Chinese President Xi Jinping is taking a page out of U.S. counterpart Donald Trump's book with his latest comments on Taiwan: Say it, and it becomes true.
But Xi's assertion that the reunification of Taiwan and China is "inevitable" is nothing short of political fantasy. It's the Chinese dream.
Look at a map of China, and you'll see Taiwan colored in the same way as the homeland. And, indeed, virtually all of the South China Sea. But coloring in is a child's game.
Taiwan, which calls itself the Republic of China, is a separate nation in all but United Nations status. It has a separate government, currency, military, immigration, police force, policy ... you name it.
Many Taiwanese would point out that China and Taiwan cannot be "reunified" because the Communist Party has never ruled Taiwan. The People's Republic of China on the mainland and the Republic of China in Taiwan can't be reunited if they've never been together in the first place.
If you want to go waaaay back, the Chinese presence on Taiwan only really began in the 1600s -- the original "aborigines," now marginalized, have more in common with the people of the Philippines than anywhere else.
Be that as it may, the Chinese president again raised the prospect of a Chinese invasion of Taiwan. "We make no promise to renounce the use of force, and reserve the option of taking all necessary measures," Xi said rather ominously.
Xi is of course playing to a home audience, and an international one, as much as anyone in Taiwan. What he is saying isn't new -- this was just a particularly strident statement at a politically sensitive time.
Xi was actually speaking on the 40th anniversary of a truce that China declared, unilaterally, with Taiwan. It stopped the artillery bombardment of islands controlled by Taiwan on Jan. 1, 1979, and offered to open up a dialogue with the island.
Politically, not a lot has progressed since then. Yet Xi sees some inexorable march of time as being on his side, part of China's manifest destiny to emerge as a world power.
"China must and will be united, which is an inevitable requirement for the historical rejuvenation of the Chinese nation in the new era," Xi said.
Not surprisingly, this hasn't gone down well with Taiwanese President Tsai Ing-wen, whose Democratic Progressive Party favors greater independence from China.
"The vast majority in Taiwan resolutely oppose 'one country, two systems', This is the 'Taiwan consensus'," she told reporters.
The Taiwanese find it incredibly frustrating that as of 1971 it has no seat at the United Nations. Due to Chinese pressure, Taiwan's number of official political allies has dwindled to a handful of nations, powerhouses like Swaziland, the Solomon Islands and Haiti, and at least one that would make a great Motown band, Saint Vincent and the Grenadines.
The Taiwanese find it incredibly frustrating that they are forced to compete as "Chinese Taipei" in the Olympics. They can't use their national anthem or their regular flag, with its bold red and blue. Instead, they use a flag song, and a special Olympic flag that has none of that boldness -- it looks like it was drawn by the same kid who did the Chinese coloring.
I had to laugh last year when the White House issued a statement that the Chinese Communist Party was engaged in "Orwellian nonsense" when it started forcing other people to color within its choice of lines. Beijing threated American Airlines (AAL) , United Airlines (UAL) and a host of other airlines for listing Taiwan, Hong Kong and Macau separately on their websites, instead coercing the carriers to list them as part of China.
Will this pressure, this "Say it and they'll believe it," pay off? In the short run, no.
In the long run, China hopes Taiwan will buy into the "One Country, Two Systems" system now in place in Hong Kong and Macau. It should not. The way China is running Hong Kong, my hometown, makes it clear there is really only "One Country" in the end, and "Two Systems" applies only when it suits Beijing.
China's courts already ruled that they are superior to Hong Kong's courts -- even though it says in Hong Kong's constitution that Hong Kong courts are independent and have "final adjudication." Beijing interprets the Basic Law however it sees fit.
There's a cluster of Taiwanese stocks that are set to suffer if trade and political tensions worsen.
The largest among their ranks is Taiwan Semiconductor Manufacturing Co. (TSM) , better known as TSMC. With a market capitalization of US$186.4 billion, it's a chipmaking giant that has fared better than most Asian exporters during the trade war. Its shares are off only 10.0% since the start of last year.
Apple AAPL supplier Foxconn is listed under its "proper" name, Hon Hai Precision Industry (HNHAF) (TW:2317). It's also massive, with a market cap of US$31.8 billion. But it is half its former size in stock market terms after a horrible 18 months, falling by 49.8% since August 2017. Embroiled in a complex legal war with Qualcomm QCOM, the company should not yet encourage investors looking for a bargain. Its future will be tied intricately with Apple shares, its largest customer by far.
ASE Technology Holding (ASX) is next in size, at US$8.0 billion market cap, and like TSMC is easy for U.S. investors to access, with its New York listing. It listed as a new entity in April 2018, as the merged company formed by Taiwan's two largest companies doing assembly, packaging and testing of integrated circuits. Its shares have slid 29.6% since its debut, but it's hard to read too much into that since the fall coincides with a terrible time for tech.
Catcher Technology (CHERF) (TW:2474), at US$5.8 billion, makes metal casings and metal parts for laptops, cellphones and hard drives. It has been a rollercoaster for investors to ride. The second half of 2015 saw it fall 45.7%; it rallied 71.4% from January through August 2017; then has cratered 38.2% since August 2018. Traders might find it ready for a rebound.
Pegatron (PGTRF) (TW:4938), at US$4.3 billion, is the second-largest contract manufacturer of electronics in Taiwan, behind Foxconn. It's another Apple supplier, which accounts for 60% of sales, and also makes Microsoft's MSFT Surface notebook computers. It shares the same trajectory as Foxconn, down 48.0% since July 2017 and apparently only knows one direction.
All five companies are worth putting on your radar if relations with Taiwan take a turn for the worse, or (let's hope) for the better.
They are all also caught in the crosswinds of the trade war, and the tech selloff. If all three winds blow behind their sales, watch out -- these five could take off.
