While the whole world was watching the Serena Hotel in Islamabad, where the ceasefire negotiations on Iran were taking place, the real news last week unfolded 6,000 kilometers away.
In the Great Hall of the People in Beijing, Xi Jinping shook hands with Kuomintang (KMT) chair Cheng Li-wun. It was the first official contact between the sitting leaders of the Chinese Communist Party (CCP) and the KMT in nearly ten years.
The cooperation between these two parties was partly forged more than a century ago by the Dutchman Henk Sneevliet. As an envoy of the Comintern, Sneevliet attended the founding of the CCP in 1921, where the young Mao Zedong was also present, and he subsequently persuaded the communists to cooperate with Sun Yat-sen’s KMT.
That cooperation collapsed violently in 1927, after which the communists under Mao drove the KMT from the mainland to Taiwan in 1949. Cheng therefore described her trip as a historic peace mission and visited, among other places, Nanjing, the former capital of the KMT government. Xi emphasized that peaceful development on both sides of the Taiwan Strait is inevitable. Thus, the heirs of Mao and Sun Yat-sen meet again, more than a century after Henk Sneevliet first brought them together.
Distracted Americans
On April 7, China blocked the UN resolution on the Strait of Hormuz, thereby preserving both Iran’s negotiating position and its own role as mediator. That same day, Beijing steered Tehran toward a bilateral ceasefire, precisely the gesture with which it built goodwill with Trump. Xi Jinping then scheduled the meeting with the KMT on exactly the day the Islamabad talks began, the moment when American attention was maximally diverted.
In five weeks, the summit between Xi and Trump will take place in Beijing, where China will arrive with three diplomatic cards: the ceasefire in Iran, the open dialogue with Taiwan, and its position as the only country with leverage over Iran. This is a coordinated strategy that combines military, diplomatic, and economic pressure in a single move.
The war in Iran has pulled US naval capacity out of the Pacific. Aircraft carriers, marines, THAAD and Patriot systems have been redeployed to the Middle East since late February. That created the strategic diplomatic space for Beijing.
“Goddess of reunification”
On Chinese social media, Cheng Li-wun is nicknamed the “goddess of reunification.” For months, she had publicly pushed for a meeting with Xi, with the core message that Taiwan “does not have to choose” between China and the United States. After the meeting, she stated that Taiwan “should no longer be a potential flashpoint,” but “a symbol of peace, jointly protected by Chinese on both sides of the strait.” She went a step further by inviting Xi to visit Taiwan if the KMT comes to power. The phrasing that Taiwan does not have to choose marks a significant break with the traditional KMT line.
The KMT does not go so far as to advocate reunification, but Cheng does endorse the principle that both sides of the Taiwan Strait belong to one China, albeit with differing interpretations. At present, a majority of Taiwan’s population still favors independence from China, but there is growing skepticism about Washington’s reliability as an ally. The KMT, which holds a parliamentary majority together with a smaller coalition partner, is blocking an expensive weapons program in Taiwan. This is not merely budgetary, but also intended to accommodate Beijing. Beijing wants to use the meeting with Trump on May 14 and 15 to demonstrate that Taiwan is aligned with it.
For investors, Taiwan matters more than Iran. The island produces the vast majority of the world’s most advanced semiconductors. A military conflict between China and Taiwan would be estimated to wipe out around 10,000 billion dollar in global GDP. Any shift in the balance of power around Taiwan therefore directly alters the risk profile of technology stocks, supply chains, and the global economy as a whole.
Trump is always looking for deals. He has shown that allies are not exactly sacred in his worldview. China is betting that a president who has just seen his NATO allies refuse to join the war against Iran, who needs rare earth metals for AI and defense, and who wants a trade deal before the midterm elections, will be receptive to a framework in which Taiwan is managed through dialogue rather than deterrence.
The real negotiations, therefore, are not taking place in Islamabad. They began in the Great Hall of the People. And the country that arranged the ceasefire, cast the UN veto, allowed its tankers to sail freely through a closed strait, and received the opposition leader of America’s most strategically important partner, did all of that in a single week. Trump’s deal with Tehran also begins in Beijing.
Han Dieperink is chief investment officer at Auréus Vermogensbeheer. Earlier in his career, he served as chief investment officer at Rabobank and Schretlen & Co.