Some years ago I enjoyed an excellent lunch – banquet would be more accurate – with the Chinese ambassador to London, prior to embarking on a press trip to the People’s Republic to witness its impressive economic achievements first hand. During coffee, I made what I thought to be a conciliatory remark about the status of Taiwan. It was a mistake. Whether he misunderstood me or not he declared, with due menace, that any challenge to China’s claim of sovereignty over Taiwan would mean war. Apart from that, our meeting was a great success.

It was a very forceful reminder of just how sensitive an issue Taiwan is for the Chinese government. The very word “Taiwan” is guaranteed to bristle with any official as I, in my own small way, discovered.

Now Xi Jinping has once again raised the issue, on the 40th anniversary of a landmark “message to compatriots” that urged Taiwan to embark upon peaceful reunification. The president was conciliatory – but, as has long been the case, he refused to rule out military action if Beijing’s ambitions are rudely thwarted by a declaration of independence from Taiwan.

This matters more than most distant territorial scraps because it is part of a long list of Chinese geopolitical grievances. Though its support of Taiwan is far weaker than it used to be, America is still the guarantor of Taiwan’s security and is therefore a third party in the dispute. President Trump’s trade war with China (and a complex range of territorial waters disputes with, among others, the Philippines, Vietnam, Japan and Malaysia) also adds to the tensions, and they have started to fester and feed upon each other.

The obvious answer is for President Trump and President Xi to settle all these matters with a “grand bargain”. The outlines of this are already clear: the prize for Beijing is reunification, and the US should usher Taiwan towards reunification under the “one nation, two systems” model proposed by China. This model was broadly followed when Hong Kong and Macau were handed back by Britain and Portugal in the 1990s. It would be a fine thing for the Chinese president to present to his people on the 70th anniversary of the revolution this year.

In return, China should stop manipulating its currency and distorting its economy, and eliminate its still vast trade surplus with the US to trivial levels. It should also settle up its more outrageous claims to the seas around its coastline.

Chuck in some environmental initiatives (which would also level the economic playing field), a clampdown on intellectual property theft and some reduction in China’s neocolonial activities in Africa, and the world could be a much safer, more prosperous place. As Nixon and Henry Kissinger recognised half a century ago, it would also reset the balance of power away from the other global superpower, Russia.

With strong leaders – and Trump and Xi at least qualify as that – such a deal is surely possible.

China cancels Christmas Show all 7 1 /7 China cancels Christmas China cancels Christmas A man sells Christmas decorations on a street of Zhangjiakou in northern China's Hebei province (AP Photo/Ng Han Guan) China cancels Christmas a promoter dressed as a teddy bear rest along a retail street in Zhangjiakou in northern China's Hebei province (AP Photo/Ng Han Guan) China cancels Christmas A family walk past images of Santa Claus in Zhangjiakou in northern China's Hebei province. (AP Photo/Ng Han Guan) China cancels Christmas A worker guards the entrance of a shop decorated with images of Santa Claus in Zhangjiakou in northern China's Hebei province. (AP Photo/Ng Han Guan) China cancels Christmas Sales staff from an apparel shop dance wearing Christmas themed costumes to promote a year end sales in Zhangjiakou in northern China's Hebei province. (AP Photo/Ng Han Guan) China cancels Christmas Sales staff from an apparel shop dance wearing Christmas themed costumes to promote a year end sales in Zhangjiakou in northern China's Hebei province. (AP Photo/Ng Han Guan) China cancels Christmas a sales person waits for customers near a Christmas tree decoration in Zhangjiakou in northern China's Hebei province. (AP Photo/Ng Han Guan)

Moreover, the Chinese claim to Taiwan is difficult to argue with. Taiwan is simply a post Cold War anomaly. China’s offer was perfectly clear and fair – especially if Taiwan is accepted to be part of China, as it has long been (and as the Taiwanese government once used to so violently insist). Xi said, for example: “On the basis of ensuring China’s sovereignty, security and interests of development, the social system and way of life in Taiwan will be fully respected, and the private property, religious beliefs and legitimate rights and interests of Taiwan compatriots will be fully protected after peaceful reunification is realised.”

More ominously, and as ever, there is a threat: “We make no promise to renounce the use of force and reserve the option of taking all necessary means.”

Taiwan has soured relations between the west and Beijing since 1949, when Mao won the civil war and his opponents, the Kuomintang, fled to a few offshore islands, the largest of which was Taiwan, itself recently occupied by imperial Japan. It is rather as if a bunch of renegades in the English Civil War in the seventeenth century wound up on the Isle of Wight and declared themselves the sole legitimate government of the entire nation. Having failed in that quixotic enterprise, they now wish to declare themselves independent. That is, more or less, what is happening in Taiwan. It is getting a bit ridiculous, and it is maddening the Chinese government.

Increasingly anachronistic, Taiwan – even now formally known as the Republic of China – used to claim sovereignty over the entire nation, and was backed in its claim by a belligerent America. The US refused to recognise even the existence of “Red China” until president Richard Nixon, the former Cold War warrior, made his historic trip to the People’s Republic in 1972 and president Jimmy Carter normalised diplomatic relations with Beijing in 1979. The PRC then also displaced Taiwan on the UN Security Council.

Since then, the Taiwanese have been slowly losing the diplomatic and, for that matter, the economic battle with a reforming, growing China. In the Mao era, China was an economic pygmy; today its economy is the largest in the world, if you remove the distortions of exchange rates. It is bigger than America and Germany combined, seven times bigger than Britain, and 20 times larger than Taiwan. The People’s Army has a million soldiers. It has 260 nuclear warheads. Diplomacy has to take some account of these towering realities.

The irony is that where once “Nationalist” Taiwan used to stress the unity of China and its claim of sovereignty over the entire territory, it is now Beijing that is anxious to reassert its claim of sovereignty over Taiwan, while many Taiwanese want formal independence.

Referring to recent setbacks for her party, the president of Taiwan, Tsai Ing-wen, now declares: “I must emphasise that the election results absolutely do not mean that grassroots public opinion in Taiwan favours abandoning our sovereignty, nor do they mean that the people want to make concessions regarding Taiwanese identity.” No – but they would like their economy to start growing again, and the obvious answer to that is economic reunification with the mainland.

The election of a female president in Taiwan in 2016 from a party that couldn’t have existed for most of Taiwan’s history in the one-party state run by the Kuomintang highlights the big new barrier to Chinese reunification. This is the second irony: this is no longer a tussle between opposing authoritarian ideologies – communist dictatorship China vs capitalist dictatorship China, as Taiwan is now a full democracy and China is no longer fully communist. It does feel bad to be abandoning a proper democracy such as Taiwan.

Yet China’s overwhelming military and economic superiority in the region does, indeed, as President Xi implies, mean that reunification is inevitable.

History proves that the most successful diplomatic initiatives, the ones that seem so bold and innovative at the time, are merely the acceptance of the inevitable: Nixon’s historic mission to China itself; the release of Nelson Mandela and a multi-racial South Africa; the existence of the state of Israel; the end of the British Empire and its transformation into a Commonwealth; the collapse of the USSR. These moments in history all required transforming a kind of defeat into a victory. Xi Jinping plainly sees this, and perhaps the authorities in Taiwan too. If only we could be confident that Trump is also willing to accept reality.

There seems to be a growing mood of hawkishness towards China in the US administration – a hostile speech by US vice president Mike Pence last year being a prominent example. Western security services fret about the power of Chinese companies such as Huawei, and arrest its executives. It is, frankly, getting very dangerous.

Time for a Xi-Trump summit, and a “grand bargain”. If Trump can do it with North Korea, why not China?