A nightmare come true. That's how China's leadership saw the presidential victory of longtime Taiwan opposition leader and independence advocate Chen Shui-bian in March. Chen's election fanned fears in Beijing that the island, which it regards as part of China, would finally declare independence from the mainland. If that happened, China was prepared to declare war. Since then, Chen has done much to assuage those fears. He has promised not to formally declare independence unless China attacks. He has practically begged China to sit down and negotiate. Faced with a growing economic imperative for closer relations, he has dropped Taiwan's refusal to allow direct trade, transportation, and postal links with China.
At the same time, though, he has kept up his provocative rhetoric. In one of his first interviews since taking office in May, the 49-year-old President declared himself the leader of a "sovereign and independent country." Referring to China's attempts to intimidate voters with threats during the election campaign, he charged that Beijing "does not understand the Taiwanese people." Citing 70% public approval for his policy of standing up for Taiwan's sovereignty, Chen urged Chinese leaders to "learn from the election result."
Chen believes tempers are now cooling in Beijing. Officials in Taiwan, both local and foreign, say both sides want negotiations soon. "They're looking for an excuse to talk," says a foreign observer. The next move could come after the August summit of Chinese leaders at the resort of Beidaihe, where the vexing question of Taiwan will top the agenda.
But even though China has shown some signs that it might be willing to talk, any real easing of tensions in the Taiwan Strait remains far off. The biggest sticking point is Chen's steadfast refusal to bow to Beijing's demand to accept its definition of the One China policy--which means accepting Beijing's sovereignty over Taiwan--before talks can start.
EXPECTING A BROADSIDE. Chen's planned foreign travel in mid-August won't make relations any easier. He has scheduled a swing through Central America and Africa, home to the 29 countries that still grant diplomatic recognition to Taiwan instead of China, as well as a refueling stopover in Los Angeles. The trip will certainly anger Beijing, which is obsessed with denying diplomatic recognition to Taiwan, and U.S. officials are bracing for a broadside.
Political sparring aside, economics plays a big role in driving improved relations. Mainland-Taiwan economic ties are approaching a crossroads as both countries enter the World Trade Organization, probably before the end of this year. As both sides implement WTO provisions, they'll have to end many restrictions and implement direct trade. Taiwan companies have invested about $40 billion in China. The figure is climbing sharply, powered by a wave of high-tech investment. But Chinese authorities are for the first time putting pressure on Taiwanese-founded businesses in the mainland, especially those headed by Chen supporters. Such pressure tactics might work, but could just as easily trigger an anti-Beijing backlash.
Neither side's leaders can ignore domestic politics. Chen's administration has made several missteps. In late July, he was forced to sack a senior official after live television showed four people swept to their deaths in floods: Rival government agencies had squabbled over rescue efforts. Taiwan Vice-President Annette Lu continues to espouse a more stridently pro-independence line than Chen, provoking suspicions in Beijing that she is expressing Chen's real opinion.
Meanwhile, China's President Jiang Zemin refuses to be the one who loses Taiwan. His fear: Taiwan is stalling for time, betting that support abroad, especially in the U.S., will grow for Taiwan's independence aspirations. Yet if he plays the bully, he risks alienating U.S. public opinion. If he does nothing, Taiwan may slip slowly away. The Portuguese dubbed Taiwan Ihla Formosa, or "beautiful island." But for China, it remains one ugly problem.