Written by Michael Reilly.

Today, Taiwanese voters go to the polls. The campaign has so far gone largely unnoticed in a world preoccupied with unrest in the Middle East, a slowing Chinese economy and emerging market debt. But the likely winner will be Tsai Ing-Wen of the pro-independence Democratic Progressive Party or DPP. The last time it was in power, from 2000-2008, relations with China were marked by tense, even confrontational disagreements and threats. China already seems to be preparing for a repeat, the Global Times warning on 11 January that Tsai’s ‘ambiguous attitude’ will ‘impair mutual trust..increasing the chances of crises’ and urging China to ‘make some preparations’ for her likely win. So outsiders will be watching the Chinese reaction closely. One mis-step or unfortunate remark by either side could easily spook already jittery markets.

Much has changed in the relationship since 2008, however and while the rhetoric may continue, a  return to historic tensions is less likely, even less a repeat of 1996 when China fired live missiles into the seas around Taiwan. In 2000 the DPP came to power never having previously held office. Their experience was gained in opposing the excesses and restrictions of martial law and authoritarian rule, not in handling often complex and delicate international relations. They got no help from the Chinese for whom under then leader Jiang Zemin their very success was an affront to party doctrine on ‘reunification’ of Taiwan with China. Nor did matters improve under his successor, the cautious and conservative Hu Jintao. Indeed, they worsened after Hu, under pressure from the PLA, agreed in 2005 to the passing of the  Anti-Secession Law whereby China asserted the right to invade Taiwan should the latter move towards formal independence. Even so, despite the hostile atmosphere, the two sides of the strait engaged in regular, albeit discreet discussions and co-operation grew.

In 2016 the personalities are very different. Unlike Chen, Tsai has studied overseas, in both the US and UK and has had eight years’ senior government experience in the last DPP administration. She can also call on a similarly experienced foreign policy team. And in contrast to Hu Jintao,  Xi Jinping  is assured, self-confident and very much in control of the party. He very likely ignored Taiwan Affairs Office concerns and objections when he held his historic meeting with Taiwanese President Ma Ying-Jeou in Singapore last November. His willingness to take such a gamble was unprecedented in China’s dealings with Taiwan.

This time round both leaders also face more pressing concerns. Although cross-strait relations traditionally dominate Taiwanese politics, the issues on Saturday will be the same as for voters everywhere: jobs and prosperity. At just under 4%, unemployment in Taiwan may be low by global standards but not by Taiwan’s. It has remained around this level throughout the outgoing administration’s term, a major reason for the DPP’s popularity in the polls. The figure also masks significant under-employment, particularly in the bloated state sector and is kept down by persistent emigration as younger, more skilled Taiwanese seek better opportunities overseas. More worrying still is that real wages in Taiwan have been stagnant or falling for most of this century. Encouraging overall economic growth masks the fact that Taiwan is at the heart of a perfect storm from globalisation: an ageing society consuming less and concerned about inadequate welfare provision; falling real wages; off-shoring of jobs to cheaper labour in China or elsewhere; a growing ‘squeezed middle’; emigration of the best and brightest, and a fortunate successful few at the top, usually owning or working in businesses in China. These are the issues which will keep the next president awake at night. Outgoing President Ma Ying-Jeou saw greater engagement with China as the answer. Voters are increasingly sceptical – but few if any see confrontation as the answer, rather that it may be less dependence on China, not more.

But above all, the two sides of the strait need one another. State-controlled media likes to portray Taiwan as dependent on the mainland. Whether it is Foxconn, with more than one million Chinese employees, Din Tai Fung’s award winning dim-sum restaurants in Beijing, Shanghai and elsewhere and Uni-president supplying instant noodles to the masses, however, the reality is that China is more dependent on Taiwanese-owned companies and skills than it has ever been. Its leaders know this. Which is why anyone looking at the future of cross-strait relations should look not at what the two sides are saying but at what they are doing.

Michal Reilly is a CPI Senior Fellow. 

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