Taipei: Cross straits relations are thawing for several reasons but Wang Daohan will find that in reality a high tech, politically modernised Taiwan is drifting away. 

To: Bob Donahue
From: Philip Bowring

by Philip Bowring

Taipei: Relations across the Taiwan straits are improving, but
the two sides are drifting further apart.

That paradox may be apparent to Wang Daohan, head of China's
Association for Relations Across the Taiwan Straits who later
this year is due to become the most senior mainland official
to visit here. Political and economic development on both
sides have had consequences for prospects for eventual
reunification different from those imagined when cross-straits
commerce began in earnest in the late 1980s.

The US and other countries interested in maintaining good
relations with both sides need to grasp the paradox.

There is a variety of reasons for the current easing of

* Both sides still bear scars from the 1996 straits crisis
which few would wish to repeat.
* There is a common economic interest in joining the World
Trade Organisation, which requires a stable US-China-Taiwan
relationship to which Taiwan can contribute
* Under US pressure Taiwan has moderated its efforts to secure
international recognition of its de facto independence.
* The retirement next year of president Lee Teng-hui will, in
Beijing's view, of itself reduce Taiwan's separatist
tendencies. It also requires that (unlike its inept threats
prior to the 1996 election) Beijing show a moderate face in
advance of the April presidential election.
* China needs a resurgence of Taiwan investment, which has
fallen sharply.
* The opposition Democratic Progressive Party has been
downplaying its pro-independence views as it bids for the
electoral middle ground, and seeks to avoid more splits in its
own ranks.

These factors for now outweigh the negative impact of US-China
tensions and Beijing's concerns about implicit US-Japan
cooperation in the strengthening of Taiwan's defences.

However, the movement towards closer de facto links has
stalled. And almost no one in Taiwan now regards unification,
even under the loosest form of One Country Two System formula
as even a remote possibility over the next decade.

The political reasons for this are obvious enough. On the
mainland, political development has essentially frozen.
Meanwhile here the democratic process has emerged more
smoothly and rapidly than expected. Its problems are still
many, but it has not brought the social disorder and unstable
government that some had feared. Indeed, it may now even have
become a stabilising factor in cross straits relations. The
DPP's shift to a more pragmatic and "responsible" stance is
mirrored by the needs of the Kuomintang and all serious
presidential candidates to be in tune with Taiwamese self-
identity. They may not need to be quite as blunt as President
Lee Teng-hui but no one in this democratic system will last
long if seen to favour progress towards reunification over
maintenance of the status quo and Taiwanese security.

After a decade of visits -- 1.5 million a year -- and massive
media coverage, Taiwanese now know the mainland very well.
Visits may strengthen their ethnic identity as Chinese. But
the traffic has enhanced Taiwanese sense of political and
social separateness. They know their society is prosperous,
free, stable and the envy not just of other Chinese but of
nations in east and west. Beijing's attenpt to equate ethnic
identity with the concept of a single Chinese political entity
has failed. Taiwan has had a separate history before and after
1949, so whatever the ideal for the future, most believe that
the mainland for now needs to be kept at arms length.

The economics have changed too. Greater China is proving
another investment bankers' grand illusion. Taiwan's
dependence on exports to the mainland stopped rising five
years ago, stabilising at under 25%. The cause is not lower
mainland growth but slowing of the big shift of labour
intensive export industries to cheap labour countries. China
remains the most attractive of these, but the whole process is
now more gradual. Whilst some Taiwan manufacturers still see a
glorious future in sales to the mainland domestic, there is
now more emphasis on high technology linkages to the West and
Japan. Brainpower not the proximity of the mainland is
Taiwan's ace.   

Investment in the mainland has also slowed sharply becuase
returns have often proved disappointing. No data is available
but anecdotal evidence suggests that no more than 50% of
Taiwan's mainland investments have turned a profit. Beijing's
tightening up on taxes, and a shift in growth emphasis away
from the southerh coastal provinces are also negatives for
Taiwanese investors.

As a result of slowed trade and investment activity, business
pressure for direct cross-straits transport links is not as
strong as before the 1996 crisis. Though there would be big
one-off cost benefits for Taiwan businesses, the appeal of the
mainland is not what it was. China too may have second
thoughts, in part because of the hugely negative impact of
direct links on Hongkong.

Investment in the mainland may revive when that economy picks
up or yuan devaluation adds to its competitive attractions.
But Taiwan is now far more excited about the new global vistas
-- and challenges -- opened up for its electronics industry by
the internet revolution.

Indeed, global economic recognition is helping Taiwan towards
a less neurotic view of the mainland, and providing a
substitute for the push for separate political identity that
so infuriates Beijing. The paradox is beneficial.





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