Written by Sophia Li.
Image credit: 01.10 尼加拉瓜的建築 by 總統府/ Flickr, license: CC BY 2.0.
In 2019, the Solomon Islands received a reported $500 million in promised Chinese investments, days before it cut ties with Taiwan and recognised Beijing. Soon after, China proposed redeveloping a military-capable airstrip on one of the islands, and by 2022, had signed a security pact with the country, raising fears that Chinese troops or assets could eventually be stationed just 2,000 kilometres from Australia. Despite Australia being the Solomon Islands’ largest donor and rapidly increasing its support—offering a $49 million embassy, patrol boats, and funding for government operations—it couldn’t stop Beijing’s influence. Taiwan had spent decades supporting the country with medical aid and disaster relief, but China didn’t need to outlast Taiwan—just outspend it.
Taiwan now has formal ties with just 12 countries—most of them small, economically struggling nations like Paraguay, Eswatini, and the Marshall Islands. A decade ago, that number was nearly double. Under Beijing’s “One China” policy, countries are forced to choose: recognise the People’s Republic of China and get access to its vast market, infrastructure investment, and development loans—or stick with Taiwan and be shut out. In many cases, Beijing sweetens the deal with large infrastructure projects, zero-interest loans, and public pledges of partnership. For countries facing mounting debt or unstable economies, China’s offers are hard to refuse. At the same time, rising cross-Strait tensions have made the stakes of choosing sides even higher. In April 2024, China conducted one of its many military drills simulating a blockade around Taiwan, and the U.S. responded with arms sales, tech cooperation, and legislation such as the Taiwan Enhanced Resilience Act. Even with the U.S. stepping up its support, Beijing’s economic influence still deters many nations from extending formal recognition to Taiwan.
One of the most telling examples of China’s diplomatic playbook is Nicaragua. In December 2021, President Daniel Ortega’s government cut ties with Taiwan and recognised Beijing just weeks after a widely criticised election that saw major opposition figures jailed. Ortega’s son, Laureano Ortega Murillo, helped broker the deal and framed it as a reset toward a more “respectful” partnership. China quickly reopened its embassy in Managua and praised the move as being “on the right side of history.” What followed, however, has exposed the limits of China’s approach.
Nearly three years later, the expected economic payoff has not arrived. Outside of vaccine donations, 750 city buses, and small shipments of medical supplies, Chinese investment has been limited. Big-ticket promises like a $600 million port and thousands of new homes remain unfulfilled. In May 2024, Nicaragua went so far as to cancel a $50 billion canal project with a Chinese investor due to a lack of transparency. Meanwhile, exports to China from Nicaragua have barely grown —just $25 million in the first quarter of 2024, compared to nearly $1 billion in exports to the U.S. Before the switch, Taiwan had provided more than $170 million in aid over a decade, backing road construction, education, and healthcare. China offered political support with fewer conditions, but not much else.
While Taiwan’s diplomatic losses have mostly come from aid-dependent nations, pressure is also mounting in a place with far more symbolic weight: the Vatican. The Holy See, the official authority of the Roman Catholic Church, has officially recognised the Republic of China since 1942, but over the past few years, its position has shifted. In 2018, it signed a provisional agreement with Beijing on the joint appointment of bishops in mainland China, which has since been renewed twice despite ongoing violations by Chinese authorities. In May 2024, the Vatican hosted Bishop Joseph Shen Bin—head of China’s state-run Bishops’ Conference—at a public religious event, the first time a mainland bishop had been allowed by the Chinese government to attend such a Vatican gathering. Vatican Secretary of State Cardinal Parolin has publicly called efforts to recognise China’s state-backed Church structure “a work in progress” and said the Vatican aims to establish a stable presence in China. At the same time, the Vatican has softened its language on Taiwan. In 2021, a Vatican official told the South China Morning Post that Taiwan “should not be offended” if the embassy were moved back to Beijing. Taiwan, for its part, has continued to express support for the Holy See, as seen with congratulating Pope Leo on his appointment and affirming its desire to strengthen ties.
On a broader scale, Taiwan’s exclusion from the formal diplomatic system resembles a shift in global politics: the erosion of a coherent liberal democratic bloc. After the Cold War, international relations were heavily shaped by liberal institutionalism—the belief that democratic states, bound by shared norms and institutions, would cooperate to uphold peace, promote human rights, and expand democratic governance. For a time, this seemed to hold. Institutions like the UN, WTO, and World Bank expanded, democracy promotion became part of Western foreign policy, and the number of electoral democracies increased across the world.
But in recent years, that vision has faltered. China and Russia have asserted alternative models of governance—centralised, authoritarian, and state-capitalist—while using economic power to expand their influence. Taiwan—despite ranking 24th out of 180 in the 2025 World Press Freedom Index and first in East Asia—is still treated as a second-class participant in international organisations. This raises uncomfortable questions: If a country like Taiwan can be excluded despite clearly aligning with democratic norms, what does that mean for the strength of democracy as a global organising principle? Can liberal democracies maintain influence without clearer collective action? And perhaps most critically: if values no longer determine international legitimacy, who gets to decide who belongs?
Looking ahead, Taiwan’s position will be a key measure of how the international system adapts—or fails to adapt—in an era of growing authoritarian influence. If democratic countries are serious about defending an open and rules-based order, they need to build meaningful alternatives. That includes formally backing Taiwan’s observer status in multilateral institutions, expanding bilateral trade deals like the U.S.-Taiwan Initiative on 21st-Century Trade, increasing defence coordination through mechanisms like the Global Cooperation and Training Framework (GCTF), and funding joint development projects that showcase Taiwan’s contributions on the global stage. The EU, for example, could move forward on stalled investment agreements; Indo-Pacific partners could integrate Taiwan into regional disaster relief and maritime security planning. These steps won’t resolve Taiwan’s diplomatic isolation overnight, but if nothing changes, Beijing’s bidding war will keep winning.
Sophia Li is a Stanford sophomore majoring in Economics and China Studies. She has covered East Asian topics for media outlets including Global Comment, Mangoprism, and The Week.
This article was published as part of a special issue on ‘Stanford Student Commentaries‘.
Taiwan Insight 