Since the two sides split in 1949, Taiwan and China have engaged in an arms race across the Taiwan Strait. The impact of the difficult political situation on cross-strait exchanges has also severely negatively impacted the economic development of Taiwan. This work employs causal loops to establish a dynamic model of the balance of terror to explain how both sides of the strait have involuntarily been drawn into an arms race during the past six decades. Based on this dynamic model, a resolution to the current confrontation is proposed.
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