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President Xi may use Speaker Pelosi's visit to Taiwan to 'create a new normal': Expert

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Susan Shirk, UC San Diego Research Professor and 21st Century China Center Chair, sits down with Yahoo Finance Live to examine House Speaker Pelosi's trip to Taiwan, backlash by Chinese officials, and the outlook for companies with business ties to China.

Video Transcript

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- Egregious provocation, that's how China described House Speaker Nancy Pelosi's trip to Taiwan this week as they announced sanctions against Pelosi and her family. But China did not stop there. Chinese leaders also announced they were suspending cooperation with the United States on things like military issues and climate change. Joining us now is Susan Shirk, founding chair of the 21st Century China Center at UC San Diego and author of the upcoming book Overreach-- How China Derailed Its Peaceful Rise. Nice to see you.

So Congressional trips to Taiwan are nothing new. We had a Senator there four months ago. Why this reaction? Why right now? Why so harsh?

SUSAN SHIRK: Well, Nancy Pelosi is in the line of succession. She's a very senior official of the American government from China's perspective. It hasn't happened that the Speaker went for 20-some-odd years. So-- and Xi Jinping is in the middle of his campaign for an unprecedented third term. So from their perspective, especially from Xi Jinping's perspective, this is really poking him in the eye in a way that could potentially make problems for him at the party congress which is coming up in the fall.

- So Susan, should we expect China to get even more aggressive from here?

SUSAN SHIRK: Well, the big question right now is whether or not these war games, these exercises, which really are very robust and unprecedented and surround the island of Taiwan to demonstrate that the People's Liberation Army could blockade Taiwan, how long they will continue? They're supposed to go until Sunday, I believe. But then has it-- you know, it's quite possible that Xi Jinping has taken advantage of the Pelosi visit to mobilize support for himself and to kind of create a new normal in which Chinese military planes and ships and other gray zone, even Coast Guard, vessels will be pressing Taiwan, going around Taiwan, including to the east coast of Taiwan, the eastern side of Taiwan. Certainly the missile tests that go right over the Island of Taiwan are very intimidating.

- Do you think they will take Taiwan? And how do you believe the US would respond?

SUSAN SHIRK: No, I-- this is not about taking Taiwan. That's something that if it were to happen would happen, in my view, quite a bit in the future. This is about demonstrating the People's Liberation Army's capabilities to put a blockade around Taiwan, squeeze Taiwan until it agrees to-- potentially, what they'd like to see is until it agrees to reintegrate with the mainland.

- What about the business blow-back? Today we have Snickers maker Mars apologizing after suggesting that Taiwan is a country. Also reports related to Apple removing Made in Taiwan, potentially, from their products. What is the business blow-back, and what does that mean here for the US, for US companies doing business over there?

SUSAN SHIRK: Well, international companies have been punished before by Chinese government and Chinese consumers for labeling Taiwan in a list or a category as an independent country. And that's very offensive to the Chinese position that Taiwan is a province of China and a province of the People's Republic of China. Chinese consumers are much more nationalistic, so consumer-facing businesses really do have to make a choice here if they are-- if the China market is important to them, they have to be very sensitive to these political considerations and how they talk about Taiwan.

- Getting back, Susan, to what got us into this mess, if you will, what did you make of the timing of the visit from Nancy Pelosi? It certainly was a strong show of support for democracy. But why now, and did the US gain anything from that visit?

SUSAN SHIRK: Well, Nancy Pelosi has a long history of being concerned about human rights violations in China and democracy promotion in China and the support of Taiwan. So it's consistent with her personal views, which I certainly respect, but it was very odd thing for a Democratic Speaker of the House to put a Democratic President, President Biden, in an extraordinarily difficult position by deciding to go to Taiwan now.

The President really didn't have complete control over the Speaker's decisions, of course, and I think was reluctant to appear to try to constrain her because there are many other politicians who would criticize the Biden administration for caving in to China. So it's certainly not good for the Democratic prospects in the mid-term or in 2024.

- Spot on. What a strange dichotomy with Senator Tom Cotton in support of something Nancy Pelosi does. It seemed like two opposite parties certainly not lined up on that one. Great stuff. Susan Shirk, really appreciate it. Have a great weekend.

SUSAN SHIRK: Sure.