Escalating Military Tensions in the Taiwan Strait: The Normalization of Gray-Zone Provocations and South Korea's Response Options

Executive Summary

Tension in the Taiwan Strait has entered a phase in which gray-zone provocations are becoming the norm, as the Han Kuang exercises, AI-based cyberattacks, and China-Indonesia joint naval exercises overlap. Looking ahead, the base-case scenario—in which attrition-style pressure continues rather than physical conflict—carries the highest probability at 55%, though there remains a 25% possibility of escalation to accidental conflict depending on variables such as arms sales and the US-China summit. The United States stands at a crossroads over whether to use the Taiwan issue as a bargaining chip vis-à-vis China or to maintain it as a red line, while China is seeking a balance between the depletion of its justification for peaceful unification and the need for economic stability. Rather than betting on a specific scenario, South Korea should set the separate management of semiconductor supply chain risk as its top priority and remain wary of the simplistic calculus that links the Taiwan issue with the North Korea issue. In the short term, this requires reviewing dual-sourcing procurement for foundry and back-end processes and tracking US policy signals; in the medium term, it requires overhauling response systems for AI-based cyberattacks.

I. Issue Situation Analysis

Escalating Military Tensions in the Taiwan Strait: Issue Situation Analysis

1. Background and Development of the Issue

○ The institutional foundation of Taiwan Strait tensions is the "One China Principle" - Has functioned as the foundation of US-China relations since normalization[2][11] - The United States officially recognizes it while maintaining strategic ambiguity[2]

○ The boundaries of ambiguity began to waver after Trump's first term - Past red lines, such as visits by senior officials to Taiwan, have been put into practice[2][11]

○ The 2019 Hong Kong National Security Law episode marked a turning point in Taiwanese public opinion - Support for cross-strait unification fell sharply[2][5] - Support for gradual independence surged from 12.8% in 2018 to 25% in 2019[5] - Support for unification fell from 12.8% to the 6-7% range over the same period[5]

○ China has judged that the prospects for peaceful unification have darkened - The premise of the peaceful unification policy introduced under Deng Xiaoping has been shaken[5] - Internal support for the option of forcible unification has strengthened under the Xi Jinping regime[5]

○ China's pressure on Taiwan has evolved into a combined military and non-military strategy - Rapid strengthening of amphibious forces under the People's Liberation Army's Eastern Theater Command[9] - "Hybrid warfare" combining routine military exercises, disinformation, and cyberattacks[6]

2. Current Situation

○ Taiwan conducts its largest-ever Han Kuang exercise in 2026 - Invasion-response drills including reservists and civilians[4] - Simulations of air raid preparedness, communications blackouts, drone warfare, and Chinese blockade scenarios[4] - The Taiwanese Air Force also conducted scramble drills assuming Chinese aerial incursion[12]

○ Communications network paralysis drills were conducted during the exercise, prompting domestic backlash within Taiwan - A simulated communications blackout drill was conducted targeting northern Taipei[16] - The Global Times criticized this as "an intention to stoke cross-strait tensions"[16] - The WSJ reported that the drill caused a slowdown in internet speeds within Taiwan[17]

○ An AI-based cyberattack occurred in July 2026 and was confirmed in August - Taiwan's Ministry of Digital Affairs detected an "anomalous attack" targeting government agencies[1][10] - The National Security Bureau issued an alert starting July 20 and concluded it was an attack "originating overseas"[1] - A Romanian outlet reported an "unprecedented" attack in which up to eight AI agents operated simultaneously[15] - There are indications that China-linked hackers used open-source AI tools[15] - Taiwan's National Security Bureau announced that as of 2025, cyberattacks averaged 2.63 million per day, a 6% increase year-on-year[6]

○ China and Indonesia conduct a joint naval exercise in waters east of Taiwan - China's frigate Honghe (Hull 523) and Indonesia's frigate I Gusti Ngurah Rai completed a maritime resupply exercise[13][14] - China's Eastern Theater Command officially announced it had "completed a scheduled navigation exercise"[14] - Al Jazeera reported that Taiwan is concerned this reflects Beijing's attempt to normalize its military presence[13]

○ Taiwan's Coast Guard is deployed at the forefront of an asymmetric defense strategy - A drill involving Coast Guard cutters leading four missile boats departing from Kaohsiung Harbor[8] - Followed by a naval deployment involving mobile radar, missile launchers, amphibious assault craft, and drones[8] - Aimed at blocking landing forces and warning Beijing of the difficulty Taiwan could impose in the event of an invasion[8]

3. Key Actors and Positions

○ Taiwan (Lai Ching-te administration) - Defense budget to increase 16% in 2027, surpassing NT$1 trillion for the first time[2] - Utilizing the Han Kuang exercise as an opportunity to conduct a live test of its blockade response system[2] - "Weaponizing" the Coast Guard to reinforce anti-landing lines and building a dual response system alongside regular forces[8] - Adopting a strategy of countering China's "gray-zone" provocations with asymmetric capabilities[8]

○ China (Beijing) - Defines the Taiwan issue as "not a bargaining chip but a red line"[2] - Seeking to justify a continuous military presence near Taiwan through joint exercises with Indonesia[13][14] - Framing Taiwan's defensive drills as "tension-provoking acts" through state media[16] - Continuing a combined strategy that pairs routine military pressure with cyber operations and disinformation[6][9]

○ United States (Republican hardliners, Trump administration) - Pushing a $14 billion arms sale package to Taiwan ahead of the Xi Jinping-Trump summit[2] - There exists an incentive to use the Taiwan issue as leverage in negotiations with China[2] - Observers warn that this approach could collide with Beijing's perception of its red lines, heightening the risk of miscalculation[2]

○ Indonesia - Framing its joint exercise with China domestically as a minimal "scheduled navigation exercise"[14] - Signaling expanded military cooperation with China amid ASEAN's regional balancing diplomacy

4. Key Issues

○ Whether the arms sale package will become a variable in the summit - Summit resolution (20%), adjusted submission with limited Chinese pushback (55%), forced submission with escalated tensions (25%)[2]

○ The need to redefine the security threat profile of AI-based cyberattacks - Emergence of a new attack pattern involving the simultaneous operation of multiple AI agents[15] - A fundamental difference from conventional human-driven hacking in terms of detection and response methods[1][15]

○ Regional order implications of the China-Indonesia joint exercise - Interpreted as an attempt to normalize Chinese military activity in waters near Taiwan[13] - The ripple effects that expanded military cooperation between an ASEAN state and China could have on the regional balance of power

○ The spillover effects of an accidental Taiwan Strait conflict on the Korean Peninsula - Possibility of North Korean miscalculation if US forces concentrate their movement toward the Taiwan Strait[7] - The logic that expanded South Korean contributions to the Taiwan issue would automatically strengthen extended deterrence is "an overly simplistic calculation"[7] - The point that maintaining the military balance on the Korean Peninsula is South Korea's primary task[7]

II. In-Depth Issue Analysis

Escalating Military Tensions in the Taiwan Strait: In-Depth Analysis

1. Root Cause Analysis

○ The structural dilemma of gray-zone tactics is the root cause - China's exercises, cyberattacks, and maritime activities are designed to stay below the threshold of war[6][14] - Each individual act secures the justification of being a "scheduled routine navigation exercise"[14] - This creates a structure in which Taiwan bears the blame for escalating tensions each time it responds to an incident[16]

○ Shifts in Taiwan's internal political landscape serve as the substantive catalyst of the conflict - Support for unification collapsed to the 6-7% range following the 2019 Hong Kong National Security Law[5] - Support for gradual independence surged to 25%, reshaping the very landscape of public opinion[5] - From Beijing's perspective, there is a perception that the political window for peaceful unification is running out[5]

○ The character of a symbolic proxy contest within US-China strategic competition - The Taiwan issue is a symbolic point at which both countries express "a will not to lose"[7] - The expansion of US resource allocation to Europe following the war in Ukraine has raised concerns about neglect of Taiwan[7] - This very concern may itself be perceived by China as a window of opportunity[7]

2. Structural Context

○ Political structure: Interpretive conflict over the "One China Principle" - US strategic ambiguity collides with China's uncompromising assertion of sovereignty[2][11] - Past red lines, such as visits by senior officials since Trump's first term, have been substantively eroded[2][11] - There is a possibility that discussions on resuming arms sales to Taiwan will be used as a bargaining chip in the US-China summit[2] - Taiwan perceives this as "a strict red line, not a bargaining chip"[2]

○ Military structure: Asymmetric capability gap and Taiwan's response strategy - A trend of rapidly strengthening amphibious forces under the PLA's Eastern Theater Command[9] - Taiwan has adopted an asymmetric strategy centered on arming its Coast Guard, missile boats, and drones instead of conventional warfare[8] - Applying a concept of denial-based deterrence intended to "warn Beijing of the difficulty of invasion" under blockade conditions[8]

○ Economic and technological structure: New vulnerabilities in cyberspace - Attacks leveraging multiple AI agents outpace the response speed of existing cyber defense systems[15] - The frequency of attacks targeting government agencies has become routine at a scale of 2.63 million per day[6] - Physical infrastructure such as data centers and communication networks is also expanding as a potential target[3]

○ Regional structure: China's strategy of securing allies and Southeast Asia's balancing diplomacy - The joint exercise with Indonesia near Taiwan suggests expanded military cooperation between an ASEAN state and China[13][14] - Indonesia is seeking to balance between its non-alignment tradition and its economic dependence on China[13] - This cooperation near Taiwan is interpreted as an attempt by Beijing to normalize its military presence[13]

3. Historical Precedents and Comparative Cases

○ Structural similarities with the 1995-96 Taiwan Strait Crisis - China's missile tests at the time also had a gray-zone character aimed at sending political signals - Today, diversified means such as cyber operations, maritime exercises, and communications disruption are being used instead of missiles[1][16] - A difference lies in the fact that the mode of crisis deterrence has shifted from carrier deployment to the buildup of asymmetric defenses

○ Lessons from the war in Ukraine are being reflected in Taiwan's defense concept - Taiwan's drills including reservists and civilians tend to reference the Ukrainian-style model of national defense[4] - Communications blackout and air raid preparedness drills reflect the experience of infrastructure attacks in the early stages of the war in Ukraine[4][17] - However, Taiwan is designing separate scenarios that account for the geographic particularity of a maritime blockade[4]

○ Iran's infrastructure attack case suggests a potential escalation pathway - The case of Iran striking data centers supporting US forces demonstrates the possibility of attacks on physical infrastructure[3] - There is a potential pathway for cyberattacks related to Taiwan to expand from government agencies to physical infrastructure[3][15]

4. Key Variables in the Evolution of the Issue

○ How the arms sale package is handled at the US-China summit - Whether the $14 billion package is submitted in its original form is the primary inflection point[2] - Outlook: summit resolution 20%, package adjustment with limited Chinese pushback 55%, forced submission with escalated tensions 25%[2]

○ Whether the increase in Taiwan's defense budget is substantively implemented - The key question is whether the 2027 defense budget increases by 16%, surpassing NT$1 trillion for the first time[2] - The key question is the speed at which the budget increase translates into an actual buildup of asymmetric capabilities[2][8]

○ Whether ASEAN states, including Indonesia, expand military cooperation with China - If additional ASEAN states join similar joint exercises, the normalization of gray-zone activity would accelerate[13][14] - An indicator for gauging whether Taiwan's diplomatic isolation is deepening[13]

○ The pace of sophistication of AI cyberattacks versus the gap in response capacity - Repeated and increasingly sophisticated attacks using multiple AI agents would create pressure to redesign defense systems[15] - Whether the scope of attacks expands beyond government agencies to civilian infrastructure such as finance and healthcare[6]

○ The possibility that an accidental Taiwan Strait conflict spills over onto the Korean Peninsula - The gap that arises if US forces are redeployed from the Indo-Pacific to the Taiwan Strait[7] - The risk that North Korea could misjudge this as a weakening of US security commitments and launch a high-intensity provocation[7] - The risk of oversimplification in the logic that expanding South Korea's contribution to the Taiwan issue automatically leads to strengthened extended deterrence[7]