Generation 40s – 四十世代

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Plenty of economic challenges ahead for Taiwan’s new president

South China Morning Post
News›China›Policies & Politics
Taiwan politics

Lawrence Chung

Tsai Ing-wen plans to boost ties with Asean and India, but analysts say it won’t be easy to switch from reliance on cross-strait trade

Taiwanese President Tsai Ing-wen won’t have time for a honeymoon period when her government rolls into operation for the first day on Friday.

She is facing an even bigger challenge than her Kuomintang predecessor Ma Ying-jeou in reviving the island’s long-sagging economy, analysts say.

Tsai, of the independence-leaning Democratic Progressive Party (DPP), has said she plans to introduce five innovative research projects to stimulate the local economy, covering green technology, the internet, biomedicine, intelligent machinery and national defence.

She also plans to increase Taiwan’s economic exchanges with members of the Association of Southeast Asian Nations and India in order to cut the island’s economic reliance on the mainland.

However, analysts predict little chance of success for at least two years. And they warn the island’s economy might become even grimmer than it was under Ma due to the possibility of economic snubs from Beijing.

Tsai replaced Ma as the island’s leader on Friday following her crushing victory in January’s presidential election.

She has criticised Ma’s cross-strait economic policy, saying he had placed too much emphasis on the mainland over the past eight years, leading to the island’s overreliance on the mainland market.

Taiwan’s exports to the mainland now account for 40 per cent of its total exports – compared with between 35 per cent and 45 per cent under Ma’s predecessor, the DPP’s Chen Shui-bian – with two-way trade worth US$190 billion last year, up from US$110 billion at the end of Chen’s presidency, which ran from 2000 to 2008.

That shows Taiwanese businessmen sensed the market was in the mainland even before Ma opened up trading ties, but the wealth generated has not been evenly distributed among the general public, with large business groups benefiting most. That upset middle-class and grass-roots people on the island, with election experts saying their dissatisfaction was the main reason Ma lost the election.

To promote a change in direction, Tsai recently named a former foreign minister, James Huang, to head her “New Southbound Policy Office”.

“We need to turn Asean into an extension of Taiwan’s domestic market as soon as possible,” Huang, who served as foreign minister from 2006 to 2008 during the final years of Chen Shui-bian’s presidency, told a forum introducing the policy initiative on Tuesday.

“If we don’t seize the opportunities in the next five years, we will be left with no interests at all.”

Huang said that unlike the island’s previous “southbound” policy, introduced by then president Lee Teng-hui in the 1990s and later pursued by Chen, which focused on investment and trade, the new one would emphasise the absorption of talent and bilateral exchanges.

“Instead of just tapping their markets, we also want their people and their investments in our innovative industries, such as biomedicine,” Huang said.

But analysts and industrialists have doubts about the effectiveness of the policy – at least for the next two years.

“Businessmen are known for their business sense to look for profits and if they think profits are really there, they should have long gone to Asean instead of clinging to the mainland market,” said Sun Yang-ming, a former vice-president of the Cross-Strait Interflow Prospect Foundation, an independent think tank in Taiwan.

He said the new policy was a politically motivated attempt to twist normal market behaviour.

“I am afraid our economy might turn even worse in the next two years, given her plan to cut reliance on the mainland,” he said. “Besides, even if the new measure works, it will take at least a couple of years to show effects. But can the general public wait?”

An opinion poll released by Taiwan Think-Tank on Tuesday showed that 56.6 per cent of Taiwanese people hoped improving the economy would be Tsai’s priority on taking office. The island’s gross domestic product declined for the third consecutive quarter between January and March, with exports falling for the 15th straight month in April amid a global slump in demand.

A recent Ministry of Finance report showed the Ma government would be handing over a total debt of NT$5.7 trillion (HK$1.36 trillion) to the new government, something that is likely to become a heavy burden for Tsai.

Joyce Lin Juo-yu, director of the Asean Studies Centre at Tamkang University in Taipei, said approaching Asean members would be a “stiff challenge” for the Tsai government, given that Beijing – which had a great deal of influence in Southeast Asia – was also introducing its “one belt, one road” economic infrastructure initiative to woo the same countries.

“It is more important for the new government to show where the beef is if it is to launch this policy,” she said.

Taiwanese businessmen, however, are more concerned about Tsai’s plan to cut reliance on the mainland, fearing that it could lead to economic snubs from Beijing, including pressure aimed at curtailing Taiwan’s participation in regional economic affairs.

“I can see hard times coming if we have to cut our business exchanges with the mainland,” said Tien Yi-show, chairman of the Taiwan Travel Industry Association. “And the tourist industry here will be the first to suffer seriously,” he said, referring to an expected reduction in the number of mainland visitors, which topped 4 million last year.

Steve Lai, executive director of Taiwan’s Supply Management Institute, said: “Transformation of our industries cannot happen instantly, and before that we need the mainland market dearly.”

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Why Beijing has no desire to turn the screw on Tsai Ing-wen and threaten stability across the Taiwan Strait

South China Morning Post
Comment›Insight & Opinion

J. Michael Cole

J. Michael Cole says warnings by the international media and marginal players do not reflect the reality among top leaders

If we believed many of the article headlines that have appeared in international media since the January 16 election of Tsai Ing-wen of Taiwan’s Democratic Progressive Party, we would think the roof was about to come crashing down on the Taiwan Strait. Time and again, articles and editorials have warned that if Tsai refuses to recognise “one China” or the 1992 consensus, Beijing could – or should – punish Taiwan by, among other things, severing all official and unofficial contact. Such alarmism, however, doesn’t pass the reality check.

While ascertaining the future behaviour of any authoritarian regime will always be a challenge, so far, the Chinese leadership has reacted to Tsai’s landslide victory in a predictable fashion, with every indication that it wants a stable relationship across the strait. Therefore, while senior officials have reiterated the predictable lines on, say, Taiwan independence, their language in no way suggests plans for retributive action against Taiwan or escalatory policies that would threaten stability. There are several reasons why.

For one, Tsai’s victory didn’t come as a surprise, and Beijing has had several months to prepare for it. Besides being known for her pragmatism, the president-elect also is a known commodity to Chinese officials who have every reason to expect that both sides will arrive at some sort of modus vivendi for the foreseeable future. At the same time, Beijing is also aware that Tsai has been given a strong mandate, with control of both the legislative and executive branches of government, an electoral outcome that stems in part from a desire by the Taiwanese people for engagement, but careful engagement, with China.

Consequently, rushing the matter would risk pushing over the carefully balanced architecture of cross-strait relations, while punitive measures against the Taiwanese for the democratic choices they make would result in the very opposite of what Beijing has sought to accomplish over the years – to win the hearts and minds of Taiwanese by convincing them that a future with China is in their best interest. And, with much more pressing matters to deal with, such as unrest in Hong Kong, tensions in the South China Sea, signs of a slowing economy, and instability, Beijing has every incentive to avoid opening another front.

It is therefore important to pay attention to the language used by Chinese officials who are in a position to influence policy, as well as to determine who their intended audience is: the Taiwanese, the DPP, or the Chinese? When President Xi Jinping ( 習近平) or Foreign Minister Wang Yi (王毅) speak about Taiwan, what they say (and don’t say), who they say it to and where, are probably a much better indication of their future plans than remarks by junior officials, nationalistic military commentators, or academics.

Absent anything truly dramatic by the people who matter in Zhongnanhai, a number of media outlets have turned elsewhere for potential trouble. And there is plenty to be found. We need only to turn to Li Yihu, dean of Peking University’s Taiwan Studies Institute, who recently warned that Tsai’s failure to recognise “one China” and to be clear on the “1992 consensus” in her inaugural speech would have “a great impact on the cross-strait relationship”. Li also said Beijing should “punish two-faced Taiwan entrepreneurs” who profit from business in China while supporting independence.

Reuters, meanwhile, headlined that China had warned Tsai to prove she does not back independence, in an article based on remarks by Wang Yifu, who heads the China-appointed “Taiwanese” delegation at the National People’s Congress as well as the All-China Federation of Taiwan Compatriots.

In these instances, and others, the individuals quoted have little, if any, influence on actual policy in Beijing, and certainly cannot speak on its behalf. A focus on individuals who are but marginal players in this complex relationship misrepresents reality. Let’s wait for clear signals by the players who matter before we run for cover.

J. Michael Cole is a Taipei-based editor-in-chief of, a senior non-resident fellow with the China Policy Institute at University of Nottingham, and an associate researcher with the French Centre for Research on Contemporary China

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Livelihood issues set the tone for Taiwan’s presidential election, not its ‘sovereignty’ tussle with China

South China Morning Post
Comment›Insight & Opinion

Jonathan Sullivan

Jonathan Sullivan says setting aside the China question is likely to help Tsai Ing-wen win Taiwan’s election race, but learning how to work with China will determine the success of her presidency

It is not news that, in Taiwan, the Democratic Progressive Party’s presidential candidate, Tsai Ing-wen, is heading for victory on January 16. She has enjoyed a double-digit lead across all polls throughout the year, and recently crossed the psychological 50-point mark, ahead of her rivals, Eric Chu of the Kuomintang and James Soong of the People First Party. Seasoned Taiwan watchers know to take media polls with a pinch of salt. But the consensus across the political spectrum is that Tsai is a lock, barring something unforeseen.

Unexpected things do happen in Taiwanese elections. In 2000, the then independent Soong was ahead in the polls until the KMT broke a corruption scandal about him. Chen Shui-bian sustained gunshot wounds while campaigning on the eve of his re-election in 2004, which might have swung the vote in his favour. More recently, no one foresaw that Ma Ying-jeou would have a face-to-face meeting with President Xi Jinping (習近平).

If the latter surprise was intended to give the KMT’s election chances a boost, it didn’t work, despite the appealing optics of “the handshake” for the world’s media and the boost it might provide for perceptions outside Taiwan of Ma’s “legacy”. (In Taiwan, the meeting was greeted with anger or apathy.)

The 2016 presidential election is all about Ma and the KMT; Tsai’s big lead does not necessarily reflect huge enthusiasm for the DPP. The KMT’s expected loss in the coming election would reflect widespread discontent with Ma and his party, particularly the outcomes and trajectory of his economic policies. In the past 7½ years that Ma has been in power, the cost of living in Taiwan has steadily risen while wages have barely moved. House prices have increased by 45 per cent, and the price of a Taipei home is now about 16 times the average annual income (it is 7.5 times in Taiwan as a whole).

Taiwan’s famously even distribution of wealth has gone to the winds, and social mobility is no longer something that Taiwanese can take for granted. Education in particular is no longer the passport to mobility it once was, with many graduates earning a desultory NT$24,000 (HK$5,600) starting monthly salary.

As widespread feelings of relative deprivation have taken hold, corporations and individuals with political connections have profited from the opening of Taiwan’s economy to mainland China. Squandering their long-held reputation as stewards of the “economic miracle” in the 1960s and 1970s, Ma and the KMT have come to represent the 1 per cent in society. That Ma, a self-styled Confucian elite, has demonstrated contempt for colleagues in his own party and adopts a personal style that combines aloofness with indecision and authoritarian decision-making, compounds the feeling that he does not serve the best interests of regular Taiwanese.

Ma’s China policy is one factor, of course. Economic integration has implications for many sectors in Taiwan, including housing and jobs. Taiwanese companies have long swapped investment in Taiwan for mainland China, even moving out research and development operations, further depressing the domestic job market.

On top of that, Chinese investment in real estate has caused bubbles and made housing unaffordable for ordinary Taiwanese. As in Hong Kong, an influx of Chinese tourists has exacerbated the sense of difference and antipathy towards Chinese people, and has no doubt contributed to an unequivocal trend in public opinion.

During Ma’s reign, the proportion of people who identify themselves as Taiwanese has increased from 45 per cent to 60 per cent, at the same time that Ma has espoused Taiwan’s commitment to being part of the imagined Chinese nation, contrary to the lived experience of Taiwanese who identify with the experience of a liberal democracy.

Taiwan under Ma has become overly reliant on mainland China; one third of Taiwan’s total trade volume is with mainland China, Hong Kong and Macau, while Beijing makes no secret of its intention to leverage this dependence. And despite the superficial entente cordiale on show in Singapore, the underlying military threat posed by the mainland is undiminished, while Ma has flubbed professionalisation of the army and steadfastly refused to increase defence spending.

China’s impact on Taiwan is inescapable, but relations with China in the abstract sense of sovereignty and Taiwan’s future status are not the major preoccupation of Taiwanese voters. There is huge controversy around the so-called “1992 consensus”, and resentment at Ma’s attempts to lock Taiwan into a narrowing range of future options. Yet, my sense is that Taiwanese are focused on more tangible issues.

In this respect, Tsai has cleverly put cross-strait relations to one side, emphasising time and again her adherence to the “status quo”. The fact that the status quo is a nebulous concept – does it refer to “one China” or Taiwan’s functional autonomy? – is to everyone’s advantage.

The DPP is vulnerable on its China policy, and going into too many specifics is not to the party’s advantage during the campaign. But since 90 per cent of Taiwanese citizens over many years have evinced favour for some version of the “status quo” (“leading to independence”, “leading to unification”, “indefinitely”), it has become an “easy issue”, inoculating the DPP from attacks on its China position and helping voters set China policy to one side – for the time being at least.

Although she has rightly focused her campaign on social and economic justice, if and when Tsai becomes president, relations with China will inevitably return to prominence. Beijing views Tsai with deep suspicion, including her ability to rein in the more independence-minded factions of a party it regards as “secessionist”. Officially, Beijing will adopt a wait-and-see attitude, while preparing to put the squeeze on Taiwan in the absence of demonstrations of “sincerity” from Tsai.

A major stumbling block will be the “1992 consensus” that Ma has enthusiastically promoted as the “status quo”. Tsai, consistent with many Taiwanese, rejects the notion that an ad hoc agreement between the Chinese Communist Party and a then unelected KMT should dictate democratic Taiwan’s options. As Xi has taken charge of the mainland’s Taiwan policy, marginalising the Taiwan Affairs Office, Beijing’s position on acceptance of “one China”, even in the guise of “one China, respective interpretations”, has hardened. Absent conciliatory noises from Tsai, Beijing will go after Taiwan’s handful of diplomatic allies, increase pressure on the large community of Taiwanese businesspeople living in mainland China and work to support the KMT and marginalise the DPP.

Tsai has intimated that she will put the brakes on Ma’s rapid embrace of China, but in reality she won’t have a choice if Beijing refuses to play ball. Tsai’s plans to reduce inequality, increase provision of social housing, and raise wages are what will get her elected, but developing a framework to manage relations with China is what will make her presidency a success.

Jonathan Sullivan is associate professor and director of research in the School of Contemporary Chinese Studies, University of Nottingham

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Meeting face to face, Xi Jinping and Ma Ying-jeou take a big leap of faith towards peace

South China Morning Post
Comment›Insight & Opinion

Lawrence J. Lau

Lawrence J. Lau believes the meeting of Xi Jinping and Ma Ying-jeou, as equals, lays the foundation for lasting peace for their peoples

The historic summit meeting between President Xi Jinping (習近平) and President Ma Ying-jeou in Singapore last Saturday was the very first time the leaders of the two sides of the Taiwan Strait have met face to face since the meeting between Chiang Kai-shek and Mao Zedong (毛澤東) in Chongqing (重慶) in 1945. This is indeed a milestone – the culmination of the progress in the development of “formal” relations between the two sides since the similarly historic “ice-breaking journey” undertaken by Dr Lien Chan, then chairman of the Kuomintang, in 2005, to meet then president Hu Jintao (胡錦濤) in his capacity as general secretary of the Chinese Communist Party. That ushered in a period of party-to-party relations at the highest levels.

There were secret but widely known meetings between the confidants of president Jiang Zemin (江澤民) and president Lee Teng-hui in Macau and elsewhere in the early 1990s, but nothing seemed to have come of it. The Hu-Lien meeting, in turn, harked back to another historic meeting – that between the late Koo Chen-fu and Wang Daohan, as the heads of, respectively, the Straits Exchange Foundation and the Association for Relations Across the Taiwan Strait, the “non-governmental” organisations responsible for cross-strait relations, in 1993, and also in Singapore.

At each such successive meeting, the level of participation has become higher as well as more “official”. This progression indicates that, despite the ups and downs, there has been long-term improvement in the relations between the two sides. Even though there was no substantive agreement at the summit meeting, and none was expected by either side, the fact that it took place at all was itself a most remarkable achievement. Almost no one predicted that such a meeting would be possible. Because of this meeting, Ma’s position in history is assured.

Ma has clearly contributed greatly to the improvement of cross-strait relations during his administration. Between 2008 and 2014, Taiwanese exports to the mainland grew from US$103 billion to US$152 billion, while exports from the mainland to Taiwan also grew, from US$26 billion to US$46 billion, with Taiwan running a trade surplus of over US$100 billion a year. During the same period, mainland visitors to Taiwan jumped from 280,000 to about 4 million while Taiwanese visitors to the mainland increased from 4.36 million to 5.37 million.

Direct scheduled flights between the mainland and Taiwan were launched in 2008, as were direct shipping and postal services. The economic impact on Taiwan has been significant and beneficial. Ma has also advocated and implemented faithfully the “three no’s” policy – no reunification, no independence, and no war – during his administration, taking into account that the majority of the people in Taiwan prefer the status quo to any of the other alternatives.

But more than anything else, over the past eight years, both sides have quietly engaged in building mutual confidence and developing mutual trust. For example, on the diplomatic recognition front, there was basically a standstill, with both sides refraining from trying to persuade another country to switch recognition from one side to the other. This has resulted in significantly reduced tensions and potential conflicts between the two sides.

It is no secret that Ma wanted a meeting with Xi, but only under conditions of equality, dignity and mutual respect, even though the mainland is much larger and more powerful than Taiwan. It took a most far-sighted President Xi to take a bold, decisive and magnanimous step to meet President Ma one-on-one, as equals (even though they only addressed each other as “mister”). This represents a major concession to Taiwan – that a national leader would treat the leader of a “breakaway” region as an equal. There was certainly opposition to this summit meeting on both sides, inside and outside the respective governments. But they did manage to meet, as partners in an enterprise to ensure a peaceful journey as well as a peaceful end. I believe leaders of both sides of the strait feel that they have the responsibility to their own people to make sure that whatever happens, happens peacefully.

The Xi-Ma summit meeting should be viewed from a long-term perspective. The two leaders are wise enough to realise that what they are doing is not for the purpose of short-term political gains for either themselves or their respective parties, but to consolidate existing peaceful relations and lay the foundations for further progress in the relations between the two sides in the future. It took great courage on both sides to make this breakthrough, because most people cannot see or appreciate the long-term benefits of what they have done.

Even though the meeting was arranged for the mutual benefit of the mainland and Taiwan, it should be welcomed by the rest of the world, as any development that increases the potential for peace and reduces the potential for war is good for the world at large. The US has expressed its support for this meeting.

It is not clear that this meeting will necessarily benefit the Kuomintang in the upcoming presidential election in Taiwan. But by creating a precedent, it does pave the way for direct contact and face-to-face meetings between the leaders on both sides of the strait in the future.

Some may ask: why now? I believe there was just a narrow window of opportunity. It either had to take place now, or not at all, given the forthcoming presidential election in Taiwan next January. The mainland side does not wish a meeting between the leaders of the two sides to take place at an Asia-Pacific Economic Cooperation economic leaders’ meeting (which was held in Beijing in November 2014 and will be held in Manila this month). Thus, there was not much choice.

Some may also ask: why Singapore? I believe Singapore is a neutral place, and its government has friendly relations with both sides and was ready to facilitate the meeting, as it did with the Koo-Wang meeting back in 1993. Holding this first meeting in Singapore would not preclude such subsequent meetings be held on the mainland, Taiwan, Hong Kong or Macau. It is also a signal to Southeast Asian countries that China is ready to sit down and talk to them one-on-one, on the basis of equality and mutual respect.

Ultimately, there will have to be a settlement between the two sides of the Taiwan Strait, hopefully one negotiated between the leaders of both sides. In this sense, direct contact between them is not only inevitable, but also absolutely necessary. The summit is just a first meeting between the leaders of the two sides since 1945, but it will not be the last. With this precedent, it will be much easier for a president from Taiwan, of whatever party, to meet the president of China in future.

Lawrence J. Lau is the Ralph and Claire Landau Professor of Economics at the Chinese University of Hong Kong, and Kwoh-Ting Li Professor in Economic Development, emeritus, at Stanford University.

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Xi-Ma summit sends pointed message that cross-strait relations are now too strong to roll back

South China Morning Post
Comment›Insight & Opinion

David Shambaugh

David Shambaugh says the Xi-Ma meeting, itself a display of bold statesmanship, caps a steady decline in cross-strait tension in recent years

The historic meeting between the leaders of China and Taiwan – Xi Jinping (習近平) and Ma Ying-jeou – on November 7 in Singapore was filled with rich symbolism reflecting the long distance travelled by the two rival regimes since 1949. It was the first time that the leaders had met in 66 years of separation, following the Republic of China’s retreat to Taiwan and the establishment of the People’s Republic of China on the mainland.

This extraordinary event is to be enthusiastically welcomed by the people of China and Taiwan, as well as the whole world. There is no downside to the meeting, unless one subscribes (as some in Taiwan do) to the delusion and illusion that Taiwan is an independent sovereign state. Much of the post-summit narrative and press coverage has emphasised the tactical expediency and linguistic obfuscation by both sides, but we should recognise the bold initiative for what it was: bold statesmanship. It is worthy of the Nobel Peace Prize.

We do not, of course, know the precise future impact that the meeting will have on cross-strait relations, but it should be viewed as a capstone of all the remarkable progress achieved under Ma’s presidency and the parallel efforts made by China’s leaders Xi and Hu Jintao (胡錦濤). It is, in fact, probably the greatest achievement of Hu’s legacy. It should also be seen as an effort to consolidate the gains made over the past seven years, as well as to put in place a framework for further development following Taiwan’s elections in January. Whoever is elected Taiwan’s leader – and in all likelihood it will be the Democratic Progressive Party candidate Tsai Ing-wen – the meeting makes it much more difficult to roll back the bridges built across the Taiwan Strait. The thick cross-strait linkages are now a reality that all of Taiwan’s politicians and citizens must live with. The question is: do they wish to push them further forward?

The two sides have travelled a tortuous course to get to this point. For Taiwan, this has included five military crises and a state of high military tension for decades (it still lives under intimidating military threat from the mainland). It included major political crises for Taipei when the Republic of China was expelled from the United Nations in 1971 and the US severed diplomatic relations and its bilateral security treaty in 1979. But the island has largely overcome these challenges by building strong substantive ties absent diplomatic relations with most nations in the world (22 states still diplomatically recognise the Taipei government). Such challenges included strenuous efforts by China to isolate Taiwan internationally and pressure it into submission. Taiwan’s government and people deserve much credit for enduring this pressure and these crises while building a modern economy, robust democracy and vibrant civil society.

Despite these accomplishments, the 23 million people on Taiwan continue to have a very mixed identity and ambivalent feelings about their relationship with the mainland. While a substantial majority endorses the “status quo” in cross-strait relations, there also exists the widespread sense that Taiwan has fallen too far under the influence of the mainland and is losing its de facto autonomy. This growing sense of dependency has fuelled the popular “Sunflower Movement” and underlies support for the DPP. China’s government in Beijing is acutely aware of, and worried about, this growing sentiment on the island – which is one reason that Xi decided to meet Ma at this time in advance of January’s elections.

To be certain, China-Taiwan relations have grown remarkably quickly and deeply in recent years. The two sides have signed 23 cooperation agreements – including in post and telecommunications, trade in services, cultural and educational exchanges, water sharing, tourism, investment, civil aviation, dual taxation, judicial matters, a landmark Economic Cooperation Framework Agreement for trade, and other bilateral areas. These agreements have facilitated dramatic growth in cross-strait interactions since 2008.

More than two million Taiwanese now live and work on the mainland. A reported 120 flights carry 6,000 people across the strait every day. Intermarriages are on the rise. Tourism is booming, with a record four million mainlanders visiting the island in 2014. Taiwan’s Tourism Bureau recently raised the cap for mainland visitors from 4,000 to 5,000 per day. Meanwhile, China’s government reports 5.37 million visits from Taiwan residents last year. The number of mainland students studying in Taiwan has also exploded in number – totalling 33,000 today.

[If Taiwan’s economy continues to grow at the current rate of 3.5 per cent, or less, many in Taiwan fear the mainland will try to leverage the economic dependency for political ends. Photo: Reuters] If Taiwan’s economy continues to grow at the current rate of 3.5 per cent, or less, many in Taiwan fear the mainland will try to leverage the economic dependency for political ends. Photo: Reuters

Yet it is precisely this rising wave of mainlanders, plus the growing economic dependence, that is giving pause to many on Taiwan. Various public opinion polls on the island show rising discomfort with cross-strait relations and increasing support for independence. This is fuelled by many factors – history, identity, politics, ethnicity, geography – but clearly economics is now among the most important. Fully 40 per cent of the island’s trade is now with the mainland. Trade last year exceeded US$198 billion, according to mainland statistics. Despite this, Taiwan’s economy has been contracting in recent years.

The “scissors effect” of trade dependence and a slowing economy has many on Taiwan worried about the future. At present, Taiwan’s economy would rank only fifth among China’s provinces and regions – trailing behind Guangdong, Jiangsu (江蘇), Shandong (山東), Zhejiang (浙江) and Henan (河南). But if Taiwan’s economy continues to grow at the current rate of 3.5 per cent, or less, many on Taiwan fear the mainland will try to leverage the economic dependency for political ends. It is thus imperative that Taiwan try to diversify its trade partners in future years. This is, however, easier said than done.

The Xi-Ma meeting took place against the backdrop. It also was facilitated by the two sides continuing to agree to what they call the “1992 consensus” of “one China, respective interpretations”. Ma’s administration has gone further when he declared at the outset of his term the three principles of “no unification, no independence, and no use of force”.

But Tsai and her DPP have never accepted the validity of this consensus that was reached after negotiations in Singapore in 1992. If elected, Tsai has said her mainland policy would be based on three factors: the “existing ROC constitutional order, the status quo, and the accumulated outcomes of the past more than 20 years” (in some speeches she substitutes “the people’s will” for the “status quo”). In a closely watched visit to Washington in June, she sought to assuage American concerns about her intentions and potential policies. She did mollify American concerns that she was not a reincarnation of Chen Shui-bian, but her intentional cross-strait policy and language of “strategic ambiguity” leaves many remaining questions in the US about what she might do if she wins the presidency.

This was another key reason for the Xi-Ma meeting – to box Tsai in, lock in the existing agreements, and give her a fait accompli that she would inherit upon taking office. Indeed, Tsai’s public statements seem to indicate she realises that the cross-strait relationship has progressed so far that it is difficult and inadvisable to try and roll it back. She seems to wish to recalibrate it and particularly to ensure the making of Taiwan’s mainland policy is more inclusive and transparent. Tsai was very critical publicly of the secret preparations that led to the surprise announcement about the summit in Singapore. She also issued a post-meeting statement lambasting Ma : “We had hoped that President Ma would speak about Taiwan’s democracy, freedom, and the existence of the Republic of China. More importantly, that he would mention the freedom of the Taiwanese people to make their own choices. However, none of these were mentioned.” In fact, Ma did this obliquely by informing Xi that: “Both sides should respect each other’s values and way of life.” Moreover, upon his return to Taiwan, he publicly released the full text of his statements to Xi.

[Activists protest against the Xi-Ma meeting. For the first time since 1949, the past seven years of cross-strait stabilisation has removed the Taiwan issue from the heart of the US-China relationship. Photo: Reuters] Activists protest against the Xi-Ma meeting. For the first time since 1949, the past seven years of cross-strait stabilisation has removed the Taiwan issue from the heart of the US-China relationship. Photo: Reuters

One issue Ma did raise with Xi was that of the short-range ballistic missiles China has deployed opposite Taiwan (for some reason, he only mentioned missiles at the Zhurihe base rather than the total number of more than 1,300), asking Xi to “take some friendly, concrete measures” concerning the deployment. After the meeting, Ma indicated that he was “not very satisfied” with Xi’s response, according to Taiwan’s China News Service. Elsewhere, it was reported that Xi responded that “not all” of the missiles were aimed at Taiwan.

Finally, it must be noted that the US government fully and officially welcomed last weekend’s momentous meeting (although it received very short notice). For the first time since 1949, the past seven years of cross-strait stabilisation and reduction of tensions has removed the Taiwan issue from the heart of the US-China relationship. To be certain, Beijing and Washington have many other difficulties, but in recent years Taiwan has generally not been one of them. The steadfast and quiet support that Taiwan has received from the US, before and since 1979 and Washington’s adherence to the “one China” policy, were also important background factors that facilitated the historic Xi-Ma meeting.

David Shambaugh is professor and director of the China Policy Programme at George Washington University, and a non-resident senior fellow at the Brookings Institution in Washington, DC