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Besides Matsu, where 13,300 people live, the coast guard says China has also been dredging in the shallow waters near the median line of the Taiwan Strait, which has long served as an unofficial buffer separating China and Taiwan.Last year, Taiwan expelled nearly 4,000 Chinese sand-dredgers and sand-transporting vessels from waters under its control, most of them in the area close to the median line, according to Taiwan's coast guard. That's a 560% jump over the 600 Chinese vessels that were repelled in all of 2019.In Matsu, there were also many Chinese vessels that sailed close to Taiwanese waters without actually entering, forcing the coast guard to be on constant alert.

The dredging is a "gray-zone strategy with Chinese characteristics," said Su Tzu-yun, an associate research fellow at Taiwan's top military think tank, the Institute for National Defense and Security Research. "You dredge for sand on the one hand, but if you can also put pressure on Taiwan, then that's great, too."

'PSYCHOLOGICAL WARFARE'

Sand is just part of the gray-zone campaign. China, which claims democratically-governed Taiwan as its own territory, has been using other irregular tactics to wear down the island of 23 million. The most dramatic: In recent months, the People's Liberation Army, China's military, has been dispatching warplanes in menacing forays toward the island. Taiwan has been scrambling military aircraft on an almost daily basis to head off the threat, placing an onerous burden on its air force.

Taiwanese military officials and Western analysts say China's gray-zone tactics are meant to drain the resources and erode the will of the island's armed forces - and make such harassment so routine that the world grows inured to it. China's sand dredging, said one Taiwanese security official investigating the matter, is "part of their psychological warfare against Taiwan, similar to what they are doing in Taiwan's southwestern airspace," where the Chinese jets are intruding.

China's Taiwan Affairs Office said in a statement to Reuters that Taiwan's claims that Beijing is allowing sand-dredging boats to engage in "illegal operations" near Matsu and the median line are baseless. The office did say it has taken steps to stop illegal sand-dredging, without elaborating.

The office also said Taiwan is "an inseparable part of China." Taiwanese authorities, it alleged, are using their claims of control over the waters near the islands to "detain mainland boats and even resorting to dangerous and violent means in their treatment of mainland crews."Asked about China's gray-zone actions, Taiwan's Mainland Affairs Council, which oversees policy toward China, said the Chinese Communist Party was engaging in "harassment" with the aim of putting pressure on Taiwan. The council said the government had recently increased penalties for illegal dredging in its waters.

Taiwan's Ministry of National Defense did not respond to questions.Chinese President Xi Jinping has not ruled out the use of force to subdue Taiwan. If he succeeds - by gray-zone tactics or outright war - it would dramatically undermine America's decades of strategic dominance in the Asia-Pacific region and propel China toward preeminence in the area.

The Matsu Islands are almost an hour by plane from Taipei. They are one of a handful of island groups close to China's coast that Taiwan has governed since 1949, when the defeated Republic of China government, under Chiang Kai-shek, fled to Taiwan after losing the Chinese civil war. The Matsu, Kinmen and Pratas island groups lie several hundred kilometers from mainland Taiwan. Their isolation, and their much-reduced Taiwanese military presence since the end of the Cold War, would make them highly vulnerable to a Chinese attack.

Matsu is just nine kilometers from the Chinese coastline at the closest point. The island has a total of just nine coast guard ships, ranging from 10 to 100 tons. On some days, government officials said, the coast guard has faced hundreds of Chinese vessels, ranging in size from 1,000 to 3,000 tons, in and around the island's waters. Taiwan says those waters extend six kilometers out from the coastline here. China doesn't officially recognize any claims of sovereignty by Taiwan.

At one point last year, more than 200 Chinese sand-dredging and transport boats were spotted operating south of Nangan, the main Matsu islet, three Taiwanese officials told Reuters. Lin, the coast guard commander, recalls a similar scene playing out on the morning of Oct. 25, when he and his colleagues encountered an armada of roughly 100 Chinese boats. That day, he said, his team expelled seven Chinese vessels that breached Matsu waters.

"People were frightened by the scene," he said, referring to local residents. "They were speculating about the purpose of the mainland boats and whether they would pose a security threat to the Matsu region."

NEW BOATS

In some stand-offs, Taiwan's coast guard has sprayed high-power water cannons at the Chinese ships in an attempt to drive them away. Last year, Taiwan impounded four Chinese vessels and detained 37 crew members, according to the coast guard. Ten of those arrested were given sentences of six to seven months in prison. The others are still on trial, the coast guard said.

Taiwan is in the process of beefing up its coast guard, partly in response to the dredging threat. Last year, President Tsai Ing-wen commissioned into service the first of a new class of coast guard vessel, based on the design of an "aircraft-carrier killer," a missile boat for the navy.

More than 100 new coast guard boats will be built in the next decade, Tsai said in December, vowing to enforce a crackdown with "no mercy" on Chinese dredging in Taiwan waters. In the meantime, larger patrol boats were sent to temporarily reinforce the coast guard in Matsu, whose 117 members are now conducting 24-hour patrols.

The number of sand dredgers off the coast of Matsu dropped significantly at the end of last year, as winter weather brought rougher seas that make dredging difficult. When the seasons change and the seas are calmer, local residents fear that dredgers will be back.

From the late 1950s through to the late 1970s, Chinese forces occasionally bombarded the Matsu Islands with artillery shells. Remnants of that era are still visible across the island group, from old air-raid tunnels to anti-Communist slogans displayed on the rugged cliffs of Nangan island.Today, Matsu is a popular tourist destination. Its picturesque old-stone homes have been turned into fashionable guest houses.

But locals say China's dredging tactics are hurting their livelihoods. Chen Kuo-chiang, who runs a seafood restaurant on Nangan, says the dredging has led to a drastic decline in the number of fish he catches off the island. Three years ago, he was hooking a dozen a day with his rod, said Chen, 39, as he stood fishing on some rocks in a Nangan port. Now, he said, he struggles to catch one or two.

The fears of a Chinese invasion are palpable on Nangan. Chen thinks the sand dredging might be a precursor to an attack by Chinese forces. "We don't want to be ruled by mainland China," he said. "We have freedom, which is limited over there."

Tsai Chia-chen, who works at an ocean-front bed and breakfast, said concern was particularly high ahead of the U.S. presidential election in early November. At the time, said Tsai, rumors circulated that China might seize the window of opportunity with the United States distracted by the election to launch an attack on Taiwan. The large number of Chinese dredgers around the islands in late October added to the anxiety, she recalled."Our guests were obviously worried," she said. "There was only one small Taiwan coast guard boat, surrounded by many huge dredgers."

DAMAGED CABLES

On five occasions last year, the dredgers damaged undersea communication cables between Nangan and Juguang, another isle in the Matsu group, the three Taiwanese officials told Reuters. Mobile phone and internet services for the islanders were disrupted, they said. There were no such incidents in 2019.State-backed Chunghwa Telecom said it spent T$60 million (about $2 million) to fix the cables last year. It also hired a local fishing boat to conduct daily patrols to ensure the safety of the cables.

The coast guard said most of the fully loaded Chinese vessels around Matsu have been seen heading with their sand in a northerly direction, towards the city of Wenzhou, where the local Chinese government has been touting a massive land reclamation project.

Known as the Ou Fei project, the area has been reclaimed for a new economic zone. It encompasses about 66 square kilometers - more than double the area of all the Matsu Islands. On its website, the Wenzhou local government describes the project as a "major strategic development for the future" of the city.The Wenzhou city government didn't respond to a request for comment.

Following contact on the local level between the two sides, China detained several dredging boats last month, according to Taiwan's coast guard. But a Taiwan-initiated meeting with authorities in the port city of Fuzhou to discuss the dredging was "postponed indefinitely" and without explanation in late December, said Wang Chien-hua, who oversees economic development in the local government that administers Matsu.

Taiwan had been planning to use the online meeting to urge Chinese authorities to enforce mandatory registration for dredgers and punish those who go out to sea without reporting to the authorities, according to an internal government note reviewed by Reuters.The Taiwan Affairs Office in Beijing said the local authorities on both sides maintained "necessary communication and collaboration" to ensure order on the seas.

Aboard his patrol vessel, Taiwanese commander Lin sounded defiant. The coast guard, he said, "will use force to drive away" Chinese ships that enter Taiwan's waters."That way we can reassure the people in Matsu. At the moment, we are capable of doing this job."