Sorting out the complex relations between Taiwan and mainland China is no easy task, for government officials or political analysts. Here, political scientist Chu Yun-han explains the basic issues---and current worries--for Taipei's policymakers.
The emerging patterns of cross-straits interaction present a perplexing dilemma. The PRC is the foremost security threat to the ROC and is also behind its diplomatic isolation and precarious sovereignty status; yet, at the same time, mainland China has rapidly evolved into Taiwan's second largest export market, its single most important source of trade surplus, and the top recipient of Taiwan's outbound capital flow.
According to ROC statistics, Taiwan's 1995 trade with mainland China (mostly via Hong Kong) totaled US$22.5 billion, accounting for 17.4 percent of the island's total exports that year. This made mainland China by far Taiwan's second largest export market after the United States. Taiwan has become increasingly dependent on the mainland as a trade partner. In 1990, for example, Taiwan's overall trade surplus was $12.5 billion, while its trade surplus with mainland China stood at $7.04 billion. By 1995, although Taiwan's overall trade surplus had dropped to $8.12 billion, its surplus with the PRC had skyrocketed to $16.3 billion.
By the end of 1995, the cumulative investment by Taiwanese businessmen in mainland China was estimated to be around $30 billion, accounting for more than one-third of Taiwan's gross capital outflow, by far surpassing Taiwan's total investment in the Philippines, Indonesia, Vietnam, Malaysia, and Thailand. In addition, mainland China hosts more than 30,000 Taiwanese-invested firms and approximately 100,000 Taiwanese business expatriates. Between 1987 and 1995, travelers from Taiwan--a large portion of them on business-related trips--made roughly 8.5 million visits to the mainland. In 1996, despite increased cross-strait tension, Taiwanese paid 1.57 million visits to the mainland via Hong Kong and Macau.
Nevertheless, these intensified economic exchanges have so far done little to ameliorate the tension between the two sides. On the contrary, cross-strait relations have entered their most turbulent period since the summer of 1995, when Beijing abruptly canceled a proposed second round of quasi-official talks between the two sides in the aftermath of President Lee Teng-hui's visit to the United States that June. Since then, the PRC has cut off all established channels of semi-official contact and negotiation.
In the summer of 1995, the People's Liberation Army (PLA) held two missile tests off the northern coast of Taiwan and a series of extensive military exercises in the following months to back up its threat of resorting to military means against Taiwan's potential move toward formal independence. In addition, Beijing launched a series of personal attacks on Lee Teng-hui for his "crime of dividing up the nation." Then, on the eve of Taiwan's first popular presidential election, held on March 23, 1996, 150,000 PLA troops were massed on the Fujian coast facing Taiwan, ready for live ammunition maneuvers--including further missile tests near Taiwan's two major seaports, the most extensive exercises in the Taiwan Strait that the PRC had conducted in forty years.
Although tension has abated since then, quasi-official talks between the two sides have yet to be reopened. The current challenge for ROC policymakers is how best to manage a growing cross-strait dilemma: the simultaneous economic convergence and political divergence between mainland China and Taiwan. What are the strategic dynamics of cross-strait interactions? And what are Taiwan's policy options toward the mainland?
Since the early 1980s, the ROC and PRC have interacted strategically on both political and economic levels. Politically, Beijing has attempted to block any possibility of an independent Taiwan, and has tried to impose on Taipei its own vision of nation-building, that is, the "one-country two-system model." Taipei's policy has been to discredit the PRC's international claim to sovereignty over the ROC. Both Taiwan and the mainland are attempting to gain control over the expanding scope and increasing speed of cross-strait economic exchanges, but neither is able to dictate the economic results of their respective policies.
Both governments try to subordinate their potential economic gains to major political objectives. Beijing encourages the acceleration and normalization of cross-strait economic exchanges in hopes that increased interdependence will bind Taipei's hands in seeking a unilateral solution--specifically, Taiwan independence--to the sovereignty dispute. And Taipei resists any attempt to make Taiwan follow the same path as Hong Kong, reasoning that full-scale economic integration with mainland China will eventually compromise its political autonomy. Taipei has therefore tried to regulate the pace of local business expansion into the mainland market, making adjustments in response to the level of PRC hostility toward Taiwan.
The two sides have yet to conduct government-to-government negotiations, but an implicit bargain over their sovereignty dispute has been reached for quite some time, ever since Beijing unveiled its first political overture for a "peaceful reunification" of China during the 1979 Chinese New Year holidays. Over the years, Beijing has sweetened its overtures with many specific proposals that allegedly guarantee Taiwan a high degree of political autonomy under the "one-country two-system" formula. Beijing has persistently tried to persuade Taipei to sit down at the negotiating table and establish high-level political contact. PRC leaders have emphasized that everything, including the issue of Taipei's status in the international community, is negotiable under the one-China principle, by which they mean Taiwan is an inalienable part of the PRC.
Throughout 1980s, Taipei repeatedly turned down Beijing's proposals, as it was preoccupied with domestic political reform. Yet Taiwan's precarious sovereignty status was increasingly endangered by the PRC's fierce diplomatic maneuvers to cut off its official ties with other sovereign states and deny it participation in international organizations.
Since the early 1990s, however, Taiwan's democratization has steadily fortified a desire to break out of the status quo, which is deemed inherently unsatisfactory by those who are under no illusions about a unified China, but have many worries about the eventual imposition of the PRC's "one country, two-system" formula on Taiwan. Moreover, the status quo is seen as providing Taiwan with little multilateral guarantee against an attempt by the PRC to retake the island by force, while giving Beijing the pretext to ignore foreign criticism or threats to intervene.
Throughout the 1990s, the ROC leadership has tried to convince the PRC of the benefits of coexistence, urging Beijing to accept a divided-nation model, as exemplified by divided Germany before 1990. To show its sincerity, Taipei made a series of goodwill gestures. The ROC government officially ended all hostile actions against the PRC, such as giving large cash awards to defecting PLA fighter jet pilots. It also formally acknowledged the post-World War II political division of China and renounced its claim of jurisdiction over mainland China. Taipei then took the bold step of indicating its willingness to tolerate dual recognition--accepting any foreign government's extension of simultaneous diplomatic recognition to the PRC and the ROC. Taipei also agreed to establish a semi-official channel of cross-strait dialogue to resolve functional issues of mutual concern, such as providing clearer investor guarantees and solving labor-management disputes.
To attract Beijing to the divided-nation model, Taipei pledged that it would resume normal bilateral economic and cultural exchanges by lifting its ban on the direct "three links" (postal, transportation, and commercial) across the Taiwan Strait. It also offered a generous package of development assistance and indicated an interest in direct, high-level political negotiations. But Taipei also laid down stringent preconditions that essentially assured failure: that the PRC would renounce the use of force against Taiwan, recognize the ROC as a political entity on an equal footing, and give the island reasonable space to participate internationally.
Not surprisingly, Beijing was unmoved by Taipei's overtures and reiterated its objection to any deviation from its interpretation of the one-China principle, reserving the right to use military means in the case of a declaration of Taiwan independence or foreign interference with China's reunification. The PRC also increased its efforts to isolate the ROC diplomatically. However, Beijing did move to set up a semi-official organization, the Association for Relations Across the Taiwan Straits (ARATS), as the counterpart of Taipei's Straits Exchange Foundation (SEF), presumably in the hope that quasi-official talks in functional areas between the two organizations would gradually be elevated to high-level political negotiations.
The standoff between the two sides was not unexpected, because preservation of a state's sovereignty is always a major issue. Both sides have tried to consolidate their bargaining position and undermine that of the other side, each hoping that its opponent would blink first.
Beijing's strategy toward Taiwan was perhaps best expressed by Qian Qichen, PRC's vice premier, foreign minister, and the deputy head of the Politburo's Taiwan Affairs Leadership Unit, at a meeting of Taiwan affairs officials in December 1993. A report of the meeting states that Beijing has a three-part strategy: "To blockade Taiwan diplomatically, to check it militarily, and to drag it along economically." The PRC has sent warning signals by conducting frequent military exercises involving amphibious landing forces opposite Taiwan. The PRC has also devoted an increasing proportion of its defense budget to building up its power projection capability, which includes acquiring advanced fighter jets and submarines.
Most significantly, however, Beijing has increased its efforts to accelerate bilateral economic exchanges. In Li Peng's words, during the Sixth Plenary Meetings of the Seventh National People's Congress in April 1993, the main goal of the PRC was to use economic exchange as an instrument to promote the three links, because achieving this end would be a breakthrough in China's unification under the "one country, two systems" formula. Beijing is quite open about the political objectives of its trade and investment policy toward Taiwan. Official documents call for the PRC "to push politics through business and influence the [Taiwan] government through the people." Specifically, Beijing is promoting the view that Taipei's ban on direct trade and direct air and sea links is politically futile and economically counterproductive.
For its part, the ROC leadership has concentrated its efforts on domestic and international affairs. Taipei has used its ascending economic status to drive home the point that Beijing is unable to maintain Taiwan's international isolation or block the gradual improvement in its external relations. In 1991, Taipei was admitted concurrently with Beijing and Hong Kong to the first ministerial-level regional economic consultation body--the Asian-Pacific Economic Cooperation forum (APEC)--and sent a representative to both the semi-official Seattle summit in 1993 and the Jakarta summit in 1994. In the winter of 1993-94, President Lee Teng-hui also conducted his so-called "vacation diplomacy," paying unofficial visits to the Philippines, Indonesia, and Thailand.
Taipei's current mainland policy options have been deeply influenced by several important events during the past three years, beginning with the promulgation of Jiang Zemin's eight-point policy proposal in January 1995, which indicated that Beijing seemed ready to make some political concessions over the issue of Taiwan's international participation, if Taipei agreed to come to the negotiating table. This initiative gave Taipei a chance to review its cross-strait strategic options.
But Taipei regarded Jiang's eight-point proposal primarily as part of his larger scheme to consolidate power as China entered the post-Deng era. Nevertheless, Taipei did not want to simply reject the proposal, as Jiang Zemin is regarded by many in Taiwan as an element of moderation within the PRC leadership. In April 1995, Lee Teng-hui therefore offered a lukewarm six-point response to Jiang's overture. In his response, Lee did not reject Jiang's suggestion for holding a cross-strait summit, but did insist that any such meeting should be held at an "international occasion." The reciprocal move by Taipei was intended to create an atmosphere of reconciliation and set the cross-strait relations back on the track of constructive engagement.
Taipei then followed a two-pronged strategy. It increased its lobbying effort in the United States to gain a visa for President Lee to make a trip to Cornell University in June 1995. At the same time, it agreed to hold talks in Beijing, and suggested such talks be held annually and even include political issues. In May, Taipei also formally introduced its plan for opening an offshore transshipment zone, a softening of its stance on banning the three links. These moves were intended to urge Beijing to accept Taipei's view that cross-strait relations could improve at the same time Taipei pursued pragmatic diplomacy. But this was not to be.
Beijing's strong reaction to the White House's decision on Lee's visa surprised both Washington and Taipei. Apparently, Beijing was furious not only because it was taken by surprise by the US decision, but also because it seemed to confirm its long-held suspicion that President Lee had a hidden agenda for Taiwan independence and that Washington actually had an undeclared policy agenda to contain China.
Beijing launched a week of missile tests off Taiwan's northern coast in late July 1995 to remind the United States, Taipei, and Japan of the dire consequences of any move made toward Taiwan independence. The missile tests were followed by official PRC newspaper editorials viciously attacking Lee Teng-hui, apparently in hopes of derailing his re-election bid. Then, the PLA launched a second round of missile tests near a Taiwan-controlled offshore island in late August.
At this point, Taipei began to take a low-profile posture and started hinting that it wanted to repair the damaged cross-strait relationship. In an interview with the New York Times in October 1995, Lee indicated that he was willing to meet with Jiang on "any occasion." Also, while on the campaign trail, Lee repeated the message that Taipei was ready to begin cross-strait political negotiations after the election. But Beijing extended the scope of its military threats up to election day. The live-ammunition exercises failed to stop Lee's campaign momentum, however, for Lee walked away with a convincing victory, winning 54 percent of the popular vote in a four-way race.
Although the successful conclusion of the presidential election--and the US decision to send two aircraft carrier battle groups to international waters near Taiwan--won the island a place in the global spotlight for a while, it delivered little tangible diplomatic gain. On the contrary, after his inauguration, President Lee had to deal with domestic and foreign pressure to reduce tension in the Taiwan Strait, and to make stronger efforts to repair the damaged relationship with Beijing. Second, the PRC increased its efforts to block Taiwan's entry into international organizations and undercut Taipei's remaining diplomatic ties.
During 1996, as a result of PRC lobbying, two important forums, the ASEAN Regional Forum (ARF) and the Asia-Europe Meeting (ASEM) passed membership rules that essentially disqualified Taiwan from participation. Then, in November 1996, South Africa decided to end diplomatic ties with Taipei within the coming year. Not long afterward, it was widely reported in the media that the PLA top brass were demanding a vast improvement in capacity to wage high-tech warfare. The PLA asked for a long shopping list of offensive weapons, including satellite-guided cruise missiles and aircraft carriers, to prepare for a future military showdown in the Taiwan Strait.
Moreover, Beijing refused to reopen cross-strait talks, despite conciliatory comments in President Lee's inaugural address, including an endorsement of Jiang's proposal for holding talks to end the state of enmity between the two sides. Instead, Beijing repeated its preconditions for reopening the channel of communication and negotiation: that Taipei has to firmly pledge its commitment to the PRC interpretation of the one-China principle, give up head-of-state pragmatic diplomacy, and end the drive for UN membership.
Although Taipei officially refused to accept any of these preconditions, there was growing awareness that it should try to halt the dangerous drift in relations and take measures to prevent the Taiwan issue from playing into the hands of Beijing's conservative old guard and military hard-liners. Taiwan's domestic political climate also favored a review of mainland policy, because Lee's election victory gave him a much freer hand to make adjustments.
It is clear that the government leadership has redone its strategic calculations: it no longer expects that Taiwan can exchange its removal of the ban on the three links for any major political concessions from Beijing. Taipei now can only hope that a step-by-step phasing-out of the restrictions will help overcome the deep chill surrounding cross-strait relations.
It is still too early to make a full assessment of the consequences of the March 1996 Taiwan Strait crisis, but there are reasons to believe that lessons were learned that will help to stabilize cross-strait relations, at least in the short and medium term. The close encounter helped all parties--including the United States and Japan--to have a better sense of the bottom-line position of all those involved, and to update their assessments of the risk associated with any unilateral attempt to change the status quo.
Within Taiwan, the crisis helped foster a stronger consensus among contending political forces: It dampened the momentum of the Taiwan independence movement, and threw cold water on popular aspirations for UN membership. It also brought both opposition parties, the Democratic Progressive Party (DPP) and the New Party, closer to a centrist position. At the same time, it seems that Lee's electoral victory by and large has helped the voices of moderation within the Beijing leadership.
In the near future, to the Beijing leadship, there is no politically acceptable military solution to the so-called Taiwan issue. A PRC military venture against Taiwan might trigger a number of unwanted results: a return to a Cold War status in East Asia; the imposition of long-term economic sanctions by the West, and the resultant rupture of China's economic development; a formal declaration of independence by Taiwan; the rearmament of Japan; and potentially high military costs for the PRC, as well as grave political risk for the current PRC leadership.
The long-term prospect, however, is far less sanguine. It will be no easy task for Taipei to reconcile the acute conflict between its political agenda and economic interests. If no new regulatory measures are introduced, the PRC will most likely become the island's number one export market after the Hong Kong handover in July of this year, given current export trends. It is also reasonable to assume that the island's trade and investment pattern will become even more skewed after the PRC's admission into the WTO (World Trade Organization).
It will also be a tough challenge for Taiwan to figure out how to ease Beijing's deep suspicions over its so-called hidden agenda of eventual independence and thereby sustain the PRC's hopes for a peaceful reunification of China. It will be difficult as well for Taipei to consolidate its separate identity in the international community, for the more effort Taipei puts into upgrading its international status and modernizing its military, the more suspicious Beijing will be about Taiwan's incremental and "unofficial" approach to independence. As the accumulation of distrust and animosity continues, the two sides will move further and further away from a negotiated peace. This trend, if not checked somehow, could precipitate a shift toward a final military showdown ten or fifteen years down the road.
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Chu Yun-han is a political science professor at National Taiwan University and director of programs at the Institute for National Policy Research (INPR), a prominent Taipei-based think tank. This article is excerpted from a paper presented at the Association for Asian Studies meeting held in Chicago, March 1997.