. Taiwan's been investing in chips since the 1970s, and 1987 to be, um, uh, to put a date to it.
The number two point that all of you know is that it's a hot spot, like Kiev, like Seoul, uh, like Tran, it's a place where war might be possible next. But that's not what, what it's all about. Uh, the third thing that all of you are interested in, as every single French person asked me, is Ukraine. Now, I want to take this opportunity to say a few things because Philip's going to ask me many difficult questions. I might as well take care of the most difficult ones first. Um, so, uh, for Taiwanese, these are very unimportant things. Not because they're unimportant, but because Taiwan's been under threat for nearly 80 years now. Uh, people say, "Are Taiwanese willing to fight?" Well, if you live in Seoul, where I just came from, or you live in Taipei, if every day there is a threat, you kind of get used to it. You both get used to it, and you are also extremely alert to it. So, um, uh, that's something that's very important to remember. Since 1949, we've been under threat. There's been two cross-strait crises, um, after which there is an exodus of people.
Today, Taiwan is an amazing, thriving democracy. That's the first thing that people don't know. Uh, very different than Ukraine. We were not at the center of civilization for the Chinese civilization. My, um, family moved to Taiwan, one side 200 years ago, the other side 300 years ago. And trust me, they were not the center of civilization. All of my grandparents were illiterate. They left because they wanted to find a greener pasture. And, um, it is an outpost, if you will. But at the same time, Taiwan is one of the most vibrant democracies in the world. A dream, if you will. If the liberal order were to succeed, you will want something like Taiwan with no natural resources. It produces the most advanced chips. People are highly educated. And in June, the growth year-over-year was 40%. We are the highest growing economy in the world. This year, we will reach actually 9% GDP growth. Um, and, uh, in the first half of the year, we've already achieved 40% growth over last year. So, the story is a little bit complex, but what Philip and I wanted to talk about was all the problems.
Yeah. Can I, can I, uh, just interrupt you? Uh, we're trying to get some, uh, surveys. They, I mean, my impression from my, my recent visit in, in, in, in Taiwan was that they're really two Taiwans, right? At least, I mean, there probably more than that, but one of them is the, the one you just described, 8% growth, semiconductors, stock markets, rich people, investors, engineers, uh, TSMC. And there's the, the other Taiwan, which is, uh, um, sorry, I can't see the, the slides here. Okay. So, this is, this is a survey from, uh, uh, from, um, u, a think tank, another think tank in Taiwan. Uh, can you, can you move on the next one, please? Um, uh, this is basically, uh, very interesting recent data, uh, from this think tank about young people, how they would feel in case of a military conflict, uh, and how do they feel, uh, um, you know, nationalistic, or do they feel about defending Taiwan from, uh, you know, from China, presumably? And, and, and the, the translation, if we can, uh, move to the next one, please, um, uh, is a, is a rather apathetic, uh, response, especially from the young people. We've now back to one year of military service. But the reality is that, uh, I've, I've spoken to a lot of people, including to, uh, uh, people from both, you know, the KMT and the DPP, the two polit main political parties. Uh, uh, of course, if you go to the president's office, also to the ministry of defense, they would tell you that everybody's ready for resilience, right? But if you speak to the average, to the man on the street, to the, nobody wants their, their kids, or their brothers, or, or fathers to, to emulate what the, the Ukrainians are doing. So, I'm, I'm, I'm interested in your, in your view on that, because the, the ones, the engineers, they want to keep making money, and they, they feel they're on top of things that may not be forever, when, when China, especially, catches catches up. But the, uh, the other, the rest of the world, they just want to have a peaceful life, and, and, and, and, and the economy is not necessarily, uh, as, as good as it, as it sounds for, for the man on the street, and for the average Taiwanese. So I'd love to hear your views.
Philipe has a very sharp, uh, understanding because he just came back and he comes every year. But, you know, surveys are very interesting. Right before, right after the Crimean War, and before, uh, this, uh, uh, attack on Ukraine, actually, there was a survey done, um, and it showed that Taiwanese were twice as willing to fight as Ukrainians. So the long and short is, because of Ukraine, there are a lot of people coming to our think tank to ask about surveys. This survey is a government-related agency survey. So there's, of course, an angle to it, which is to increase spending on weapons. Uh, the reality is, peacetime surveys about willingness to fight are very misleading. The way you ask questions to a Taiwanese, "Are you Chinese?" "Are you Taiwanese?" You always have a second part to the sentence. If you say, "Are you willing to fight?" And we hosted an amazing conference with Richard Bush at the leading university in Taipei, and we asked the question live with 300 students. If you ask the question, "Are you willing to fight if the Americans will get there within seven days?" 80%. If you say, "Are you willing to fight if the Americans will never come?" Nobody. So there's a big difference in terms of what neighborhood you're in. Ukraine is in a neighborhood with NATO countries. Taiwan is not a country by definition, by France's definition, by European Union's definition. Nobody will come to our aid. Today, skepticism towards the United States is at all-time high, reaching 40%. It is our security guarantor, but nobody trusts, uh, the American government to come to our aid.
So what does that mean? I think what it really means is realizing, I've been in France now 12 days. I don't think French people at the same age as Taiwanese youngsters are as willing to be conscripted either. In a wealthy country where you've been under threat for three generations, there is something that leads to needs to be said about young people lying flat in China, in Taiwan, in Europe. 20-year-olds, which I've been teaching in China, in Hong Kong, in Taiwan, and in Virginia for the last 15 years. Young people at the same age, 21 is usually the age. I usually teach fourth-year college students in all these places. They think more similarly than with me. And that is, your parents fought really hard. And my daughter's here, so I'm not going to misspeak, and she will critique me tonight at home. Um, but basically, I think young people share a lot more in common because of social media and about the comfort where they come from and the prospect of war. I don't think people are empathetic. They're empathetic about politics because it's so difficult to make a difference. But I think as to the, um, defense readiness, conscription is a very hard topic, and the Taiwanese government has just to be honest, at the, on the, at the pressure of the United States, increased conscription, increased mandatory, um, service in the army to one year. It used to be two years, became four months, and, uh, under a pro-China government, and now it's one year. Mhm.
So, one, one last, last question on politics and security, and then we'll move on to to tech and, and, um, and other things. So, Rana this morning was saying very clearly that he believes, you know, it's going to be gray zone tactics. It's going to be cyber attacks, cutting under-sea cables, or, and, you know, political interference, and, you know, which is already happening heavily. Is this something that the majority of Taiwanese believe, that, you know, uh, we're just, uh, a year and a half before the 21st Party Congress in China, as we know there are a lot of changes taking place, there will be changes at least, you know, at the PLA level, there will be the 2028 presidential election in Taiwan. Is this, uh, are we going to continue this kind of, I mean, I call this apathy, but, you know, it depends a lot on the result of both events, perhaps 2027 and 2028?
So, you know, for China to have a peaceful unification, the dream, I believe, and RA is right, is not to attack amphibious landing on the Taiwan coast. I was looking at how beautiful Brittany was. Every night after walking 10 hours, literally dying, we would go swim in the English Channel. There's no such thing in Taiwan. Most of the coastal line is not swimmable, and it's not landable. There's no Normandy. There's not possible for the Chinese, for the PLA, who also consist of only child. So, how willing are the Chinese, uh, to fight against the only child in a Taiwanese family? Well, it's a big question. So, um, the real issue, of course, is, um, how have I, if you think about Venezuela, if you think about Iran, if there's no cooperation, if there's no infiltration at the local level, you cannot be successful with any kind of invasion. So the question is, how well have the Chinese infiltrated? Well, there are two sides of Taiwan. The real two sides of Taiwan, besides age difference, is, uh, basically the blue and the green, the pro-China and the, uh, pro-US side. And today, it's very interesting. The KMT used to be the pro-US party. All of the KMT leaders were US-educated, and, uh, basically DPP are mostly leaders who don't speak English. And they're actually pro-Japanese, but not really pro-US. That has completely flipped because the DPP, which is considered more pro-independence, actually, um, is very pro-US, favorable to buying weapons. $40 billion we've committed. We've committed more than $200 billion dollars, probably more than that, uh, of TSMC investment in Arizona. All of this, of course, uh, is quite strange because the KMT now is opposing all of this. Now, in Taiwan, if you eat an apple and you say it's sweet, people will say, "Ah, you're pro-American because that apple is from California." That's how polarized the situation is. Every TV program you watch, you say, "Is this a green channel? Is this a blue channel?" Everything you talk, every forum like this you go to, you ask, "Is this green or is this blue?" And in fact, everybody who comes to our think tank says, "Why don't you have a color?" So eventually, Taiwan did have a third party. It's white. And we used to say, "We're invisible. We're not white, blue, or green. Otherwise, you'll be in big trouble."
You can see there's a market for Apple, uh, from Brittany, uh, which I'll be working on very soon. Um, turning to, um, uh, what you wrote, uh, on Taiwan, supply chain fragmentation, and the, uh, what you call the protectionist policies by the US and China. Now, Taiwan is an island. It's like, everybody knows that it's just, uh, surrounded by big powers, primarily China and Japan. But if China was to decide to cut links, I mean, to, you know, surround the island and cut, I mean, cut the export of semiconductors and technology from Taiwan, or, or, you know, cut certain access to Taiwan, that would be a big problem. So there are already these problems with, uh, supply chain fragmentations, but how, you know, what are the options for, for, for this, uh, island?
Philipe, sorry, I didn't finish answering the last question and segues into this one perfectly. So the infiltration of Chinese in Taiwan is, infiltration is a negative word. By saying that, I'm already taking a side, so I shouldn't say that. I will say the penetration of the market by the Chinese is very successful. In 2012, the Chinese, using a proxy, the owner of Wong Wong, the cookie, the biscuit, um, bought the leading, actually, Chinese, um, language newspaper in Taiwan. So everything you see in Taiwan actually has a Chinese, um, hue to it, if you will. And I would say similarly for supply chain, uh, a million Taiwanese live in China still today. So while China is, uh, Taiwan's biggest enemy, it is our biggest friend, our most important friend. Trading, uh, with China is still at an all-time, um, uh, high, but investment has gone so low today. EU is the leading investor in Taiwan. It's quite incredible, the change. This all changed only in the last few years. And, um, if you're talking about the supply chain, uh, if I were here last year, and I'm sorry that I couldn't actually, um, accept Duncan's invitation last year, because of a family illness, but I really wanted to come, it would have been a totally different talk. Because, uh, as of last year, export sanction, all of the things that the US was doing to us, Taiwan, all of the things the Chinese were doing to us to coerce us into unification, was creating such a strain on everybody, the business sector, civil society, students who used to think, to us, it's incredibly easy to go to Shenzhen to work because most people don't speak English. We don't take it that seriously. China is a huge market. We speak Chinese. The culture is exactly the same, very different than Hong Kong, which is more, um, Anglophone. But today, students don't come to my office and ask, "Should I go to Shenzhen to work or should I go to Silicon Valley?" There is no possibility for long-term, actually, life and work in China. So that's a really big difference. However, a year later, why is the talk today different? The AI transformation now counts Taiwan at the center of everything. So today, it doesn't really matter if there's decoupling. Taiwan simply cannot make enough for all of you to consume. So Taiwan doesn't care anymore. I mean, until last year, we were figuring, if I don't sell to Huawei, for TSMC to cut off entire Huawei revenue was just cutting off its arm. But that was then. Today, as long as we wake up and we work, the cash is piling in.
And I just want to add one more thing about the two worlds. Even though there's 80% of Taiwanese work for small and medium enterprises, which is why it's such a vibrant democracy, people are business owners, entrepreneurial, uh, the best healthcare system with only 7% of the GDP spending. Everything about Taiwan is quite a miracle considering the threat, the amount we have to invest in defense, just like the dilemma that EU now faces with the threat up north. Taiwan faces that every day for 80 years. However, today, um, I think it's really, um, quite different with most of the, what I call the Silicon Valley problem. Everybody in Hsinchu Industrial Park is just making out like there's no tomorrow. However, it's like Shanghai when Duncan and I were there, you know, 20, 30 years ago. You wake up, you work hard, and you're like, "This is great." However, um, most Taiwanese who do not benefit from working in the Hsinchu Industrial Park, they buy shares. Almost all the Taiwanese buy shares. Playing in the casino is what we do. Uh, think about it. We go to China, we work, there's no insurance. We're not a country. We go to places, they don't recognize the passport. We go to places without insurance. The total cowboy situation. So, buying stock is second nature to Taiwanese. So, most people benefit from the stock market rise, which is also very problematic. It's similar to when real estate was really good in Beijing. I used to teach in Tsinghua. Nobody's attending the classes. They're worried about their mortgage, buying another apartment, you know, getting on. Nobody cares about what you're teaching. Same thing in Taiwan today.
Okay. So, but what, what, what happened, um, after the TSMC bubble? I mean, uh, it's not going to go on forever. Uh, this company is amazing. But the national economy seems to depend partly on this sector, right? I mean, this is the, the multinational that everybody talks about. There's a security element to this. TSMC has been investing in the US, is looking at Germany. But at the end of the day, China will be catching up, and others might be catching up. And what, what will the Taiwanese do?
Taiwanese will move to China, which we already do. So I think the, the bigger question, of course, is what is the AI cycle? Now, that's too big of a question. I gave a speech at the Morgan Stanley AI Summit just a month ago. Uh, if you were to ask me the question, basically Taiwan, and I just, like I said, I just came from visiting SK Hynix, which we're working very closely with, as well as Tokyo Electron, that was just here, um, in the previous Japan panel. Basically, Northeast Asia is powering the entire world. And if you're asking me when the bubble will burst, well, we should ask the whole world when is, you know, the IPO boom going to bust, both in China and in Silicon Valley. That's a bigger question. I think we don't have enough time for that. But I would just say the semiconductor cycle is a very dangerous one. I've been investing in semiconductors. I founded in Shanghai. It is a money game. It's not really a know-how game in the sense that the reason that in the decoupling, the Taiwanese and the Koreans and the Japanese have to choose the American side is because that's who owns the IP. The hyperscalers, the basically the Apple and the Nvidia, those are the ones who, um, are actually serving the customers. And so for the East Asian economies, they are basically in the hardware middle section. And, uh, as countries like India are trying to, we work a lot with India as well, are trying to move into testing and packaging, and, you know, a Taiwanese company just made a big investment here in France in testing and packaging. Foxconn, which, um, founded SMIC with me. I think that the, the game is a very long one. Um, how long will this bubble last is for all of you investing in, um, uh, in OpenAI, and I think you'll have to ask yourself how long are you willing to fund this game, which is increasingly capital intensive?
Great. Do we have time for a couple of questions? Anybody? Okay, sorry. Um, I want to get a retirement home in Taiwan and sip in Alishan. I'm scared of potential war. Okay, that's an interesting one. Um, all right. I thought we'd answer that already. You know, there's going to be no war. It's going to be just a gray zone tactic. Okay.
Well, we do have a wonderful board member. So, our foundation is also pioneering. We want to say that Taiwan shouldn't be making chips or bicycles in 30 years. We should be exporting ideas. How did Taiwan become such a miracle with no natural resources? So, one of the ideas we have is that we would start a nonprofit foundation think tank that would include non-Taiwanese board members. So, our board member Alicia Garcia spoke here last year for those of you who were here last year, thanks to Duncan's invitation. So, she has three homes in northern Taiwan, and she also has a few bunkers. So, don't worry, you'll be all covered.
All right. Has the CCP put forth a plan on how they envision Taiwan's development, uh, or role if it were to be absorbed by the mainland?
You know, the, uh, I've been, I take pride in trying to play the role of teaching in Beijing, speaking to policymakers in Hong Kong, in Washington, and Taipei. But the last few years have made it quite difficult. So I would be, it would be hard for me to answer this question, which I could five years ago when I still visited a higher party school to tell them about what's happening on the ground in Taiwan. It's very hard to see how the, how Beijing could develop a plan when so much interaction has been cut. So people-to-people interaction is still very, very high. I mean, for Taiwanese going on a trip to, uh, Xinjiang is a no-brainer. You just sign up, you go on a tour. We can use local guides. We understand everything. We know how things work. We love it. Uh, but on a formal level, expert to expert, I just went to a conference, um, where Jiang University, which is now the number one university in the world in innovation, came, and they said how difficult it was for them to ever visit. So they asked me if I could help them issue visas. Uh, similarly, I think if Taiwanese experts and policymakers were to go to China, they need permission, and after you return, you get a lot of questions, which I felt the same when I went to Norway. I talked to a lot of Chinese experts. I think Europeans going to China and staying there for research, uh, could lead to some kind of trouble. Um, and so I think it's, uh, really too bad. Um, so it's hard to say if Beijing has a good plan for Taiwan, but, uh, of all of these plans, uh, for those of us who still go to China quite often, I think it's pretty clear they're not very interested in bombing things and running the place. Um, I think for Xi Jinping to get the Nobel Peace Prize, he would have to do something dramatically different, and that includes winning the hearts and minds of the world, and especially Taiwanese.
And perhaps one last thing, they are also mainland people who live on Taiwan, but 150,000 I'm told. So these people are playing a role as well. It's not just the Taiwanese in China.
It's quite complicated. Our biggest source of male and Chinese immigrants are spouses because until a few years ago, you could imagine in a high-income society like France, the lower-income men don't have wives. So, uh, 30 years ago, the biggest source of spouses were from China. Today, China is too wealthy, too, uh, prosperous. So we don't, uh, have that import anymore, if you will. So, but we still, we do have a few hundred thousand of them. And several Chinese spouses have now organized political parties. This is a big source of contention because KMT and the TPP, the two opposition parties, include actually mainland Chinese spouses as party leaders and members, and a lot of people feel that they could be working on both sides. So if you read the Taiwanese newspapers, the front page is always about some kind of expose of somebody taking money from, somebody from the other side of the street.
Shirley, thank you very much. Voice from Taiwan. Very useful. Come back. Come back to us. Thank you.