Does this mean that if all of my units at the time of the defection are under 200, then my cheapest unit automatically defects?

If it does, then won't that allow the SSw player to dictate what the Liao player is going to get?

Yep, the way it's currently worded, that's what it means.
However, in a recent post on the WK forums, raininva
eliminated the line stating that the lowest cost unit would
automatically defect if all units were less than 200. Instead,
she said that defections would be determined randomly
(method to be determined by your BM) and that the scenario
rules were going to be updated on the WK MW page. So far,
they haven't been. Who knows, for sure, what changes may
yet be in store? :rolleyes: