The Indo-Pacific Economic Framework for Prosperity (IPEF) was launched in the wake of President Joe Biden’s Asia trip this May, signaling the commencement of “Pivot to Asia 2.0” on the economic dimension. In the following months, China has accelerated to revive, despite being dubbed as “re-emergence”, its decades-old supply and marketing cooperatives—a Mao-era institution that once served as the engine of Chinese planned economy in the 1950s. The rebooting of the co-op system was actually initiated as early as 2016, but its recent sudden expansion across the country has provoked suspicion that China is reversing its market-reform efforts, and more importantly, it could be used as a pre-mobilization training by China to counter the increasing pressure from America or even to prepare for military operations targeting Taiwan.
China’s Co-op System in the 1950s: An Outgrowth of Geopolitical Threats
The first few years after the 1949 Chinese revolution is often portrayed by Beijing as a period fraught with internal and external threats—internally, a dearth of qualified infrastructure and urban workforce for industrialization; externally, the Korean War and intermittent border conflicts with Cambodia, Vietnam, and India. Consequently, China was forced to prioritize the development of heavy industry with the help of Soviet Union. The result of the rapid industrialization led by state-owned enterprises was the food shortage in cities due to the huge influx of farmers into urban areas. In order to efficiently balance the circulation of food and industrial products between urban and rural areas, the supply and marketing co-op system was born.
A year after the termination of Soviet aids to China in 1957, Beijing transformed its supply and marketing co-op system to a more centralized Commune System in the name of improving the “self-reliance” of poor communities to solve the issues of impoverishment. Later that same year, China triggered the second Taiwan Strait Crisis by initiating an artillery bombardment of Taiwan’s front-line islands, Quemoy and Matsu. Even though there was no direct evidence showing that the nearly decade-long collectivization movement in the 1950s was designed in the first place to target Taiwan, it was still an outgrowth of a grim geopolitical circumstance China believed it was in. Therefore, it is not difficult to understand China’s motivation to revive the Co-op system today.
Co-op 2.0: Decoupling from the U.S. and Targeting Taiwan?
The recent Biden-Xi meeting during the G20 summit may have sent a positive signal to the world that a period of détentebetween the U.S. and China could be expected in the near future, but a real breakthrough in their systematic competition may take a much longer time. With the successful implementation of the Regional Comprehensive Economic Partnership (RCEP) this year, China’s economic influence could be further projected in the region, which would largely bolster China’s confidence that building a regional trade bloc to exclude U.S. influence is feasible. China’s plan of becoming economic autarky, as having been framed as “internal circulation” , may be a workable cause so that a self-reliant China would no longer needs external demand to be a major driver of its economic growth.
Following the recent revival of Quadrilateral Security Dialogue (Quad) and the establishment of AUKUS, the announcement of IPEF by the United States undoubtedly reaffirm China’s conviction that it is again caught between a rock and a hard place the way it was in the early 1950s—external challenges with intensifying geopolitical tensions and internal downward economy compounded by its unwavering “zero Covid” policy. Consequently, the rebooting of the supply and marketing cooperatives was initiated with the hope to pave the way for a grand duel strategy in the future: externally, further decoupling from global economic system dominated by the U.S. and its western democratic allies; internally, tightening the government’s grip on the economy to weather international sanctions that could be imposed by western countries.
It is without doubt that Taiwan Strait is the most probable battlefield should any hot wars initiated by China in the years to come. In spite of speculations that Russia’s setbacks in Ukraine may thwart China’s potential aggression against the self-governing island, Xi Jinping’s Taiwan ambition did not seem to take a hit. Instead, his historic third term as the top leader of China appeared to inject a shot of adrenaline to his “wolf-warrior” warmongering proclivity. Not only did the 20th Party Congress deliver a work report that manifested “the most authoritative” evaluation of China’s Taiwan policy, but Xi’ recent portrayal of China’s geopolitical situation as “unstable and uncertain” was a message sent to the United States and Taiwan that any provocative initiatives from them could be greeted with China’s forceful responses.
However, that type of forceful responses would come at a cost as having been seen in Russia’s case. Having learned from from Russia’ lack of economic preparation for international sanctions, Beijing realizes the importance of planning ahead. Thus, the supply and marketing cooperative system would function as a practical drill for China’s need to transform its socialist market economy to wartime economy for possible military confrontations with the U.S. and Taiwan.
Implications for Counterstrategies of the U.S. and Taiwan
The legislation of America’s new export controls of semiconductor chips may have landed a huge blow to the China’s hope to save its economy via high-tech industry, but it is not likely that the U.S. would directly respond to the intentions behind China’s Co-op 2.0 other than continuing to proceed the advancement of IPEF. Apropos to certain bilateral trade issues, the Biden administration may even favor a temporary ceasefire with Beijing, not only for the urgency to tackle the ongoing inflation, but also for the 2024 presidential election.
On the other hand, Taiwan can actually make the most of America’s “Pivot to Asia 2.0” to win itself more bargaining chips. First, despite being denied membership, Taiwan can still take advantage of the support from its allies inside of American congress to seek active participation in IPEF under the name of the “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”, the same title it uses as a member of the WTO. Second, it should put more efforts to promote the “Chip 4 Alliance” which is comprised of the United States, Taiwan, Japan, and South Korea, and strengthen technological ties with more European democracies. Last, it can seek more strategic dialogues with the new Republican-dominated congress. Compared to his predecessor, the would-be House Speaker, Kevin McCarthy, holds a tougher stance toward China and has already set to form a special committee to contain Beijing. Taiwan’s active interactions with the new American congress would be helpful to increase its strategic value to both U.S. China policy and U.S. partisan politics in the following two years.