A new report from the German Marshall Fund of the United States outlines steep military, economic, social, and international costs China could face in a conflict with Taiwan, including scenarios ranging from a “minor conflict” to a “major war.” The report says a large-scale invasion could lead to months of fighting and end with Chinese forces withdrawing from Taiwan’s main island, while still retaining control of the offshore Kinmen and Matsu islands.
The report is titled “If China Attacks Taiwan: The Consequences for China of ‘Minor Conflict’ and ‘Major War’ Scenarios,” and it was released on Monday, as described by multiple outlets. Focus Taiwan reported that the German Marshall Fund is partially funded by the United States government and that the report aims to predict consequences for China in both “major war” and “minor conflict” scenarios.
What the report says could happen militarily
In the report’s “major war” scenario, the conflict begins with an amphibious invasion of Taiwan and includes attacks on U.S. military bases in Japan and Guam, according to the Taipei Times. Focus Taiwan said one author, Zack Cooper, described a major war as starting with amphibious landings, paired with attacks on Taiwan’s military and U.S. forces in Japan and Guam.
Even if Chinese forces are able to land on Taiwan, the report says their supply lines could be severed by Taiwanese and U.S. strikes on ships and aircraft crossing the Taiwan Strait, in the scenario described by Focus Taiwan. Under these conditions, the report envisions several months of heavy fighting and “massive losses,” potentially including up to 100,000 Chinese troops killed, Focus Taiwan reported.
The Taipei Times wrote that the report estimates the People’s Liberation Army could lose more than half of its active-duty ground forces, including 100,000 troops, in a major war scenario. Both the Taipei Times and Focus Taiwan said the report’s major war scenario ends with Chinese forces withdrawing from Taiwan’s main island, while still retaining control of the Kinmen and Matsu islands.
The report also lays out estimated losses for multiple parties in a major war scenario. The Taipei Times reported the estimates as 50,000 Taiwanese military and 50,000 Taiwanese civilian casualties, along with 5,000 U.S. military and 1,000 U.S. civilian casualties, and 1,000 Japanese military and 500 Japanese civilian casualties. RTI described the same figures as deaths and said the fighting could last several months before the PLA withdraws from Taiwan’s main island while retaining Kinmen and Matsu.
“Minor conflict” versus “major war”
The report distinguishes between a “minor conflict” and a “major war,” and it treats them as different kinds of Taiwan Strait crises with different levels of escalation and different international responses. The Taipei Times said the report defines a minor conflict as a blockade by Chinese ships and aircraft, involving deadly air and maritime confrontations between the PLA and Taiwan, without losses of foreign personnel, and ending with U.S. intervention to ensure both sides agree to de-escalate.
Focus Taiwan described a “minor conflict” in slightly different operational terms, saying it could involve weeks-long air and maritime battles, breaches of Taiwan’s territorial waters and airspace, and a “quarantine” of major Taiwanese ports. The Taipei Times also said the report’s contingencies cover scenarios expected to occur between this year and 2030.
Economic fallout and sanctions risks
The report warns that even limited military action could be economically devastating for China, RTI said, with potential costs reaching the trillions of dollars. The Taipei Times reported that the paper references estimates by Rhodium of US$2 trillion to US$3 trillion and by Bloomberg of US$10 trillion in economic losses in a limited escalation scenario.
The Taipei Times also highlighted the report’s point that China’s annual exports account for about 20 percent of GDP, compared with about 10 percent for the United States, and said a conflict could threaten what the report describes as China’s only sources of future economic growth by cutting off exports. In a war scenario, the report says China could face near-total embargoes on trade, U.S. sanctions, major swings in global financial markets, and disruption to manufacturing supply chains, the Taipei Times wrote.
The report also suggests the broader global economy could fracture into blocs under a conflict scenario. RTI said the report describes a large-scale conflict as potentially splitting the global economy into a U.S.-led coalition driven mainly by market demand and a China-linked coalition driven mainly by commodity and raw material suppliers. The Taipei Times similarly said the report envisions three blocs: a larger U.S.-aligned group, a smaller Beijing-aligned group, and a group trying to stay neutral while trading with both sides.
Social and political pressures inside China
Beyond the battlefield and the economy, the report argues a Taiwan contingency could trigger major internal strain for Beijing. The Taipei Times said the report warns of significant social unrest and says a contingency could test the Chinese Communist Party’s ability to maintain internal political order and social control, particularly if China were defeated.
The report lists potential risks including loss of legitimacy for the CCP, sensitivity to casualties during demographic decline, dissatisfaction linked to economic consequences, and emboldened ethnic separatist movements, according to the Taipei Times. The Taipei Times added that the report says the CCP is preparing through intensive surveillance and internal security measures, but could still struggle to maintain control in a major conflict due to shortages, political disillusionment, and population dislocation.
RTI reported that in a smaller-scale Taiwan Strait conflict, transportation blockades could disrupt food and medicine supplies to coastal areas. RTI also said the report warns that a prolonged confrontation with rising casualties could raise questions about the legitimacy of the conflict and lead to social unrest.
International reaction scenarios
The report lays out a wide range of potential international responses, but it says only a few would be seen as especially costly by Beijing in a major war scenario. Focus Taiwan reported that among several dozen possible international responses, the report identifies four as “high cost,” including freezing the assets of Chinese leaders, which it describes as having a high likelihood. Focus Taiwan said the other three “high cost” options are described as low likelihood: signing a NATO-like Asian alliance, recognizing Taiwan’s independence, and signing a treaty alliance with Taiwan.
In the minor-conflict scenario, the report describes a more limited response from other countries. Focus Taiwan said the report suggests countries might issue travel warnings for China and release critical public statements, which the report characterizes as low cost for Beijing.
For a major conflict, the report also outlines harsher diplomatic and economic steps that could emerge as the war drags on. RTI said the report describes a large-scale conflict as prompting the U.S. and its allies to recall ambassadors and expel Chinese embassy personnel, with some countries possibly withdrawing from the Belt and Road Initiative and halting BRICS cooperation as sanctions and boycotts intensify. The Taipei Times likewise said the report describes potential withdrawals of foreign ambassadors and noncombatants, pullouts from Belt and Road, and withdrawals from groups such as BRICS and the Shanghai Cooperation Organization.
Why the report says deterrence may fail
Even as it outlines severe consequences, the report argues that Beijing could still underestimate the real costs of conflict. The Taipei Times quoted the report’s view that “deterrence rests on perceptions, rather than reality,” and said Chinese leaders may misjudge Taiwan’s or the U.S. capabilities or commitment, underestimate the costs, or feel they have no alternative and must achieve “reunification” on a timetable.
The report also raises the risk of political shock inside China if a war ends badly. RTI said the report argues that large casualties and high-visibility losses, such as sunken aircraft carriers, would be difficult to hide and that defeat could lead leaders to shift blame to PLA commanders, potentially triggering a military coup. The Taipei Times similarly said the report raises the possibility of military backing for a rival civilian leader or even a coup aimed at restoring national pride after a defeat.
