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The U.S.-China Conflict Over Chips Is About to Get Uglier - Bloomberg
The ability to make semiconductors for everything from artificial intelligence to smartphones has become a national security issue, and the U.S. election won’t change that.
Twelve inch silicon wafers being manufactured at a TSMC facility in Taiwan. Source: Taiwan Semiconductor Maufacturing Co. Ltd. On a scorching hot day in late August, representatives of Taiwan’s government and industry crowded into the clinical cool of a state-of-the-art semiconductor facility for a symbolic moment in the global tech conflict. They were attending the opening ceremony for a training center built by Dutch company ASML Holding at a cost of about $16 million, small change for an industry used to spending $10 billion or more on a single advanced manufacturing plant. The real value of the site in the southern city of Tainan is strategic: It’s one of just two such facilities outside the Netherlands capable of training semiconductor engineers to fabricate cutting-edge chips on ASML machines. Fellow U.S. ally South Korea hosts the other — and Washington is working hard to ensure China never acquires the same technology. Taiwan Semiconductor Manufacturing Co. is the world's largest contract chipmaker. As the U.S.-China confrontation takes root, the ability to craft chips for everything from artificial intelligence and data centers to autonomous cars and smartphones has become an issue of national security, injecting government into business decisions over where to manufacture chips and to whom to sell them. Those tensions could kick into overdrive as Communist Party leaders set a five-year plan that includes developing China’s domestic technology industry, notably its chip capabilities. Semiconductors made from silicon wafers mounted with billions of microscopic transistors are the basic component of modern digital life and the building blocks of innovation for the future. They are arguably one of the world’s most important industries, with sales of $412 billion last year; scale that up to the electronics industry that depends on chips, and it’s worth some $5.2 trillion globally, according to German manufacturers. Semiconductors are the basic component of modern digital life and the building blocks of innovation for the future. Politics is roiling that business model, sparking a drive for more autonomy from the U.S. to China, Europe and Japan. “We’re in a new world where governments are more concerned about the security of their digital infrastructure and the resiliency of their supply chains,” said Jimmy Goodrich, vice president of global policy with the Washington-based Semiconductor Industry Association. “The techno-nationalist trends gaining traction in multiple capitals around the world are a challenge to the semiconductor industry.” At once highly globalized and yet concentrated in the hands of a few countries, the industry has choke points that the U.S. under the presidency of Donald Trump has sought to exploit in order to thwart China’s plans to become a world leader in chip production. Semiconductor Production The industry is divided into three main areas, though businesses are integrating other specializations to centralize their supply chain Washington says Beijing can only achieve that goal through state subvention at the expense of U.S. industry, while furthering Communist Party access to high-tech tools for surveillance and repression. China rejects the allegations, accusing the U.S. of hypocrisy and acting out of political motivation. For both sides, Taiwan, which is responsible for some 70% of chips manufactured to order, is the new front line. Beijing is increasingly hostile toward Taiwan, a democratically governed island it regards as a renegade province. Taiwan Semiconductor Manufacturing Co.’s status as the world’s largest contract chipmaker — a trend taking over the industry — the go-to supplier for Apple Inc. and the focus of next-generation chip-making, adds another dimension to China’s enmity, and to its standoff with the U.S. A Taiwanese Air Force F-16 follows a Chinese Army Air Force H-6 bomber as it passes near Taiwan in February. Beijing has become increasingly hostile toward Taiwan. TSMC has become “turf that all geopolitical players want to secure,” founder Morris Chang said in November. Just a couple of kilometers from the new training center, cranes dot a massive construction site where TSMC is building “fabs” in which it will manufacture the most advanced chips in the world — chips that are no longer available to China’s Huawei Technologies due to U.S. export controls. Huawei used to be TSMC’s second-largest customer, accounting for 14% of sales; those shipments stopped in September. The White House has also imposed export restrictions on China’s largest chipmaker, Semiconductor Manufacturing International Corp., having already squashed Fujian Jinhua Integrated Circuit Co., once among Beijing’s biggest hopes to climb the chip ladder. The U.S. is also reaching out to key players at home and abroad to ask them to reconsider their relations with China. President Trump, left, and President Xi Jinping, in Beijing, in 2017. The White House has imposed export restrictions on China's largest chipmaker SMIC. China’s intentions are so alarming to America because chips can be dual-use items with military applications, according to a former official familiar with the U.S. administration’s efforts. “They are the fundamental basis of our qualitative military advantage, from missiles to radars to submarines,” the official said. After decades when the industry was encouraged to go global, Trump is attempting to reel it back home. The CHIPS for America Act introduced to Congress in June aims to set up incentives to support semiconductor manufacturing and research in the U.S. China isn’t standing by as its high-tech ambitions are kneecapped One executive at a Chinese semiconductor company, asking not to be named due to commercial and political sensitivities, said three of its deals had been aborted because of concerns raised by the Committee on Foreign Investment in the U.S., or CFIUS, which reviews the national security implications of transactions. Germany has also been effectively cut off, making any deals very difficult, the person said. China “firmly opposes the unjustified suppression” of its companies by the U.S. “under the weakest pretext of national security,” and will continue to defend them, Foreign Ministry spokesman Wang Wenbin told reporters in late September. China — the world’s biggest semiconductor market, accounting for more than 50% of all chips sold — isn’t standing by as its high-tech ambitions are kneecapped. That outsized demand means many major deals need Beijing’s sign-off: Qualcomm gave up its pursuit of NXP Semiconductors in 2018 after failing to win approval from China. China’s five-year plan for the chip industry will lend it the same strategic importance Beijing gave to its atomic bomb program. What's more, a law passed Oct. 17 may allow China to hit back at the U.S., with speculation that it could prompt export controls on rare earths used in chip production. Still, the rolling restrictions imposed by Trump haven’t just hit China’s chip capabilities but are upending the entire industry. And there’s scant sign of a climbdown, whoever wins the U.S. election in November. President Obama handles an Intel wafer while touring a facility at Intel Corp. in Hillsboro, Oregon, in 2011. The Obama administration first acted on the threat from China. Citing the need to promote “digital sovereignty,” the European Commission is exploring a 30 billion-euro ($35 billion) drive to raise Europe’s share of the world chip market to 20%, from less than 10% now. Japan is also looking to bolster its domestic capacity. At least one Japanese delegation traveled to Taiwan in May and June this year in the hope of convincing TSMC to invest in Japan, a person with knowledge of the visit said. But TSMC announced in May that it was building a $12 billion facility in Arizona, and the company declined to receive any foreign visitors seeking to woo it, said another person familiar with the company’s thinking. Both asked not to be named discussing corporate strategy. Meanwhile South Korea, home to Samsung, the No. 1 memory chipmaker, is striving for more self-reliance after Japan imposed export curbs last year on chemicals used in semiconductor manufacture during a flare-up in the countries’ tensions over Japan’s wartime past. While the U.S. remains dominant with giants like Intel Corp and Qualcomm and a virtual monopoly on the software essential to chip design, “there’s no region in the world that can proclaim strategic autonomy in semiconductors,” said Jan-Peter Kleinhans, director of the Technology and Geopolitics project at Berlin-based think tank Stiftung Neue Verantwortung. “Take out any of these players and the value chain falls down.” Chip Industry Choke Points The industry’s biggest companies are siloed in just a few countries Source: Bloomberg data Note: Samsung revenue figures are for its semiconductor segment. In January, days before Trump signed an initial trade deal with China, Secretary of State Michael Pompeo sat down for dinner with around 30 CEOs in Silicon Valley. He was the guest of Keith Krach, a 30-year veteran of the tech scene who was appointed undersecretary for economic growth in June 2019. Pompeo had a message for them: China’s Communist Party “is a threat to your companies because they don’t want to compete, they want to put you out of business,” Krach recalled him saying, he told a virtual conference of the German Marshall Fund of the United States on Sept. 29. From left: Keith Krach, Taiwanese president Tsai Ing-wen, and TSMC founder Morris Chang inside Tsai’s presidential residence in Taipei in September. Trump may have weaponized the semiconductor value chain, but it was the Obama administration that first acted on the threat posed by China, unveiling a semiconductor strategy in January 2017 as one of its last acts. Trump picked up the baton, but the nature of the supply chain means that others are in the U.S. line of sight. Israel — a high-tech R&D hub where Intel is the largest private employer — exported semiconductors worth about $2.1 billion last year, with about half going to China, data compiled by UN Comtrade shows. That closeness to China risks becoming a liability. Zvika Orron, a partner at Israel’s Viola Ventures who leads semiconductor investing, said there’s a hesitancy on the Israeli side to look to China because of worry that Chinese funding could imperil future U.S. deals. Carice Witte, founder of the SIGNAL nonprofit focused on Israel-China ties, said the U.S. is bound to “start asking more questions.” The U.K. is another pinch point thanks to Arm Ltd., whose instruction set — the basic code that allows chips to communicate with software — underlies everything from smartphones to the world’s fastest supercomputer. Arm currently sells to China, but the company’s takeover by Nvidia Corp puts that business in doubt. If the $40 billion deal wins regulatory approval, Arm would fall under American jurisdiction and become even more subject to U.S. export controls. A technician monitors the manufacture of silicon wafers in Silicon Valley. After decades when the industry was encouraged to go global, Trump is attempting to reel it back home. While the U.K. government has yet to show its hand, it allowed the sale of Arm to Softbank of Japan in 2016, so wouldn’t normally be expected to intervene now. But the newly strategic nature of the industry has prompted lawmakers to call for a review of the deal’s implications. Here too there are concerns at being caught between the U.S. and China. Losing a world-class technology company to the U.S. for the Department of Justice to “weaponize” is not a good place to be, according to a person with knowledge of British national security considerations. The risk, they said, is a U.K. strategic asset becomes “recognized as part of the U.S. arsenal” in its campaign against China. Over the Taiwan Strait on mainland China, the mood at the 2020 World Semiconductor Conference in Nanjing in late August was gloomy. Chinese executives worried what the Trump administration might do next to hobble Beijing’s progress. “The conflict remains very fluid, which makes it impossible to predict what next moves both sides are going to take,” said Huang Yan, application and sales director at Senodia Technology, a Shanghai-based chip design company that develops sensor chips for smartphones. China is on course to import $300 billion of semiconductors for the third straight year, underscoring its dependence on U.S. technology. That’s something President Xi Jinping is determined to end. Xi has pledged an estimated $1.4 trillion through 2025 for technologies from artificial intelligence to wireless networks. A focus of Beijing is to accelerate research into so-called third-generation semiconductors — circuits made of materials such as silicon carbide and gallium nitride, a fledgling technology where no country dominates. Yet without silicon capabilities it will be difficult for China to build a proper semiconductor industry, said a senior TSMC official. Another person from a company involved in third-generation chip production said designing them is an art, and even poaching a team of designers won’t necessarily guarantee success. “A world in which the U.S. and China are independent from one another is a negative outcome for everyone” The consensus is it won’t be easy for China to catch up, especially at the cutting-edge where TSMC and Samsung are producing chips whose circuits are measured in single-digit nanometers, or billionths of a meter. SMIC would have to double annual research spending in the next two-to-three years just to prevent its technology gap with those companies widening, says Bloomberg Intelligence analyst Charles Shum. The tussle raises the prospect of a broader decoupling of the global industry with two distinct supply chains. As with 5G, the question then becomes one of the extent of each system: Does China’s high-tech gravity pull in Southeast Asia and parts of Europe, or is it confined to its immediate neighborhood? How many allies will side with the U.S.? To be sure, the chip industry is still thriving, with the benchmark Philadelphia Semiconductor Index up about 30% this year. Geopolitics is now a feature of boardrooms, said the SIA’s Goodrich, but 5G and AI are likely to cause more market upheaval. The direction of travel still worries key players. Shares of Micron Technology Inc., the largest U.S. chipmaker, fell in September after it was forced to halt shipments to Huawei, its biggest customer. Complete decoupling would harm U.S. competitiveness and hurt China, raising the prospect of less money for R&D, slowing innovation, said Goodrich. “A world in which the U.S. and China are independent from one another is a negative outcome for everyone.” — With assistance by Jeremy Diamond, Kitty Donaldson, Ivan Levingston, Yuan Gao, Yuki Furukawa, and Edwin Chan
Treat Covid-19 Early to Save Patients’ Lives, SARS Veteran Urges - Bloomberg
Hong Kong’s top pandemic doctor sees a way out of intensive care for thousands of Covid-19 patients: keeping them from entering in the first place.
Hong Kong’s top pandemic doctor sees a way out of intensive care for thousands of Covid-19 patients: keeping them from entering in the first place. After sobering experiences 17 years ago with the outbreak of severe acute respiratory syndrome, Yuen Kwok-Yung is advocating early, aggressive hospitalization and treatment to minimize ravaging disease and death. Hong Kong’s 2% Covid-19 fatality rate as of Friday, well below the global average, lends weight to the approach. Most therapies for SARS-CoV-2 are authorized for use in severely ill patients, in some cases backed by research that’s still in question. Yuen, the Henry Fok professor in infectious diseases at the University of Hong Kong for 15 years, is admitting patients with minimal disease so they can be isolated, monitored and treated if needed. “In places like the U.K. and U.S., usually if you have mild symptoms, you are not admitted to a hospital at all -- you just wait at home until you feel very bad or you have shortness of breath,” he explained over Zoom from his office. “But we basically admit any patients, even without much symptoms, into the hospital for isolation.” The strategy reduces transmission in the community, and enables patients to enter a clinical trial and receive experimental treatment soon after developing a fever or showing other signs of worsening illness, Yuen said. That’s critical because the amount of SARS-CoV-2 virus or “viral load” in patients peaks at around the time symptoms appear -- similar to influenza. Yuen, who graduated from the University of Hong Kong in 1981 and has the rare distinction of being a microbiologist, surgeon and physician, has been at the forefront of the city’s response to infectious outbreaks for decades. In 1998, he and colleagues described the first dozen patients afflicted with the H5N1 strain of avian influenza. Five years later, they reported SARS in a patient visiting Hong Kong from Guangzhou, China. Yuen recalls the trial and error involved in saving patients from SARS, also caused by a coronavirus. Soon after, he identified “ a time bomb” of environmental and social conditions that he predicted would inevitably result in more deadly coronavirus outbreaks. That prediction came true in December, when the first cases of a mysterious pneumonia came to light in Wuhan, in China’s Hubei province. Hong Kong responded to the novel coronavirus by preparing tests and advising citizens to wear masks. Meantime, Yuen’s lab was conducting research that led to the first reported cluster among family members in which human-to-human transmission of the new coronavirus occurred. In February, he joined the WHO-China Joint Mission to investigate the country’s early response and his lab has since reported a number of important findings, including the first confirmed SARS-CoV-2 reinfection. Bitter Lesson “All this is an extension of our experience in the year 2003,” Yuen said. “We have nothing to brag about because we learned bitterly from 2003 SARS.” The appearance of an unknown virus to which no one has immunity created a desperate need for effective treatments. Hong Kong doctors are using several experimental infusions including convalescent plasma -- a mix of factors extracted from recovered patients’ blood -- and interferon, an immune-system protein. They’re also using the antivirals ribavirin and Kaletra, although preliminary results released Thursday from a World Health Organization-led trial involving 11,266 patients in 30 countries found they don’t decrease patients deaths. Yuen said he wasn’t surprised by the results of the WHO’s study because the drugs weren’t administered soon after patients became ill. “No antiviral will work if given late,” he said. The drugs were also administered singly, rather in combinations that could add to their impact, he said. ‘Modestly Active’ “We know that one drug is not good because all of these are very modestly active,” Yuen said. “We need early cocktail therapy to get good results.” Giving a combination of ribavirin, Kaletra and interferon to patients in the first week of illness reduced the time to clear the virus by six days and shortened hospitalization by a week, when compared with giving Kaletra alone, Yuen and colleagues showed in a study in May. The trial, published in The Lancet medical journal, recruited 127 patients from Feb. 10 to March 20 -- more than half of the Covid-19 cases reported in Hong Kong during that period. Patients began treatment about five days after developing symptoms. “With the memory of the 2003 SARS pandemic, most patients with Covid-19 in Hong Kong accepted antiviral treatment, which explained our high recruitment rate,” Yuen and his team wrote. Sixteen years earlier, Yuen and many from the same group showed that a cocktail of ribavirin and Kaletra prevented serious illness and death in SARS patients. Saudi Arabia researchers said earlier this month that Kaletra given with interferon improved survival in patients hospitalized with Middle East respiratory syndrome, also caused by a coronavirus. The effect was greatest when treatment was started within a week of symptom onset, the authors said, noting “an important time-to-treatment effect on mortality.” Interferon Response Evidence is mounting for early use of interferon in some patients. Blockbuster studies published by the journal Science last month showed about 14% of critical Covid-19 patients have insufficient levels of the substance, which orchestrates defenses against viral pathogens. Read More: Covid Doctors Find a Turning Point in Life-Threatening Cases If the body mounts a good interferon response when the viral load is low, it can limit subsequent viral replication and prevent dangerous inflammation, Yuen said. A late or delayed interferon response to a high viral load, though, may trigger severe damage to the lungs. “This is really disastrous,” he said. That’s made injections of interferon the “backbone” of early treatments. Some doctors outside Hong Kong agree with Yuen’s approach. Using antivirals early may suppress viral load and prevent the serious hyper-inflammatory response some patients develop in their second week of illness, said Richard Russell, a respiratory physician and senior clinical researcher in the Nuffield Department of Medicine at the University of Oxford, who is also conducting studies on Covid-19 patients. Yuen’s strategy has pointed to how multiple existing antivirals may be repurposed and partnered with immune-modulating drugs as a bridge until protective vaccines become available, said Steven Opal, clinical professor of medicine at Brown University in Providence, Rhode Island. Dexamethasone, a cheap, generic anti-inflammatory, was found in June to reduce deaths by almost a third among Covid-19 patients receiving mechanical ventilation. The University of Oxford study confirmed what Yuen had observed with SARS patients in 2003: that the medication could quell the immune overreaction, sometimes called a cytokine storm, in deteriorating patients showing signs of inflammation. Dexamethasone and Gilead Science Inc.’s remdesivir help patients with more advanced disease, said Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. “The one thing we really need to do is get a bunch more interventions for early infection to prevent people from going on to needing hospitalization,” he said in an interview with the American Lung Association this month. Antibodies that are specifically designed to fight the coronavirus may also help, Fauci said. U.S. President Donald Trump credited Regeneron Pharmaceuticals Inc.’s antibody treatment with his recovery from infection. Leprosy Drug Yuen’s team is also investigating the potential of clofazimine, an inexpensive, 50-year-old antimicrobial that’s on the WHO’s list of essential medicines for leprosy. Studies in hamsters indicated it could fight SARS-CoV-2 and prevent infection. Hong Kong took rapid and decisive action in response to Covid-19 because of the legacy of SARS, Yuen said. He hopes others will learn from the current crisis about the need to prepare for and mitigate the risks of future pandemics. “It’s the 2003 experience that allowed us to walk another mile early,” Yuen said. “I hope that everybody in the world will learn this time that emerging infectious disease is something that would happen more and more frequently.”
Goldman Says Short Dollar as Odds Firm for Biden Win, Vaccine - Bloomberg
The dollar may tumble to its lows of 2018 on the rising likelihood of Joe Biden winning the U.S. election and progress on a coronavirus vaccine, according to Goldman Sachs Group Inc.
The dollar may tumble to its lows of 2018 on the rising likelihood of Joe Biden winning the U.S. election and progress on a coronavirus vaccine, according to Goldman Sachs Group Inc. “The risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive outcome -- a win by Mr. Trump combined with a meaningful vaccine delay,” strategists including Zach Pandl wrote in a note Friday. “A ‘blue wave’ U.S. election and favorable news on the vaccine timeline could return the trade-weighted dollar and DXY index to their 2018 lows.” The ICE U.S. Dollar Index has fallen over 3% so far this year to just over the 93 level as investors reacted to unprecedented pandemic-related monetary stimulus from the Federal Reserve and rock-bottom interest rates. The gauge traded below 89 in 2018, a level which would imply a further slide of more than 4%. Goldman joins the likes of UBS Asset Management and Invesco Ltd. in predicting a weaker dollar as Biden extends his lead over President Donald Trump with less than three weeks to election day. It recommends investors short the dollar against a volatility-weighted basket consisting of the Mexican peso, South African rand and Indian rupee. The strategists also suggest buying the euro, Canadian and Australian dollars against the greenback. “The wide margin in current polls reduces the risk of a delayed election result, and the prospect for near-term vaccine breakthroughs may provide a backstop for risky assets,” they wrote.
China's Insistence That Taiwan Isn't a Country Starts Backfiring - Bloomberg
The more China tells the world that Taiwan isn’t a country, the more Beijing’s adversaries are starting to treat it like one.
The more China tells the world that Taiwan isn’t a country, the more Beijing’s adversaries are starting to treat it like one. Ahead of Taiwan’s National Day on Saturday, Beijing’s embassy in New Delhi was reported to have issued a letter telling India’s media not to refer to it as a country or to Tsai Ing-wen as its president. Indians responded by helping the hashtag #TaiwanNationalDay go viral while banners with the Taiwanese flag were hung outside the Chinese embassy. “Hats off to friends from around the world this year, #India in particular, for celebrating #TaiwanNationalDay,” Taiwanese Foreign Minister Joseph Wu wrote in a Twitter post on Saturday. Instead of marking Taiwan’s independence, a red line that Beijing has warned could trigger an invasion, the day commemorates a 1911 uprising in the central Chinese city of Wuhan against China’s last imperial dynasty. That led to the creation of the Republic of China, which leader Chiang Kai-shek then brought to Taiwan seven decades ago when he fled Beijing as the Communist Party took power. For many in Taiwan today, the Republic of China seems like historical relics with diminishing relevance for the democracy of 24 million people. Taiwan has long abandoned Chiang’s goal of reconquering what he knew as the mainland, and polls show that more and more Taiwanese don’t want any unification with China. But celebrating the Republic of China is strategically useful for Tsai’s government. It allows her to sidestep the question of formal independence, avoiding a potentially devastating conflict with China while providing cover to create a distinct political and cultural identity for Taiwan -- ultimately undermining President Xi Jinping’s goal of subsuming it under Communist Party rule. “Taiwan has become more and more adept at finding space behind the ‘red lines,’” said Jonathan Sullivan, director of China Programs at the University of Nottingham Asia Research Institute. “Beyond a formal ‘declaration of independence,’ it is hard to think of a line that is not malleable or has actually worked.” Here’s What Could Happen If China Invaded Taiwan Military tensions have risen in recent months, with Chinese fighter jets moving ever closer to Taiwan as the Communist Party ramps up rhetoric, warning Tsai against moves that push it further away from China. It has been particularly angered by the Trump administration, which has stepped up weapons sales to Tsai’s government and sent over the most senior American officials to Taiwan in decades to discuss the pandemic and economic ties. In Tsai’s address at a national day event on Saturday, she called for talks with Beijing while vowing to defend the island. “We are willing to facilitate meaningful dialogue,” she said, adding that “showing weakness and making concessions will not bring peace.” Hu Xijin, editor of the Communist Party-run Global Times, said the remarks were Tsai’s “softest tone” in years and “obviously less arrogant than her past remarks.” He attributed the shift to China’s increased threats of war, which his newspaper has helped disseminate. “The Chinese mainland must maintain strong military pressure, which can be triggered at any time, over the island of Taiwan, to ensure that certain forces on the island restrain themselves,” Hu wrote. China has long used the threat of force to intimidate Taiwan. It fired missiles into waters near the main island of Taiwan in the late 1990s simply because then-leader Lee Teng-hui was allowed to speak at Cornell University. It also expressed fury at his proposal for Taiwan and China to have “special state-to-state” relations. But things have changed as Taiwan drifted ever further from the Chinese identity that Chiang’s Kuomintang party imposed on it via the Republic of China. Now Tsai and officials from her ruling Democratic Progressive Party regularly call Taiwan a country on social media. “We don’t have a need to declare ourselves an independent state,” Tsai told the BBC shortly after she was re-elected by a landslide in January. “We are an independent country already, and we call ourselves the Republic of China, Taiwan.” For many Taiwanese, the Republic of China was akin to a foreign occupation when the Kuomintang party arrived after Japan’s surrender in World War II. A violent uprising against the KMT prompted officials to massacre Japanese-trained civil servants, lawyers and doctors who could’ve administered an independent Taiwanese state. Taiwan endured decades of martial law under one-party rule before democratic reforms brought competitive elections, and in 2000, it elected the first non-KMT leader. During Tsai’s inauguration speech in 2016, she hailed the fact that the Taiwanese people had taken control of the Republic of China: “My dear fellow Taiwanese,” she said. “We did it.” Within 30 years Taiwan has gone from a one-party dictatorship to an open democratic system. The R.O.C. was re-born here. The Taiwanese people made it better, more beautiful, stronger. I am proud to serve as VP and contribute to this ongoing transformation.#TaiwanNationalDaypic.twitter.com/667ulaPHQI — 賴清德Lai Ching-te (@ChingteLai) October 9, 2020 Tsai’s government has sought to assert more of a Taiwanese national identity, including by redesigning passports this year to highlight the word “Taiwan” while minimizing “Republic of China.” At the same time, people who support a Taiwanese identity also take pride in Republic of China emblems such as the flag, according to Margaret Lewis, a law professor at Seton Hall University. “The symbols from the past have taken on new and complex meaning in the present,” she said. This broader shift doesn’t bode well for Xi’s plan to one day unite China and Taiwan, preferably through coercion rather than war. That has some observers particularly worried. “No trend is going in the PRC’s preferred direction, except perhaps the military balance,” said Sullivan from the University of Nottingham, referring to Communist Party rule in Beijing. “That’s what makes me nervous.”