The question is will Xi invade Taiwan as a Nationalist project to "change the subject" from economic difficulties at home? It's tempting to say no, but talking about geopolitical actions assumes that the players are aware of what is going on.
The big issues for China are (a) demographic, (b) energy, (c) food, (d) debt, and (e) globalization.
Demographic pressures are even more serious than first thought: One thing Xi is aware of because China made a big deal of admitting it, is that for the past 40 years it has been fudging its birth rate numbers and that China's population is between 100 and 150 million smaller, which means that China's demographic chart (with fewer young people) is even worse than it was projected two years ago in their 2020 census. Xi is probably not aware that labor shortages have already started and they can easily be extrapolated from the rapid rise in wages (14 fold increase in the past decade -- now nearly three times more expensive than Mexico). Demographics is a ticking timebomb, and China is now a rapidly aging society, and there are no solutions. China is not unique but is by far the worse, moreover, it is now thought that there is a 10% male/female imbalance which makes it even worse. In addition, birth rates/women is in free fall, averaging only 1.3 per female (2.1 is replacement), and in cities it is below 0.7. Mathematically, China's 2100 population will be less than 800 million, but unlike 1954, when China's population was last 800 million and where 90% of its population was below the age of 60, in 2100 it will be 50% of the population that will be over the age of 60. That's problem #one.
Unlike Russia, China is a net energy importer -- the entire sector is in trouble (it's almost certain that Xi is unaware of this problem -- as he was unaware that for nearly 6 months in 2022 there were brownouts throughout Eastern China). 80% of China's energy is imported, and 95% of that relies on shipping, especially from Russia. that's problem #two
Although the vast majority of Chinese food is produced locally, it relies heavily on the import of fertilizers and pesticides from abroad. Russian Potash is a major element for Chinese agriculture (90% of its Potash is only shipped by sea, from Russia). Vessels are already unable to get insurance for shipping goods from Russia, and what is shipped is high-value export (oil) and not low-value Potash. In addition, in 2021 China had a huge swim flue epidemy, where they culled nearly 2/3rd of their entire pig stock. So 2023 could be a difficult year for China's agricultural sector, as rice needs Potash to grow. problem #3.
It has fallen out of favor but the Chinese debt problem remains massive. In effect, the Chinese government has recycled Chinese savings into loans from state-owned banks to state-owned corporations. Nearly 1/3rd of this debt is non-performing, (6 times the level of the US Savings and Loans crisis of the 1990s). For the rest of the world, it matters not since the Yuan is not convertible, and the debt is 100% domestic, still this will create massive tensions as Chinese savers try to access their savings. The debt will have to be written off, somehow problem #4.
Several years ago at a Foreign Affairs conference in Washington, a speaker (this is the early 90s) mentioned that one of the peace dividends from the ending of the cold war was that America would no longer have to be the world's policeman and that others would take over the costly job -- aside from Turkey few have stepped up if anything the Europeans have cut defense spending even more aggressively. However, a strategic shift has occurred, and the US's force deployment focus has shifted from the policeman of the world to 11 large battle groups that will take care of America's military interests. Over the past 20 years, America's foreign-based military presence has shrunk by nearly 50% from 400,000 to 200,000 and 25% of these are based in Japan which has a very strong security pact with the Americans. America has shrunk its destroyer base of vessels by nearly 2/3rds -- By the end of 2027 there will only be 11 left from a fleet of more than 40 in 2000. America is no longer patrolling the middle east (except for an aircraft carrier group). Problem #5 no more global policemen to keep shipping lanes safe
The reason that America is no longer a global policeman patrolling the seaways of the world is that America takes the view that the rest of the world can govern itself as America doesn't need them anymore. It has food, energy, and a stable population. Moreover, the cost of manufacturing in China is uneconomical for Americans; Mexicans are cheaper and better trained, and Mexico's demographics are favorable. Finally, America's demographic means that as the baby boomer retire consumption will fall, and America will need fewer of the gismos manufactured in China.
It is more than likely that Xi is unaware of problems #2, #3, #4, and even #5. But he knows that he has social unrest and a nationalistic press ready to follow. The Chinese press has long been pro annexation for Taiwan. Although Taiwan is apparently well-armed it is far from certain that it would not fall quickly. The question is what would the Americans do, especially since the Americans view Taiwan's own defense preparation as half-hearted (as Nancy Pelosi discovered on her last trip there). Now, America's (and Europe's) support for the Ukrainians has surprised the Russians, but the question is if Xi aware of this support.
Rumors are that Xi is in an "un-information bubble" -- his advisors are reluctant in giving him any information. He was made aware of the same level of demonstrations (which led to the unilateral lifting of Covid protocol in the entire country), the question is therefore what are Xi's 2023/24 strategic objectives? Time is not Xi's friend and the strong likelihood that the Russians will win in Ukraine means that Xi may consider that by the end of the summer a nationalistic war to "unify China" is a good idea.
My guess, therefore, is that by the end of 2023, Xi will seriously consider action in Taiwan, because he doesn't have the information. He may take the lessons from Putin and decide that the only way forward is a nationalistic war! But then again, the support by the Americans and Europeans for Ukraine has surprised everyone, especially the "citizen-led" boycott of all things Russian -- that the Chinese cannot even compute. Still it would be an error to think that Xi is working with a full information deck...
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