The One-China policy is an acknowledgement that Taiwan and the mainland are part of the same China, and the Communist Government in Beijing regards it as a bedrock policy that has underpinned bilateral relations with the US.
Indeed, President Xi Jinping warned at his meeting with Taiwan's opposition leader in November that "the Communist Party would be toppled by its own people" if Taiwan went independent, and his Government could use economic leverage to influence cross-strait ties.
"All bilateral business interests and trade negotiations would come to nil were the One-China bottom line overstepped," said He Weiwen, deputy director of the Beijing-based Centre for China and Globalisation, and a former business attache in the Chinese consulates of New York and San Francisco.
"There would be nothing left to talk about between the two countries. China will not give the US any trade deal to speak of, and Trump will lose badly. Taiwan's interests would also suffer as a result."
The US has maintained a close relationship with Taiwan - often to China's anger - and is legally required to provide military support and protection. Trump cited the conundrum while defending his precedence-breaking phone call earlier this month with Taiwan's President Tsai Ing Wen - the closest Taiwan has come to getting formal recognition from Washington since the US established ties with the Communist Government in 1979.
"No country is willing to bargain over core national interests, and China is no exception," the official Xinhua news agency said yesterday. "China views the One-China principle as a bottom line and there is no room for any compromise."
The flip side to Trump's statement linking support for the One-China policy to trade outcomes is that Taiwan may end up the loser if the President-elect also sees its security as negotiable in a grand deal.
"The One-China policy is a double-edge sword," Lo Chih Cheng, a lawmaker with Taiwan's ruling Democratic Progressive Party, said. "It could cut China, but could cut Taiwan as well."
Trump's horse-trading mentality suggests he's ready to "bargain away mechanisms that help lock in US commitment to Taiwan," including the Taiwan Relations Act that legally binds Washington to arm Taiwan against potential aggression, according to Ja Ian Chong of the National University of Singapore, who specialises in Asia-Pacific relations.
"Any deal with China that sacrifices Taiwan is likely to lead other long-standing US partners and allies to question the credibility of US commitments to regional security," said Chong. The hint that "Washington is willing to sacrifice their interests in favour of making deals may encourage greater insecurity" in the region, he said.
As for potential economic disruption, China has "a lot of tools to keep their economy growing" in the event of a trade war as its economy is less export dependent than in the past, according to David Dollar, a senior fellow at the Brookings Institution in Washington and former US Treasury attache to Beijing.
"The talk of the US shifting its recognition to Taiwan seems likely to be just talk," Dollar said. "If the US goes down that road, other countries are definitely not going to follow."
Even if Trump does press ahead with a plan to link security outcomes with trade and business negotiations, there's no reason to assume it would deliver better market access, said David Loevinger, a former China specialist at the US Treasury who is now an analyst at fund manager TCW Group Inc. in Los Angeles.
Making matters even more complicated is a twice-a-decade leadership transition in the Communist Party late in 2017.
"Playing the nationalist card is irresistible politics in China too," Loevinger said. "As they jockey for leadership positions next year, Chinese politicians will be tripping over themselves to show they can stand up to foreigners."
- Bloomberg
