China economic woes could raise Taiwan risks, says US House committee chair

House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party holds a meeting on the wargames simulation "Taiwan Tabletop Exercise (TTX)," on Capitol Hill in Washington

By Michael Martina

WASHINGTON (Reuters) - China's economic slowdown could increase the risk of Beijing taking military action toward Taiwan, the Republican chair of a U.S. congressional committee on China said on Monday, drawing a contrast with Democratic President Joe Biden, who said it made it less likely.

Biden on Sunday called China's economic troubles a "crisis," and said on a trip to Asia that he did not think it would cause China to invade Taiwan, noting instead that he felt Beijing probably did not have the "same capacity" it previously did.

"I don't know if that's true," Mike Gallagher, chair of the U.S. House of Representatives' select committee on competition with China, told a Council on Foreign Relations event in New York.

"I just think it's equally as plausible that, as China confronts serious economic and demographic issues, Xi Jinping could get more risk accepting, and could get less predictable and do something very stupid," Gallagher said, referring to the Chinese president.

The congressman added that this alternate scenario was not meant as a criticism of the Biden administration.

China's military in recent years has stepped up activity around Taiwan, which Beijing claims as its territory. U.S. Central Intelligence Agency Director William Burns has said Xi has instructed his country's armed forces to be ready to invade by 2027, though that does not mean he would order it.

Gallagher said he was visiting New York partly to work with financial industry experts to assess the risk to the global financial system if China were to invade or blockade Taiwan.

A source close to the committee said senior executives from major investment banks, current and former executives from the pharmaceutical and critical minerals and mining industries, as well as retired four-star military officers would participate in a war game later on Tuesday.

"I think our best chance at deterrence is robust and smart investment in hard power," said Gallagher, who has repeatedly called for the U.S. to ramp up arms provisions to the island, and to ban U.S. capital flows into Chinese-military linked companies.

Fears of an economic slowdown have gripped China, and Xi skipped the G20 summit this past weekend.

U.S. officials have said Beijing has the resources to deal with its economy short-term but must face longer-term structural economic issues such as demographics and high debt.

(Reporting by Michael Martina; Editing by Josie Kao)