Fellows Feature: The Cost of Recognition: How China Buys International Support in the Battle over Taiwan

How does "Checkbook Diplomacy" work, and does it?

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Since 1949, Beijing and Taipei have been locked in a fierce diplomatic tug-of-war over international recognition. Both sides historically engaged in what came to be known as “dollar” or “checkbook diplomacy”—the strategic use of foreign aid and financial incentives to secure diplomatic allies. While Taiwan’s ability and willingness to offer such incentives have diminished, China’s financial capacity has grown considerably, particularly since the launch of the Belt and Road Initiative (BRI) in 2013. For example, Honduras switched recognition to the People’s Republic of China (PRC) in 2023 after maintaining ties with the Republic of China (ROC) for over 80 years. Shortly after the switch, it formally joined the BRI and signed an infrastructure cooperation agreement in which the PRC pledged $275.99 million in development financing. The competition for diplomatic recognition between the PRC and ROC is not new; in recent years, however, the PRC has begun a broader campaign to win international support—or at least acquiescence— for all aspects of its “reunification” agenda, including through the potential use of force or coercion.

Although many observers date China’s rise as a major development financier to the BRI’s announcement in 2013, the roots of its aid diplomacy stretch back to the early years of the PRC. After the Chinese Communist Party (CCP) won the Chinese Civil War in 1949 and established the PRC on the mainland, the defeated Kuomintang (KMT) government retreated to Taiwan, maintaining the ROC. Both governments continued to claim legitimacy as the sole representative of all of China. At the time, the newly founded PRC was plagued with one big issue: most countries continued to recognize the weakened ROC in Taiwan as the legitimate government of China, leaving Beijing diplomatically isolated.

Seeking to break out of this isolation, Mao Zedong and Zhou Enlai identified opportunities to court allies in the Communist bloc and newly decolonized nations across Africa and Southeast Asia. Beginning in the 1950s, China extended development assistance to countries such as Albania—which, following the Sino-Soviet split, became one of Beijing’s closest allies and top aid recipients—and launched landmark projects like the Tanzania-Zambia Railway (TAZARA) in the early 1970s. The PRC’s development efforts paid off and culminated diplomatically on October 25, 1971. That day marked the passage of Albania-sponsored Resolution 2758 by the United Nations General Assembly, which withdrew recognition of the ROC and recognized the PRC as the sole legitimate government of China. More than a dozen African nations voted in favor of the resolution.

Despite Beijing’s major diplomatic breakthrough, the tug-of-war over Taiwan’s political status did not end. To this day, the island’s international position remains deeply contested. As China’s economy has boomed, its diplomatic toolbox—and checkbook—has grown substantially. By early 2025, Beijing had succeeded in reducing the number of countries maintaining formal diplomatic relations with Taiwan to just 12, most of them small Caribbean and Pacific Island nations.

The BRI, launched in 2013, is a central instrument in Beijing’s expanding arsenal of economic statecraft. Since 2013, Beijing has managed to flip 11 more countries, each of which went on to formally endorse the PRC’s One-China principle. Analyzing PRC-funded official financial projects within countries that switched diplomatic recognition between 2013 and 2021 reveals a common pattern. Prior to switching, countries that recognized the ROC received little to no development financing from Beijing. Fortunes change quickly after a diplomatic switch – when a country severs its diplomatic ties with Taipei and recognizes the PRC, it is rewarded with a sharp and immediate surge in the number of development projects funded by Beijing, resulting in a considerable and immediate capital injection. For countries that used to recognize the ROC, switching diplomatic allegiance to the PRC has become a lucrative move.

From Recognition to Reunification

Beijing is clearly winning the de jure contest for diplomatic recognition. But under Xi Jinping, the PRC has grown increasingly assertive about ending Taiwan’s de facto self-governance and achieving “reunification”—a central objective linked to the “Chinese Dream” of national rejuvenation, which Xi aims to realize by 2049.

This new chapter in the diplomatic tug-of-war is no longer just about who recognizes whom. For the PRC, it is now about mobilizing international support for potential measures to challenge Taiwan’s de facto independence. While a full scale Chinese invasion of Taiwan is neither imminent nor inevitable, Beijing is clearly laying the economic, military, legal, and diplomatic foundations for future action—if necessary, through coercion or force.

The economic and financial ties forged through the BRI have become central to Beijing’s campaign to shape the global narrative on Taiwan. At the 2024 Forum on China–Africa Cooperation (FOCAC), 53 African governments—nearly the entire continent—affirmed that Taiwan is part of China and expressed their “firm support for all” of Beijing’s reunification efforts—effectively legitimizing coercive or even military action. In return, China pledged over $50 billion in investment and financial support for Africa over the next three years.

The Lowy Institute categorizes countries into five groups based on their political stance toward Taiwan and China, ranging from those that recognize the ROC to those that fully endorse Beijing’s one-China principle and support its reunification efforts, without insisting they remain peaceful. A clear pattern emerges when examining the number of Chinese development projects allocated to each country in the Global South based on its diplomatic grouping: Developing countries receive substantially more development projects and financial support the more closely they align with Beijing's position.

At one end, nations recognizing Taiwan ("Team Taipei") receive virtually no development projects from China, aside from exceptions such as humanitarian aid following natural disasters, educational initiatives, or strategic commercial investments in sectors like port and shipbuilding. Conversely, Chinese development finance increases progressively with alignment towards Beijing’s reunification stance. Countries that acknowledge the PRC but hold reservations about its full sovereignty claims or the One-China principle (“Status Quo-ists” and “Mixed Signallers”) receive a moderate amount of projects. In contrast, states that fully endorsing the One-China principle (“Beijing Leaners”) receive considerably more development projects, that go further by actively supporting Beijing’s reunification agenda, including non-peaceful means (“Beijing Backers”), receive the highest levels of financial support from the PRC.

A new 2758 in the making?

The data depicts a clear trend: the PRC is using its development finance as leverage to entice not only diplomatic recognition but active political support for its position on Taiwan. This aligns with a broader campaign designed to secure global support—or at least indifference—for China’s campaign of coercion against the island. By encouraging much of the world to view its Taiwan policy as legitimate, Beijing is hedging against future international backlash. Should it take coercive or military action, a large bloc of Global South countries—financially tied to China and diplomatically aligned—could withhold condemnation, or even lend explicit support.

Of the 128 UN-recognized nations classified by the World Bank as developing countries, 82 (64%) have fully endorsed China’s reunification agenda, while another 18 are categorized as “Beijing Leaners.” Among the 89 “Beijing Backers”identified globally by the Lowy Institute, an overwhelming 92% are located in the Global South. As it stands today, any resolution condemning or sanctioning Beijing for its actions on Taiwan would almost certainly fail, given the current global alignment. Unlike the case of Russia’s invasion of Ukraine, the US and its remaining allies would likely struggle to assemble a broad, multilateral coalition capable of isolating the PRC.

In many ways, this moment echoes the run-up to UN Resolution 2758 in 1971. Once again, Beijing is strategically leveraging legal, diplomatic, and financial channels to engineer international consensus—this time not just for formal recognition, but for the erosion of Taiwan’s de facto sovereignty. Should conflict erupt, the outcome will not only be determined by military might but also by which side commands legitimacy on the global stage. In the legitimacy game, Beijing appears to be rapidly gaining the upper hand. The cost of recognition is steep, both in terms of what China is willing to spend and the concessions it demands of its partners; but for China and many other nations in the Global South, it may be a price worth paying.