Confrontation with the United States } 629
While the exercises at the southern end of the Strait were still underway,
new exercises began off Haitan Island at the northern end. Once again, the
exercise involved assault on a hostile shore. Again, a wide variety of warships,
airplanes, and missiles sought air and sea superiority prior to the landing
operation. Amphibious tanks, several new types of landing craft, and heli-
copters once again delivered waves of assault troops. A parachute drop was
planned, but was canceled because of heavy winds. Once again, the initial
assault force secured a beachhead through which a second wave was landed.
As with earlier PLA exercises, the 1996 exercises were given extensive cover-
age by China’s media. Reports to Hong Kong papers asserted that China was
preparing to actually strike against Taiwan, or perhaps against Jinmen, Mazu,
or the Pescadores Islands. These reports may have been part of Beijing’s psy-
chological assault on Taiwan’s electorate.
PLA missile “tests” in July and August 1995 had triggered incipient panic
in Taiwan. The panic touched off by the March 1996 exercises was far worse.
People rushed to stores to stock up on cooking oil, rice, toilet paper, and other
essentials and began withdrawing Taiwan dollars from banks and exchang-
ing them for US dollars or gold. Demand for US dollars became so great that
planeloads of dollars had to be flown in, while some banks imposed limits on
the size of individual transactions. Taiwan’s stock and real estate markets fell
as people dumped illiquid assets. The outflow of capital from Taiwan surged,
up 27 percent over the same period in 1995. Public unease lasted only about
a week, however, and disappeared quickly once a US carrier deployment was
announced. Had the United States not intervened swiftly and effectively,
Taiwan’s first-ever presidential election might have occurred in the midst of
deepening panic and flight. Had the United States not intervened early and
forcefully, the outcome of Beijing’s military demonstrations could have been
far more advantageous for Beijing than was, in fact, the case.
As the PLA prepared to begin its new exercises, US leaders decided mili-
tary countermoves were prudent. On March 8, the day PLA missile firings
off Kaohsiung and Keelung began, Washington announced that an aircraft
carrier battle group built around the USS Independence would deploy to
within a few hundred miles of Taiwan. The evening before that announce-
ment, Defense Secretary William Perry told senior national security official
Liu Huaqiu that missile firings so close to Taiwan “could only be considered
as an act of coercion” and were reckless. About the same time, China’s defense
minister Chi Haotian gave a speech stressing the need to unify Taiwan and
the PRC. “Without any doubt,” Chi said, reunification would be achieved.
“Lee Teng-hui and his gang” were “facing a grim situation” because of their
attempt to “split China.” Peaceful unification was the best path, Chi contin-
ued, but China would “never tolerate any attempt to split our country using
all kinds of schemes.” Chi quoted PLA cofounder Zhu De to the effect that “As
long as Taiwan is not liberated, the Chinese people’s historical humiliation