China-Taiwan Weekly Update, January 24, 2025
Authors: Matthew Sperzel, Daniel Shats, Alison O’Neil, Karina Wugang, and Grant Morgan of the Institute for the Study of War;
Alexis Turek and Yeji Chung of the American Enterprise Institute
Editors: Dan Blumenthal and Frederick W. Kagan of the American Enterprise Institute
Data Cutoff: January 21, 2025
The China–Taiwan Weekly Update is a joint product from the Institute for the Study of War and the American Enterprise Institute. The update supports the ISW–AEI Coalition Defense of Taiwan project, which assesses Chinese campaigns against Taiwan, examines alternative strategies for the United States and its allies to deter the Chinese Communist Party’s (CCP) aggression, and—if necessary—defeat the People’s Liberation Army (PLA). The update focuses on the Chinese Communist Party’s paths to controlling Taiwan and cross–Taiwan Strait developments.
Key Takeaways
Cross-Strait Relations
Taiwan
The KMT-led Taiwanese legislature passed significant cuts and freezes to the 2025 national budget. The budget reductions will almost certainly impede the Democratic Progressive Party (DPP)-led administration's ability to function and undermine Taiwan's resilience against PRC pressure. Opposition Kuomintang (KMT) and Taiwan People’s Party (TPP) legislators, who hold a collective majority in the Legislative Yuan (LY), finalized amendments on January 21 that cut a total of 6.6% from the Executive Yuan’s proposed expenditure, making the largest budget cut in Taiwan’s history.[1] The Executive Yuan originally approved the budget in August 2024, which projected a slight surplus.[2]
ROC Premier Cho Jung-tai, who leads the DPP-controlled Executive Yuan, accused the opposition parties during a press conference on January 21 of “indiscriminately cutting budget items” for the purpose of disrupting the government’s operations.[3] Cho stated that the budget cuts would affect Taiwan in five key ways: harming national competitiveness, weakening national defense capabilities, undermining technological advancement, constraining public services, and diminishing the government’s ability to communicate to the public.[4] The KMT has framed the budget cuts as a necessary measure to exercise oversight of the DPP administration and rein in its excessive and wasteful spending.[5]
The Ministry of National Defense (MND) experienced a freeze of 30% of its operating budget and a 3% cut to its military equipment expenditure, which will affect the military’s basic functions, including weapons and materiel maintenance.[6] Deputy Minister of Military and Political Affairs Alex Po Horng-Huei stated during an MND press conference on January 20 that the PRC benefits from MND-related budget reductions, which negatively affect Taiwan’s combat readiness. Taiwan’s domestic submarine program experienced a 50% freeze, effectively halting construction of submarines until completed submarines pass sea trials, at which time the LY may decide to unfreeze the funds. The budget amendments also froze 50% of the budget for the Minxiong Aerospace and Drone Park, an industrial manufacturing and testing facility that is at the center of Taiwan’s drone development. Taiwan’s state-owned National Chung-Shan Institute of Science and Technology (NCSIST) manages the park and is responsible for R&D and production of new defense technology and weapons. Constraints on Taiwan’s drone production capability constitute a significant setback for its ability to defend itself from a PRC invasion, which would heavily rely on the use of drones to thwart the advancement of enemy forces.
Po stated that the more than 15% reduction in personnel travel expenses constrains the military’s ability to transport new equipment from abroad for installation and train service members to use it.[7] He noted that the 60% reduction in media and publicity expenses will hurt the military’s ability to recruit new personnel and combat PRC disinformation and political warfare tactics.[8] Po stated that the cuts and freezes together affect up to 44% of the total defense budget.[9]
The Mainland Affairs Council (MAC), which is the agency responsible for conducting cross-strait policy, experienced cuts or freezes amounting to approximately 21% of its budget.[10] MAC Spokesperson Liang Wen-chieh stated at a press conference on January 16 that the budget cuts would “paralyze” the agency and hinder its ability to combat PRC United Front infiltration into Taiwan, which is disguised in cross-strait exchanges.[11] United Front activities against Taiwan include overt and covert influence operations that primarily aim to inculcate in the Taiwanese public CCP notions that the PRC is the only legitimate government of China and that Taiwan is a part of that China. Liang warned that Taiwan will be even more vulnerable to subversive activities, including theft of military intelligence, developing espionage networks, information operations, and poaching technology industry talent.[12]
The Ministry of Foreign Affairs (MOFA) experienced significant reductions to its operating budget and international assistance programs. MOFA stated on January 20 that the affected funds are used to support the ministry’s basic administrative work, including that of overseas missions, as well as to support international exchanges and the rotation of personnel stationed abroad. MOFA stated that freezing operational expenses would result in insufficient diplomatic resources that weaken Taiwan’s international influence and damage its competitiveness, while the PRC strengthens its diplomatic offensive to isolate Taiwan.[13] Diplomatic isolation is a key aspect of the PRC’s overall strategy to undermine Taiwan’s sovereignty by eroding its legitimacy on the international stage and depriving it of supporters. The PRC advances Taiwan’s diplomatic isolation by pressuring sovereign governments not to engage with the Taiwanese government, rejecting Taiwan’s participation in international organizations, and inducing Taiwan’s remaining diplomatic allies to recognize the PRC as the legitimate government of China and Taiwan. MOFA budget cuts may make it more difficult for Taiwan to counter recent PRC efforts to sway Taiwan’s diplomatic allies in the South Pacific, for example, several of which switched diplomatic relations from the ROC to the PRC in recent years.[14]
DPP officials have indicated that the party would take measures to resist the budget reductions. DPP Caucus Whip Ker Chien-ming stated on January 23 that the DPP would file for a court injunction to prevent the budget amendments from going into effect.[15] DPP Caucus Secretary-General Rosalia Wu Szu-yao stated on January 21 that the Executive Yuan would seek constitutional interpretation to challenge budget cuts, on the grounds that the LY cannot use its budgetary review powers to infringe on the rights of other constitutional organs.[16] It is unclear when the Constitutional Court will be able to accept the case, however, as recent KMT-led Constitutional Court reforms require at least 10 sitting justices to hear a case. The court currently has only eight justices, and the KMT-TPP alliance rejected all of the DPP's nominees to fill the vacancies in December 2024. Premier Cho Jung-tai stated on January 23 that the Executive Yuan is considering asking the LY to hold a revote on the budget plan with the aim of reversing the spending cuts.[17] This course of action is unlikely to yield a different result, however, as the opposition parties still maintain enough votes to confirm the amendments.
The budget reductions and freezes will fundamentally constrain government agencies’ capacity to carry out their core functions. The government’s degraded ability to operate is potentially disastrous for the policy agenda of President Lai Ching-te’s administration, which is intensely focused on combatting pervasive PRC efforts to undermine Taiwan’s sovereignty.
The KMT-TPP budget cuts specifically target ROC agencie...
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