We should all take very seriously Secretary-General Xi Jinping’s New Year’s Day speech to the Chinese people, in which, speaking from the equivalent of the Oval Office, he promised the Chinese people that Taiwan would be reabsorbed into China as their 19th province.

The reason we should take it seriously is that he’s now faced with growing problems and no solutions. It turned out that the effort he made to clean up corruption degenerated into an effort to clean up his political opponents. And he’s been purging people right and left, including in the military.

Also turned out that the Chinese One Child policy, which had been an effort to control population growth by literally limiting families to one child, it backfired. And all of a sudden, they’re faced with the reality that if you think about it, if two people have one child, that means that you now have an aging pyramid, in which there are always more people getting older than there are people available to work and take care of them. That has been compounded because, when they realized what a demographic disaster they were building, with fewer and fewer workers and more and more retirees, they tried to change it into a pro-child, pro-growth policy. And the women of China have rejected it.

Now, this is not peculiar only to China. In Japan, in South Korea, in a number of other Asian countries, as women have grown to realize that they don’t have to have children, the number of children per female is dropping dramatically. In South Korea, it’s well below the replacement rate. In Japan, it is below the replacement rate. And now in China, this has become a disaster. China may go from 1,400,000,000 people to about 500 million within the next two generations.

So what does that mean? You build a country for 1,500,000,000, and you have towns, buildings, infrastructure, and you don’t need them. You no longer have a big enough workforce to be the leading economy in exporting material in the world, you no longer have a big enough workforce of young people to take care of aging seniors. So he’s faced to cry with a crisis there. Xi Jinping is also faced with a crisis, in that his famous program worldwide, the project of reaching out and helping with Belt and Road, giving people money, getting access to their countries, and building ports, which for a while, was really very, very impressive, now it’s begun to fall apart. It turns out that they were overcharging, under-delivering, that they have all sorts of countries now that owe the money they can’t repay, that the momentum of Chinese outreach is declining dramatically.

All these things are beginning to weigh on Xi Jinping. And he now takes the classic dictator’s response to a domestic problem, which is to see whether or not he can whip up nationalism by focusing on foreign opportunities. Taiwan is the natural opportunity it’s a matter of enormous national pride to the Chinese. They do, in fact, regard Taiwan as the 19th province. They’ve been very clear about that all the way through. At the same time, they have had an agreement with the United States that they will not militarily occupy Taiwan. And with every passing decade, Taiwan has become wealthier, more scientifically advanced, it now dominates the production of advanced computer chips in the world, and is central to the world economy, in terms of computers. And in terms of the rise of artificial intelligence, and artificial general intelligence, which requires very, very sophisticated manufacturing, which is largely available only in Taiwan. I think about 10% of it’s available in the US. But 70% plus is in Taiwan, and the tiny Taiwanese people have less and less identity with Mainland China. So the Chinese Communists have been faced with the reality that Taiwan is gradually slipping away, gradually becoming more capable of surviving on its own, and that they may be running out of opportunity. They spent enormously on their military. The Chinese Communists would like to have the ability to occupy Taiwan. It’s very, very unlikely they could, the Japanese, the Australians, the Americans have all come together in an alliance that would almost certainly protect Taiwan. But Xi Jinping may decide that his very survival, that the base of his regime, requires him to do something dramatic in Taiwan.

And therefore, I think we should be very careful, pay a lot of attention, not assume this is just rhetoric or a bluff. That in fact, if he saw an opening, he might try to find a way to grab Taiwan just to prop himself up at home. Very difficult, very dangerous situation.