Written by Mark Wenyi Lai.

Early morning on January 4, China announced that it would begin using the new aviation route M503, connecting its most important economic hubs of Shanghai and Guangdong.

Later that day, the Taiwan government, citing national security, demanded China scrap the route, which it said was too close to the middle line of the Taiwan Strait. China refused to do so and Taiwan, in return, rejected more than 176 flight applications from Chinese airlines scheduled to bring Taiwanese back home during the coming Chinese New Year holiday. Various analyses from academics, news outlets and observers have offered explanations from political, security and international relations perspectives. This article however will look at the M503 aviation route incident from a structural point of view and offers an alternative way of understanding contemporary cross-Strait relations.

“Beijing is somewhat glad to see this new development because it has pleased the general public in China and indirectly escalated the political pressure on Taiwan. The task ahead for Taipei is more challenging.”

The structure of cross-Strait relations prevents both Beijing and Taipei from interacting in a flexible or efficient way. Beijing has to polish its tough image while at the same time granting benefits in order to court Taiwan in accordance with its “one China” policy. Taipei also needs to emphasize its sovereign status while repeating its sincerity to maintain peaceful and cooperative relations with China. Because both sides of the Strait clearly comprehend the limits of what they can do, this structure has actually brought stability to the region for decades. However, it has also clouded our understanding of the complexity of the political and economic interdependence of Taiwan and China.

In the M503 aviation route incident, both sides have seemingly legitimate reasons to be angry and to stick firm to their stance. On the Taiwan side, the Mainland Affairs Council protested against China’s unilateral action and claimed that China had failed to honour an agreement signed in 2015. It changed the status quo in the Taiwan Strait in a dangerous direction. On the other hand, China said the new routes were to ease the area’s congested air traffic and had no political intent. But China did not forget to remind Taiwan that it could take such action without bilateral discussions because Taiwan was not part of the International Civil Aviation Organization. Repeatedly, cross-Strait relations hit a deadlock, as both sides wanted respect but weren’t willing to give it.

Between the lines of the rhetoric of government spokesmen are interesting facts that warrant further scrutiny. Per the logic of game theory, the following analysis labels participants of the incident as winners, losers or others. First, the Chinese military sector and Chinese airlines are the obvious winners. The People’s Liberation Army’s Navy has sent its aircraft carrier, the Liaoning, to encircle Taiwan several times. The opening of four new aviation routes (one north-south of the middle line and the other three crossing the Strait) can provide the Navy with precious intelligence regarding how to launch precise and effective attacks to break Taiwan’s air defences. Although China Eastern Airline and Xiamen Air complained about the cancellation of Chinese New Year flights, both along with other Chinese airlines stood to benefit from the M503 route, which offers more business for the whole industry.

Second, Taiwanese travellers are the losers. There are approximately 420,000 Taiwanese working in China, and half of them travel back home for Chinese New Year. The cancellation of flights reduced the number of seats by 30%. The Taiwan government urged local airlines to provide extra seats to help with the transportation. Taiwanese people in China have played an important role in sustaining Taiwan’s economic prosperity for decades. However, the Taiwan government has usually ignored them and denied them their political rights. The M503 incident caused them grievance and practical difficulties.

Third, Beijing and Taipei both win in pleasing their domestic audiences. Beijing once again demonstrated toughness in guarding Chinese pride and Taipei properly played the victim card and gained popular support for the Tsai Ing-wen administration. However, Beijing and Taipei both lose with regard to improving their relationship. The incident deepened the distrust of Beijing harboured by the Taiwanese people, who have long been concerned and terrified by the prospect of Chinese military deployment in the Taiwan Strait. Beijing further stirred the Taiwanese people’s resentment at not being able to join international organizations. Beijing gave President Tsai the opportunity to strengthen her image as a bulwark against Chinese advances, thus consolidating her political base.

However, Taipei continued to isolate itself from the still-booming Chinese economy. And it further nourished the sinophobic sentiment on the island and made reconciliation with China even more difficult. By refusing to extend a kind message to China, Taiwan failed to safeguard its national security, making it by far the biggest loser in this bargaining game with China.

In sum, those who stand to benefit from a thaw in relations will support the direction of Beijing’s recent action, while those who stand to suffer from it will try to turn the tables. Finally, those who stand to both win and lose will seek to maintain stagnation in cross-Strait ties. It is reasonable to expect that in the following years of Tsai’s presidency, the relationship between Beijing and Taipei will see neither a breakthrough nor a confrontation.

This incident has also revealed a new development. The pressure from different sectors in China to alter Beijing’s beneficial policy toward Taiwan is rising. Chinese corporate interests, along with local governments, will in the future increase the pressure on Beijing’s policy makers to pursue equal treatment vis-a-vis Taiwan, including areas such as tax benefits, business competitiveness, trading quotas and preferential tariffs.

Beijing is somewhat glad to see this new development because it has pleased the general public in China and indirectly escalated the political pressure on Taiwan. The task ahead for Taipei is more challenging. Tsai has to persuade Beijing that Taiwan is not sailing too far from the “one China” policy and at the same time deal with the rising complaints from Taiwanese people in China. The Tsai administration called on Taiwanese corporations in China to “come home” last year. However, it has learned that business is for profit, not for personal feelings.

Overall, this coming Chinese New Year holiday, we are expecting more complaints at the dinner table when Taiwanese people working in China finally arrive home after their exhausting trip.