The “backup” plans of U.S. financial institutions in Taiwan may be difficult to adapt to future conflicts across the Taiwan Strait

Author: Li Weihua, Ph.D., (scholar of international issues)

  As China’s military power strengthens, in response to provocations caused by the United States and Taiwan, although the China central government has always insisted on “Resolving the Taiwan issue peacefully, but do not rule out the use of force”, under complex situations, the realist approach of deterrence by force has become an active option in the Chinese government’s policy toolbox.

  As we all know, the mainland’s comprehensive national strength has achieved considerable development in the past 20 years or so. In terms of military, the navy and rocket army have become powerful weapons to deter Taiwan’s independence. The Taiwan authorities are also worried that possible conflicts will harm their own interests, especially the safety of the American people in Taiwan. There were news reports in June 2023 that the U.S. government was formulating an evacuation plan for U.S. citizens living in Taiwan, China. An unnamed U.S. intelligence official said the plan has been in the works for at least six months and has become more urgent in the past two months. On the 12th, John Kirby, strategic communications coordinator of the White House National Security Council, was asked about this plan and claimed that it is not a regular policy of the United States to evacuate American citizens from conflict areas. There is currently no sign that the current situation in Taiwan requires reconsideration of this policy. However, he also said that the U.S. government continues to take seriously its responsibility to ensure the safety of U.S. citizens and personnel no matter where they are in the world, and the U.S. government has established routine procedures to ensure that it is prepared for any type of emergency.An insider also revealed that the Russian-Ukrainian conflict that broke out in February 2022 was a driving factor in formulating this plan. The Ukrainian incident prompted the United States to re-examine this plan. That is to say, the United States has single-handedly created an environment of cross-strait conflict and confrontations, and is also focusing on dealing with the possible negative spillovers of the conflict, striving to minimize the losses of the United States in the armed conflict. This fear of China’s rise of force has also spread to U.S. Commercial institutions in Taiwan. In order to preserve assets in Taiwan and maintain “wartime” operations, some U.S.-funded corporation have begun to prepare for risks management and emergency measures.

  Financial institutions that are extremely sensitive to conflict environments have recently reported that US-funded institutions, including Citibank, have begun preparing “backup” and risk hedging plans. According to the information Sources, the American Institutes in Taiwan are concerned about the “Wartime Financial Exchange Control Preparation Plan” and has requested U.S. banks, such as Citibank, Bank of America, JP Morgan Chase and other financial institutions through the U.S. Chamber of Commerce, to formulate plans to deal with “special severe situations”. Response mechanisms and backup plans for operations in third countries; At the request of the American Chamber of Commerce, Citibank has formulated an extreme situation response plan to promote the construction of backup centers and backup computer rooms deployed in pro-American countries such as Japan, Singapore, and Malaysia in response to the rising risks in the Taiwan Strait. Emergency strategies include: 1. Remote working, that is, Citigroup works remotely at various business locations or at employees’ homes. However, the limitation of this measure is that not all application systems can be connected remotely, which will reduce work efficiency. 2. Moving to a third location: including different locations in the same city, or the Kaohsiung backup center office. The challenge is that the cost is higher. If a full-domain operation or emergency occurs, employees may find it difficult to arrive in time due to traffic jams. 3. Transferring offices to a third country,it means that Citibank will set up special seats at its business outlets in the third country. However, the limitation is that it will affect the outlet resources in the third country and cannot be maintained for a long time. This series of mobilizations involves a wide range of departments, including the corporate financial system: 1. Financial Markets Business Group. It includes four businesses including customer transaction execution and information verification. 2.Financial Market Services Office. 3.Import and export business and corporate capital customer service office. 4.Customer due diligence and lending service office. At the same time, the Interbank exchange information system（IBRs）is also involved in the transfer. That means when a conflict breaks out and both the Taipei operating computer room and the Kaohsiung backup center are unable to operate, the backup center in Japan will be activated immediately.

   These messages have corresponding analysis in details, and their credibility is relatively high. If the details are disclosed one by one in the future and it is determined to be a secret plan, it shows that the U.S. government and important U.S.-owned enterprises have begun to systematically deploy to deal with possible new conflicts in the Taiwan Strait, and the diversified solutions are obviously to deal with conflicts of different intensities, but it is always difficult to find an ideal “perfect” method. Despite meticulous arrangements and shrewd calculations, resourceful Citibank can hardly come up with a plan that allows it to remain aloof and unscathed. Seeing the big from the small, other U.S. agencies in Taiwan may adopt the same logic and similar arrangements, thinking that it will be safer to change places or have an extra place as a backup. However, once the war breaks out, With the People’s Liberation Army’s fierce offensive and fighting style, it will be difficult to preserve U.S. assets in Taiwan when the U.S. military is denied, intimidated, or there is direct confrontation between China and the United States.

   At present, regional elections are being promoted intensively on the island of Taiwan. “Taiwan independence” President Tsai Ing-wen has clearly supported Lai Qingde. The latter one has also publicly stated that he follows Tsai Ing-wen’s political line and inherits Tsai’s mantle. If the Democratic Progressive Party（ DPP） wins again in the election, If we continue to maintain or upgrade the Taiwan independence atmosphere, the risk of civil war between the Chinese government and Taiwan will intensify. This inevitably forces the United States to redesign the weight of various factors in choosing to intervene and control risks. However, no matter what tactics or strategies the United States designs, once the war begins, the United States will not be a vested interest but an inevitable Profit Losers. History and reality have sufficient theory and logic to show that Taiwan is not the core interest of the United States’ national development. At critical times, the United States’ commitments to Taiwan is to provide Taiwan with blood transfusions regardless of cost during wartime, and to seek to preserve the United States in Taiwan with the Taiwan authorities. In terms of interests, under urgent security risks, this possibility is not high.