Power Transition and China-US Conflicts 47 ominous example of a territorial dispute.25 Given the periodic tensions over Taiwan,the growing power of the Chinese military,unambiguous statements by Chinese leaders,provocative statements by Taiwanese leaders, some evidence of increasing nationalism and the possibility of miscalculation either in Beijing,Taipei or Washington,DC,the prospect of war over Taiwan must be taken seriously. Second,a very reliable predictor of dissatisfaction is the buildup of armaments aimed at each other.26 Are China and the United States engaging in an arms buildup leading to an arms race? China is increasing its defence expenditure and now may rank third in the world behind the United States and Russia.Intelligence estimates anticipate that they will become the second largest defence producer in another decade. Annual increases exceed the national rate of growth of the economy. Most of the Chinese military spending is off budget-not disclosed in official budget documents.Of particular interest is the Chinese concen- tration of over 700 modern ballistic missiles in the Nanjing region across 25 Three distinct options loom in the future. Option 1:Taiwan seeks independence.Timing here is crucial.We believe that the time when Taiwan can seek independence with US support and without a military reaction by China has passed.Independence cannot now be achieved without immediate military confrontation and even if the United States intervenes and wins that localized conflict over Taiwan,the long-term consequences would be severe.Following a military loss,China would have every reason to be a permanently dissatisfied power and when it reaches parity,the prospects for global war would be increased significantly.In the longer run,as China grows in power and reaches parity with the United States,and the existing alliances are restructured in response to declining US dominance,the possibility for a peaceful accommodation over Taiwan diminishes.The danger in the independence calculation resides in the stipulation that Taiwan's allies in the United States will force the administration in power to come to its aid if attacked after a declaration of independence. This calculation represents the highest stakes of any global game and is based on a series of complex assumptions that cannot be confirmed in advance. Option 2:Taiwan is incorporated into China.Such reunification could take place in a smooth'and 'evolutionary'manner.Incorporation could result from direct or indirect negotiations between the two parties with or without the participation of the United States.We hesitate to suggest the terms of this complex issue but undoubtedly there will have to be specific guarantees reinforced perhaps by some outside body (United Nations or regional security complex)dealing specifically with local economic,social and political freedoms at the expense of relinquishing foreign policy jurisdiction to Beijing and some long-term arrangement for shared national security obligations.An incorporation or merger or joint venture,call it what you like,would help preserve the international peace by eliminating a territorial flash point between China and the United States. Option 3:Continuing the status quo.Tensions over Taiwan most likely will continue with repeated crises between China and the United States resulting in periods of high drama and perhaps increasing frustration on the Chinese side.Nationalism probably will increase during the Chinese developmental cycle.Under such conditions,as China approaches power parity with the United States sometime in the period 2020-2050,an attempt by China to use coercive means to re-incorporate Taiwan into China would force the US to make either of the two difficult choices.It could choose to look the other way and not intervene to protect Taiwan or it could commit its military to the defence of that island.In the former case,it would represent a de facto passing of the mantle of pre- eminence from the United States to China.In the latter case.it would represent the prospect of a severe war. 26 Suzanne Werner and Jacek Kugler,'Power Transitions and Military Buildups'. Chinese Journal of International Politics,Vol.1,2006,35-55ominous example of a territorial dispute.25 Given the periodic tensions over Taiwan, the growing power of the Chinese military, unambiguous statements by Chinese leaders, provocative statements by Taiwanese leaders, some evidence of increasing nationalism and the possibility of miscalculation either in Beijing, Taipei or Washington, DC, the prospect of war over Taiwan must be taken seriously. Second, a very reliable predictor of dissatisfaction is the buildup of armaments aimed at each other.26 Are China and the United States engaging in an arms buildup leading to an arms race? China is increasing its defence expenditure and now may rank third in the world behind the United States and Russia. Intelligence estimates anticipate that they will become the second largest defence producer in another decade. Annual increases exceed the national rate of growth of the economy. Most of the Chinese military spending is off budget—not disclosed in official budget documents. Of particular interest is the Chinese concen￾tration of over 700 modern ballistic missiles in the Nanjing region across 25 Three distinct options loom in the future. Option 1: Taiwan seeks independence. Timing here is crucial. We believe that the time when Taiwan can seek independence with US support and without a military reaction by China has passed. Independence cannot now be achieved without immediate military confrontation and even if the United States intervenes and wins that localized conflict over Taiwan, the long-term consequences would be severe. Following a military loss, China would have every reason to be a permanently dissatisfied power and when it reaches parity, the prospects for global war would be increased significantly. In the longer run, as China grows in power and reaches parity with the United States, and the existing alliances are restructured in response to declining US dominance, the possibility for a peaceful accommodation over Taiwan diminishes. The danger in the independence calculation resides in the stipulation that Taiwan’s allies in the United States will force the administration in power to come to its aid if attacked after a declaration of independence. This calculation represents the highest stakes of any global game and is based on a series of complex assumptions that cannot be confirmed in advance. Option 2: Taiwan is incorporated into China. Such reunification could take place in a ‘smooth’ and ‘evolutionary’ manner. Incorporation could result from direct or indirect negotiations between the two parties with or without the participation of the United States. We hesitate to suggest the terms of this complex issue but undoubtedly there will have to be specific guarantees reinforced perhaps by some outside body (United Nations or regional security complex) dealing specifically with local economic, social and political freedoms at the expense of relinquishing foreign policy jurisdiction to Beijing and some long-term arrangement for shared national security obligations. An incorporation or merger or joint venture, call it what you like, would help preserve the international peace by eliminating a territorial flash point between China and the United States. Option 3: Continuing the status quo. Tensions over Taiwan most likely will continue with repeated crises between China and the United States resulting in periods of high drama and perhaps increasing frustration on the Chinese side. Nationalism probably will increase during the Chinese developmental cycle. Under such conditions, as China approaches power parity with the United States sometime in the period 2020–2050, an attempt by China to use coercive means to re-incorporate Taiwan into China would force the US to make either of the two difficult choices. It could choose to look the other way and not intervene to protect Taiwan or it could commit its military to the defence of that island. In the former case, it would represent a de facto passing of the mantle of pre￾eminence from the United States to China. In the latter case, it would represent the prospect of a severe war. 26 Suzanne Werner and Jacek Kugler, ‘Power Transitions and Military Buildups’. Power Transition and China–US Conflicts 47 Chinese Journal of International Politics, Vol. 1, 2006, 35–55