TAIPEI (Taiwan News) — A Chinese military attack on Taiwan could carry a high cost to Beijing, potentially destabilizing Xi Jinping’s rule if the campaign failed, according to a report by the German Marshall Fund on Monday.
Most war-gaming and policy analysis has focused on US and Taiwanese vulnerabilities while underestimating the consequences China itself would face if a conflict erupted in the Taiwan Strait, Nikkei Asia cited the report as saying.
The report, authored by GMF Indo-Pacific Managing Director Bonnie Glaser and six other analysts, assesses the impact of a Taiwan conflict across four areas: China’s economy, military, social stability, and international relations.
Glaser said Xi’s long-stated goal of “national rejuvenation” depends on all four pillars remaining intact. She warned that a war could undermine the foundations of China’s political legitimacy and long-term development.
The study evaluates two scenarios: a limited conflict lasting several weeks and a major war lasting months that ends in a decisive defeat for the PLA, concluding that both would inflict substantial and potentially destabilizing damage.
On the economic front, the report said even a limited conflict could trigger immediate global shockwaves, with estimated losses ranging from NT$62.9 trillion (US$2 trillion) to nearly NT$314.42 trillion depending on the scale and duration of fighting.
Longer-term effects would likely include accelerated “de-risking,” manufacturing relocation, and a collapse in foreign investment in China. The report warned this could permanently damage the growth model that has underpinned China’s rise.
Militarily, the report said a major war could leave China unable to project power beyond its borders. GMF simulations estimated around 100,000 PLA casualties and a forced withdrawal after months of combat.
The same scenario projects roughly 100,000 total casualties in Taiwan, about half of them civilians, while US and Japanese losses would number in the thousands. Even a limited conflict would degrade China’s ability to enforce claims elsewhere.
The report said China’s capacity to operate in the South China Sea, patrol the Indian border, secure Indian Ocean sea lanes, or manage internal security missions would be weakened. Those constraints could persist long after fighting ended.
Social stability was identified as Xi’s most critical vulnerability. The authors warned that large casualties, economic hardship, and prolonged uncertainty could trigger public dissatisfaction and unrest.
Risks would be especially acute among single-child families, students, and ethnic minority regions such as Xinjiang and Tibet. Digital networks could amplify dissent if state control mechanisms were strained.
While China’s internal security apparatus could likely manage short-term unrest, the report said a prolonged or failed war, especially one involving damage to the country, could overwhelm local systems and strain party control.
Internationally, the authors said China could face diplomatic isolation through expulsions, severed ties, recognition of Taiwan, and withdrawals from China-led groupings such as BRICS, the Shanghai Cooperation Organization, and the Belt and Road Initiative.
Even if only some countries adopted such measures, the report concluded that the cumulative effect could significantly erode China’s global influence, economic connectivity, and strategic standing.