As U.S.-China tensions continue to escalate, Taiwan can no longer hedge its bets between the two powers. The island must make pragmatic choices based on long-term economic and institutional risks. Chun Lee, an associate research fellow at the Taiwan WTO & RTA Center of the Chung-Hua Institution for Economic Research (CIER), argues that China under Communist Party control is moving toward a highly planned economy that fundamentally differs from Taiwan’s market-based system and those of the U.S. and Europe. For most countries, long-term engagement with China may actually bring structural shocks.
Lee analyzes that under Xi Jinping’s leadership, China’s policy priorities extend beyond maintaining regime stability to attempting to establish an alternative international order outside U.S. influence. Beijing frequently uses economic leverage to amplify other nations’ dependence on China, converting it into political influence. In recent years, industries across Europe have faced mounting competitive pressure from China, with Germany’s automotive sector serving as a clear example. This demonstrates that the risks China poses to the global economy are increasingly outweighing its economic opportunities.
Regarding Taiwan’s strategic direction, Lee emphasizes that the key consideration isn’t political posturing but rather who can provide Taiwan with future development space and stable market cooperation. From industrial, trade, and long-term growth perspectives, deepening cooperation with the United States, Europe, and other democratic market economies remains the path most aligned with Taiwan’s interests.
Lee observes that Europe is currently confronting several challenges, such as competition from China, the burden of transatlantic security sharing, and the need for political integration. This situation has prompted a reassessment of Europe’s external economic relationships and partnerships. Taiwan, with its complete industrial supply chains and market economy experience, is well-positioned to become a trusted partner for Europe in this process.
Author: CIER Editorial Team
Date: February 9, 2026