China-Taiwan Weekly Update, January 11, 2024

China-Taiwan Weekly Update, January 11, 2024 

Authors: Daniel Shats and Nils Peterson of the Institute for the Study of War 

Editors: Dan Blumenthal and Frederick W. Kagan of the American Enterprise Institute 

Data Cutoff: January 9 at 5pm ET 

The China–Taiwan Weekly Update focuses on the Chinese Communist Party’s paths to controlling Taiwan and relevant cross–Taiwan Strait developments. 

Key Takeaways

1. PRC high-altitude balloon flights through Taiwan’s Air Defense Identification Zone (ADIZ) have become a daily occurrence and are likely part of a CCP effort to test Taiwan’s responses and wear down its threat awareness.
2. Taiwan arrested an independent legislative candidate on suspicion of accepting money from the CCP to run for office.
3. The CCP threatened further economic punitive measures against Taiwan related to the cross-strait Economic Cooperation Framework Agreement (ECFA).
4. The People’s Liberation Army (PLA) Southern Theater Command conducted air and naval exercises in the South China Sea from January 3 to 5.
5. The December purges of top PLA military and defense industry officials reflect Xi Jinping’s fears of disloyalty in the military and show that the anti-corruption campaign has not yet succeeded in rooting out endemic corruption in the military.
6. A loss of Compacts of Free Association (COFA) funding for Palau, Micronesia, and the Marshall Islands would enable the CCP to expand its leverage points over these countries.
7. The Times of Israel reported that Israeli Defense Forces encountered “vast quantities of weapons manufactured by China” in Gaza.

Taiwan

Taiwan’s three presidential candidates are making their last appeals for votes before the January 13 presidential election. Democratic Progressive Party (DPP) presidential candidate Lai Ching-te urged voters to “choose the right road” and not reverse eight years of progress by the Tsai Ing-wen administration. Lai and the DPP also continued past messaging of protecting Taiwan’s democracy against CCP interference. Kuomintang (KMT) candidate Hou Yu-ih and the KMT heavily promoted an appeal for all anti-DPP voters to strategically concentrate their votes on him because he is the candidate most likely to defeat Lai. The KMT also continued criticizing the DPP for alleged corruption and incompetence. Taiwan People’s Party (TPP) candidate Ko Wen-je continued to criticize both major parties and promote his economics-focused “Third Way” campaign.

DPP presidential candidate Lai Ching-te, vice-presidential candidate Hsiao Bi-khim, and President Tsai Ing-wen campaigned together and emphasized a message of not “turning back time” on progress made during the eight years of the Tsai administration. They warned of negative consequences if voters allowed the KMT to win the presidency or a legislative majority. The consequences they noted include the obstruction of defense spending, a reduction of Taiwan’s economic competitiveness, and a return to the unratified Cross-Strait Service Trade Agreement (CSSTA) that sparked mass student protests in 2014.[1]

Taiwanese media reported that many viewers commented that a recent viral DPP campaign ad resonated with them. The January 2 campaign ad, which features Lai, Tsai, and Hsiao on a road trip, received over 10 million views across social media platforms by January 5. The video showed Tsai and Lai casually chatting and joking in the car as Tsai drove around. Near the end, Tsai handed the keys to Lai and got out, telling him he was a better driver than her. The trip continued with Lai driving and his running mate Hsiao as a passenger.[2] Lai, Hsiao, and Tsai continued using the ad’s theme of “choosing the right road for Taiwan” as a motif in campaign events throughout the week.[3]

KMT presidential candidate Hou Yu-ih, vice-presidential candidate Hsiao Bi-khim, party chairman Eric Chu, and top-ranked legislator-at-large nominee Han Kuo-yu attempted to secure more backing from voters who support the opposition. The KMT officials repeatedly called on supporters of TPP candidate Ko Wen-je and former independent candidate Terry Gou to strategically concentrate their votes on Hou.[4] They argued that Hou was the candidate most likely to defeat the incumbent DPP. Hou was in second place behind Lai in most polls since the November 25 candidate registration. He consistently hovered around 29% support in a weighted average of polls, compared to Lai at around 34% and Ko at around 22%. Hou and Jaw also repeatedly said that Ko and Gou would be included in discussions of their Cabinet composition if they won the election.[5] The KMT candidates also continued to attack the DPP for allegedly corrupt and ineffective governance and for creating “panic” over PRC election interference to discredit its political opponents.[6]

Ko and Gou have not been receptive to the KMT’s appeal to consolidate the opposition, however. Ko claimed that the KMT lacks integrity and that its offer to include him in its cabinet was a “trick” to promote strategic voting.[7] Terry Gou continued not responding to calls from Hou or Jaw.[8] Ko did not call on Terry Gou to endorse him but said “true friends” did not need to force each other. The president of a Gou support organization endorsed Ko and claimed that most former Gou supporters now supported Ko despite efforts by Hou’s campaign to win over Gou supporters and Gou’s previous attempts to unite the opposition against Lai.[9]

TPP presidential candidate and chairman Ko Wen-je and vice-presidential candidate Cynthia Wu Hsin-ying continued to emphasize that economic issues as central to their “Third Way” campaign. Ko published an article in The Economist in which he argued that the two dominant parties were overly focused on the “unification or independence” debate even though he claimed 90% of Taiwanese citizens supposedly support the “status quo.” He laid out broad policy proposals for “pragmatic” and “rational” domestic and international policies, listing economic development as first among them.[10] He also criticized the DPP administration for failing to construct promised social housing units.[11]

There have not been any new polls about the Taiwan election since Taiwan’s Central Election Commission instituted a “polling blackout” beginning on January 3. The final Taiwan News Poll of Polls, released on January 2, showed Lai in first place in a weighted aggregate of polls from the previous 15 days. At the time, Lai had 35.3% support, Hou had 28.7%, and Ko had 24%.[12]

PRC high-altitude balloon flights through Taiwan’s Air Defense Identification Zone (ADIZ) have become a daily occurrence and are likely part of a CCP effort to test Taiwan’s responses and wear down its threat awareness. Taiwan’s Ministry of National Defense (MND) reported eleven PRC high-altitude balloons that floated over or around Taiwan since January 3. This number included three balloons on January 3, one on January 4, two on January 5, one on January 6, three on January 7, four on January 8, and one on January 9. At least five of the balloons flew directly over the island of Taiwan. The MND detected the balloons at altitudes ranging from 15,000 to 33,000 feet.[13] The MND first reported a PRC balloon among its daily updates of PRC violations of Taiwan’s ADIZ on December 8 and has since reported them with high frequency throughout late December and every day of 2024 so far.[14]

An MND press statement on January 6 said the balloons posed a “serious threat” to international air routes and condemned the Chinese Communist Party’s (CCP) “disregard for the safety of passengers.” It assessed that the main purpose of the balloons is to carry out gray-zone harassment and “cognitive operations” to harm the morale of the Taiwanese people.[15] Retired Taiwanese Army Major General Ko Yung-sen echoed this perspective, saying that the balloons were part of PLA “gray zone” operations intended to normalize the PRC’s territorial claims over the Taiwan Strait and reduce Taiwanese people’s threat awareness.[16] Colonel Wang Chia-chun, who is the deputy head of the MND’s joint operations planning section, said that the CCP wanted Taiwan to shoot down the balloons, but MND would not waste ammunition attempting to do so.[17] MND previously assessed that the balloons were harmless weather balloons.[18]

The PRC has normalized daily air and naval activities around Taiwan, including near-daily aerial crossings of the median line in the Taiwan Strait, since 2020.[19] Taiwan does not scramble aircraft in response to all PRC ADIZ violations, but it does put military personnel on standby to respond quickly if needed. The high frequency of ADIZ violations drains Taiwan’s resources, exhausts military personnel, and degrades Taiwan’s threat awareness. The PRC’s daily balloon flights around Taiwan in 2024, including an increasing number of balloons flying directly above the island, indicate that it is trying to normalize these activities as well. Taiwan’s MND’s statements on the balloon flights and its unprecedented inclusion of the balloons in its daily maps of ADIZ violations starting in December show that Taiwan considers the balloons a part of the PRC’s broader coercion campaign.

The CCP has not issued an official explanation for the increase in balloons that have passed over Taiwan since early December. Two articles in the PRC’s state-owned Global Times on January 4 cited unnamed “experts” who claimed the PRC balloons over Taiwan were weather balloons that drifted unintentionally and said they should not be “sensationalized.”[20] ISW cannot confirm the nature of the balloons themselves, but the trend of balloons flying first near Taiwan, then directly over Taiwan in increasing numbers and frequency closer to Taiwan’s election is unlikely to be the result of natural weather patterns.

Taiwan arrested an independent legislative candidate on suspicion of accepting money from the CCP to run for office. Taiwan’s Ministry of Justice Investigation Bureau (MJIB) said on January 5 that it arrested independent legislative candidate for the city of Taoyuan Ma Chih-wei on suspicion of colluding with the CCP. Prosecutors said that Ma had received over 1 million NTD (over $32,000) in cryptocurrency and US dollars from a source in the PRC through money transfer apps, such as Tether. The money was intended to fund a run for a legislative seat in Taoyuan. Ma was formerly the spokesperson for the Taoyuan office of the Taiwan People’s Party (TPP). She failed to secure her party’s nomination for the legislative seat and continued to run as an independent, however. Ma made trips to the PRC in April, May, October, and December 2023, including a trip in May to partake in a Mazu religious pilgrimage and meet with CCP contacts together with the current chairman of the TPP’s Taoyuan Office Huang Cheng-chun.[21] Prosecutors also accused Ma of passing information about intelligence officials and classified information about her legislative race to PRC contacts.[22]

Trips to the PRC by Taiwanese politicians have been a frequent source of controversy during the last few months of the Taiwanese election. A Keelung borough warden on January 9 became the first borough warden to be indicted for allegedly leading a CCP-funded group trip to the PRC, where participants were encouraged to support certain legislative candidates in Taiwan. A borough warden is a type of local official below the municipal level. Taipei prosecutors had previously questioned 41 borough wardens in December over similar trips they made to the PRC.[23]

The CCP threatened further economic punitive measures against Taiwan related to the cross-strait Economic Cooperation Framework Agreement (ECFA). The PRC’s Ministry of Commerce said on January 9 that it was “studying” additional measures to suspend tariff concessions for certain Taiwanese products under ECFA because Taiwanese authorities had “not taken any effective measures to ease trade restrictions.” Targeted industries may include agriculture, fishing, machinery, auto parts, and textiles.[24] The PRC previously announced on December 15 that Taiwan had violated its commitments under ECFA by imposing “trade barriers” on trade with the PRC.[25] On December 21 it announced it would end tariff restrictions on 12 chemical products originating in Taiwan.[26] Taiwan’s Mainland Affairs Council (MAC) said on January 9 that the PRC had ignored Taiwanese proposals to negotiate trade disputes within the framework of ECFA because it was determined to interfere in Taiwan’s election. The MAC issued its “strongest condemnation” of the CCP and said the CCP’s methods would not succeed in intimidating Taiwanese people and forcing them to submit.[27]

The CCP’s threat of additional economic punishment for Taiwan conflicts with the party’s simultaneous measures to promote cross-strait economic integration, however. On January 8, the PRC Ministry of Commerce, Taiwan Affairs Office, National Development and Reform Commission, and Ministry of Industry and Information Technology jointly released new guidelines to help the PRC’s Fujian Province deepen economic integration with Taiwan. The guidelines said Fujian would establish an institutional system and regulatory model conducive to cross-strait integrated development, including encouragement for Taiwanese businesses to explore the Chinese market.[28] The CCP Central Committee previously announced in September 2023 that Fujian would be built into a “demonstration zone” for cross-strait integrated development.[29] A January 8 Global Times article said the measures were meant to boost Taiwanese business confidence in the PRC and to demonstrate “goodwill” toward Taiwan in alleged contrast with actions by Taiwan’s DPP administration.[30] The CCP’s policies to promote economic integration with Taiwan are part of a long-term effort to increase PRC influence over Taiwan. In the short term, these measures may serve as a “carrot” to incentivize Taiwanese businessmen to support the KMT in pairing with the “stick” of threatening economic “retaliation” to punish the DPP.

China

The People’s Liberation Army Southern Theater Command conducted air and naval exercises in the South China Sea from January 3 to 5.[31] The exercises were in response to joint Philippines-United States operations in the South China Sea from January 3 to 4, which the aircraft carrier USS Carl Vinson led.[32] These operations occurred in the wake of CCP harassment of Philippine ships near Philippine-controlled territory since December. Chinese Coast Guard (CCG) vessels attempted to thwart Philippine supply missions near the Second Thomas Shoal by firing water cannons and acoustic weapons at Philippine government ships delivering supplies on December 9 and 10, for example. A CCG vessel also rammed a Philippine ship near Second Thomas Shoal.[33] The PRC MFA inaccurately framed the Philippines as the instigator on December 25 by stating that it “provocatively violated relevant waters in the South China Sea, spread false information, and colluded with external forces to undermine peace and stability in the South China Sea.”[34] The PRC MFA repeated this language on January 4 by claiming that US-Philippine naval activities “hinder the management and control of maritime situations and disputes.”[35]

The December purges of top PLA military and defense industry officials reflect Xi Jinping’s fears of disloyalty in the military and show the anti-corruption campaign has not yet succeeded in rooting out endemic corruption in the military. Bloomberg reported that United States intelligence assessments attribute the purges of top military and defense industry officials in late December to graft that resulted in missiles filled with water and missile silos with improper lids.[36] PLA Navy Lt. Col. Yao Cheng, who defected to the United States in 2016, stated that widespread misappropriation of the equipment budget for events such as dinners was common during his time in the PLA.[37] This shows that the extent of corruption before Xi’s 2015-2016 PLA reforms stretched beyond the military leadership to the officer cadre. The December 2023 purges demonstrate that those reforms did not eliminate lower-level corruption because the purged PLA leadership were burgeoning leaders a decade ago.

Compacts of Free Association

A loss of Compacts of Free Association (COFA) funding for Palau, Micronesia, and the Marshall Islands would enable the CCP to expand its leverage points over these countries. These COFAs govern the United States’ relationship with Palau, Micronesia, and the Marshall Islands while also granting the United States extensive military access throughout their territories. The United States renewed COFAs with Palau and Micronesia in May.[38] It then did so with the Marshall Islands in October.[39] The signed agreements are now before Congress for funding consideration. Congress previously funded the COFAs for a twenty-year period in 2003.[40] The total cost for all three of the twenty-year agreements would be roughly $7 billion spread over the period 2024 to 2043, according to the Congressional Research Service.[41] Deputy Secretary of State nominee Kurt Campbell stated during his Senate confirmation hearing on December 7 that “if we don’t get it [COFA funding] you can expect that literally the next day Chinese diplomats — military and other folks — will be on the plane…trying to secure a better deal for China.”[42] The US House of Representatives Select Committee on the Strategic Competition between the United States and the Chinese Communist Party also called for renewing the COFAs in a mid-December report.[43] President Biden signed the 2024 National Defense Authorization Act into law on December 22, but it did not include COFA funding.[44] Funding the COFAs is a key part of the US Pacific Partnership Strategy to “fulfill our [United States] historical commitments and strengthen our enduring relationships with the full Pacific Islands region, including our special relationship with the Republic of Palau, the Republic of the Marshall Islands, and the Federated States of Micronesia.”[45] Palau’s President, Surangel Whipps Jr, expressed concern in a December 27 interview with ABC Australia over the lack of Congressional-approved funding for the COFA agreement, in part because the 2010 Palau Compact Review Agreement was not funded by the US Congress until 2018.[46]

These three island countries control key sea lanes that provide a secure route connecting American allies and partners, such as the Philippines and Taiwan, to the US territory of Guam and the state of Hawaii. Palau and the Marshall Islands are 2 of the 13 countries that maintain official diplomatic relations with Taiwan.[47]

The loss of COFA funding would present an opportunity for the CCP to expand its economic influence with these vital Pacific Island countries. For example, this funding loss would cause severe financial pressure in Palau because COFA funding accounts for $36.9 million of the national government’s annual $124.2 million revenue as of fiscal year 2023.[48] This is an economic vulnerability that the CCP could partially fill by encouraging PRC nationals to vacation in Palau. The CCP cut tourism to Palau over the last decade to nearly zero as punishment for maintaining full diplomatic relations with Taiwan.[49] The reversal of this CCP policy would provide the party with economic leverage to wield over Palau in the event of future policy disagreements. The expansion of the CCP’s economic influence in Palau would also provide the party a leverage point to coerce the countries into switching diplomatic recognition from Taiwan to the People's Republic of China (PRC). The PRC aims to coerce countries into switching diplomatic recognition to falsely argue that Taiwan is a province of the People’s Republic of China rather than a legitimate country named the Republic of China.

The loss of COFA funding would also exacerbate the CCP narrative put forth by the propaganda outlet Global Times that the United States only cares about Palau for security reasons rather than mutually beneficial cooperation. [50] The Palau Senate passed a resolution in November rejecting the permanent deployment of a US Patriot missile defense battery.[51] This was the first instance of lawmakers challenging President Surangel Whipps Jr’s request for the United States to construct an over-the-horizon radar system in Palau.[52] In a December 27 interview with ABC Australia, Whipps tied this Palau Senate resolution to a narrative among unspecified portions of Palau that the United States actions were not in the best interests of Palau, as seen by the repeated delay in COFA funding.[53] The associated fiscal challenges that Palau faces without COFA funding buttresses the CCP’s narrative, which in turn creates hurdles for deploying mutually beneficial United States defense resources to the country.

The loss of COFA funding would also provide the CCP an opportunity to expand influence efforts targeting Micronesian political elites. The CCP has completed infrastructure projects throughout the country, such as houses for the country’s president, vice president, speakers of congress, and chief justice.[54] Axios reported that former Micronesian officials confirmed receiving gifts from the PRC, such as money, while on official state visits to the country.[55] The lack of COFA funding would exacerbate the appeal of CCP monetary gifts or infrastructure projects that target the Micronesian political elite. Micronesian President Wesley Simina also stated in late November that his country would be at a “fiscal cliff” without US Congressional approval of COFA funding. This would mean that “we [Micronesia] will have to find different sources of funding… and that’s not out there available immediately.”[56] The loss of COFA funding would also provide opportunities for external powers such as the CCP to enhance their economic influence in the country by filling these funding gaps.

The COFA funding also makes up $35.2 million of the Marshall Islands national government's annual $173.9 million revenue as of fiscal year 2023.[57] The loss of COFA funding would expose the country to similar severe fiscal challenges as Palau and Micronesia.

PRC in the Middle East

The Times of Israel reported that Israeli Defense Forces encountered “vast quantities of weapons manufactured by China” in Gaza.[59] Business Insider reported that the weapons included items, such as assault rifles and grenade launchers. An unspecified Israeli intelligence source expressed concern over the technological sophistication of the uncovered weaponry and communications technology because it is “stuff that Hamas didn’t have before, with very sophisticated explosives which have never been found before and especially on such a large scale.” [60] It remains unclear whether the PRC knowingly supplied the weapons to Hamas or if the group acquired these weapons via a third party.

The PRC is currently pursuing a diplomatic line of effort that aims to supplant US influence with Arab states by proposing what it claims to be a more inclusive and cooperative regional security framework.[61] This involves portraying Washington as a self-interested and destabilizing influence in the region while simultaneously positioning Beijing as an altruistic and unbiased actor.[62] The use of Chinese weapons by Hamas contributes to undercutting this narrative, regardless of whether Beijing knowingly supplied these items.

The CCP is balancing in Yemen by financially supporting the Republic of Yemen and avoiding condemning the Houthis. The Charge d'affaires of the Chinese Embassy in Yemen Shao Zheng held a meeting with Director of the Office of the Minister of Foreign Affairs of Yemen al-Qadir in Riyadh on January 7.[63] The meeting comes in the aftermath of a December 7 “economic and technical cooperation agreement” between the Republic of Yemen and the People’s Republic of China.[64] The Republic of Yemen is a separate political entity from the Houthi Movement, which ISW and CTP have assessed is attacking shipping in the Red Sea as part of a broader regional escalation strategy led by Iran.[65] The CCP meeting with the Republic of Yemen official allows the PRC to claim it supports stability and economic development in the region.

PRC Minister of Foreign Affairs Spokesman Wang Wenbin instead called on January 4 for all parties to “play a constructive and responsible role” in keeping the Red Sea safe.[66] The CCP avoided condemning Houthi attacks in the Red Sea. The absent condemnation of the Houthis reflects the PRC aiming to avoid antagonizing Iran.

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[11] https://news.ltn dot com.tw/news/politics/breakingnews/4543379

[12] https://www.taiwannews dot com.tw/en/news/5070525

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[17] https://focustaiwan dot tw/cross-strait/202401090010

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[19] https://docs.google.com/spreadsheets/d/1qbfYF0VgDBJoFZN5elpZwNTiKZ4nvCUcs5a7oYwm52g/edit?pli=1#gid=0

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[29] https://www.gov dot cn/zhengce/202309/content_6903538.htm

[30] https://www.globaltimes dot cn/page/202401/1305063.shtml?utm_source=substack&utm_medium=email

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[32] https://www.pacom.mil/Media/News/News-Article-View/Article/3630769/philippines-us-partner-in-maritime-cooperative-activity-in-south-china-sea/

[33] https://apnews.com/article/south-china-sea-philippines-second-thomas-shoal-scarborough-shoal-632cbc349007048cc2ad56502ef4fc67

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[45] https://www.whitehouse.gov/wp-content/uploads/2022/09/Pacific-Partnership-Strategy.pdf

[46] https://www.doi.gov/oia/press/interior-secretary-zinke-applauds-completion-palau-compact-funding-agreement

https://www.abc.net.au/pacific/programs/pacificbeat/whipps-palau/103269182

[47] https://www.reuters.com/world/asia-pacific/palau-says-committed-supporting-taiwan-despite-mounting-aggressions-2022-10-06/

https://www.reuters.com/world/china/marshall-islands-says-strongly-committed-taiwan-ties-2022-03-22/

[48] https://www.palaugov dot pw/wp-content/uploads/Economic-and-Fiscal-Update.pdf, p.12

[49] https://apnews.com/article/japan-palau-us-china-taiwan-pacific-islands-add711bf4a7989faca33e883359f2458

[50] https://www.globaltimes dot cn/page/202312/1304091.shtml

[51] https://www.reuters.com/world/us-missile-defense-proposal-stirs-debate-palau-2023-12-20

[52] https://www.pacificislandtimes.com/post/amid-heightened-tensions-palau-s-senate-rejects-missile-deployment

[53] https://www.abc.net.au/pacific/programs/pacificbeat/whipps-palau/103269182

[54] https://www.fsmgov.org/press/pr092206.htm

https://www.axios.com/american-military-chinese-competition-micronesia

[55] https://www.axios.com/american-military-chinese-competition-micronesia

[56] https://www.rnz.co.nz/international/pacific-news/503173/fsm-faced-with-a-fiscal-cliff-president-simina-says

[57] https://www.imf.org/en/Publications/CR/Issues/2023/10/16/Republic-of-the-Marshall-Islands-2023-Article-IV-Consultation-Press-Release-Staff-Report-540607, p.3

[58] https://www.imf.org/en/Publications/CR/Issues/2023/10/16/Republic-of-the-Marshall-Islands-2023-Article-IV-Consultation-Press-Release-Staff-Report-540607, p.3

https://www.palaugov.pw/wp-content/uploads/Economic-and-Fiscal-Update.pdf, p.12

[59] https://www dot timesofisrael.com/liveblog_entry/tv-report-huge-quantities-of-chinese-made-weapons-being-used-by-hamas-in-gaza/

[60] https://www.businessinsider.com/hamas-has-a-chinese-weapons-arsenal-in-gaza-says-the-idf

[61] https://www.fmprc.gov[dot]cn/zwbd_673032/wjzs/202312/t20231226_11212966.shtml 

https://www.fmprc.gov[dot]cn/zwbd_673032/wjzs/202312/t20231226_11212967.shtml 

https://www.fmprc.gov[dot]cn/zwbd_673032/wjzs/202312/t20231227_11213522.shtml 

[62] https://www.fmprc.gov[dot]cn/fyrbt_673021/202312/t20231211_11199542.shtml

http://un.china-mission.gov[dot]cn/chn/hyyfy/202312/t20231220_11207420.htm

scmp[dot]com/news/china/diplomacy/article/3246266/why-hasnt-china-joined-us-led-naval-force-against-houthi-rebel-attacks-red-sea?module=top_story&pgtype=homepage 

[63] https://www.fmprc dot gov.cn/zwbd_673032/wshd_673034/202401/t20240108_11219576.shtml

[64] https://www.mofa-ye dot org/Pages/25266/

[65] https://www.understandingwar.org/backgrounder/iran-update-december-31-2023

[66] https://www.fmprc dot gov.cn/fyrbt_673021/202401/t20240104_11218767.shtml