The Beijing Taipei Cat And Mouse Game Gets Trickier

China is allowing more economic ties with Taiwan--to rope it in

Call it Taiwan's year of living dangerously. China's leaders are as determined as ever to snuff out any sentiment for independence on the island. But Beijing needs to avoid a blowup over Taiwan that could damage a smooth transition to Chinese rule in Hong Kong. So the Chinese are moving to strengthen economic ties with Taiwan instead, hoping to make the island more dependent on the mainland. In late January, they suddenly agreed to a longstanding Taiwan proposal to lift a 48-year ban on shipping between the two rivals. The deal will allow local vessels registered under foreign flags to carry goods between Taiwan and China.

But the shipping agreement is anything but a sign of thaw in the frosty political relations between Taiwan and China. Wary of China's embrace, Taiwan President Lee Teng-hui is trying to keep a brake on such initiatives. He's pushing to expand Taiwan's links with the rest of the world while the Chinese are occupied in Hong Kong.

What has changed in this cat-and-mouse game are Beijing's tactics. If Beijing can adeptly take control over free-wheeling Hong Kong, then it has a model for reunification it can try to extend to Taiwan. By adopting Taiwan's shipping proposal, Beijing is hoping to demonstrate to the international community that it can deal "peacefully and flexibly" with Taipei, says Andrew Yang, secretary general of the Council of Advanced Policy Studies in Taipei.

Deeply suspicious of Beijing's motives, President Lee views 1997 as a window of opportunity to step up Taiwan's quest for wider diplomatic recognition. It's less likely that China will retaliate with military pressure against Taiwan while trying to orchestrate peaceful reunification with Hong Kong. Taiwan Vice-President Lien Chan has been traveling around the globe to drum up international support. Recently, he visited the Vatican to invite the Pope to come to Taipei. Tibet's exiled leader, the Dalai Lama, may visit in the spring. "Taiwan's foreign policy is very aggressive," says political scientist David Zweig at Hong Kong University of Science & Technology.

President Lee hasn't softened his line. Fearing that Taiwan is becoming too economically dependent on China, he is actively discouraging new large-scale investments on the mainland, where Taiwanese already have a $30 billion stake. The Economic Affairs Ministry is considering banning investments of $30 million and up until Beijing resumes official talks cut off 18 months ago.

BIG WIN. These days, though, Beijing feels it has the upper hand. Top Chinese officials have been dispatched to Africa and Latin America to win over nations that still maintain diplomatic links with Taiwan. In a major victory, South Africa announced plans in November to break relations with Taipei in favor of Beijing. At the U.N., Beijing initially vetoed a proposal to send a U.N. force to police an accord that ended the civil war in Guatemala, which has close ties to Taiwan. China relented only after Guatemala agreed to stop supporting Taiwan's entry into the U.N. "They are trying to limit Taiwan's international space," says a Western diplomat in Beijing.

The other form of pressure on Taiwan, Beijing's economic charm offensive, is intended to turn up the heat on President Lee from Taiwanese business leaders eager to invest more in the mainland. As Beijing sees it, the greater its economic contacts, the greater its political leverage. Recently, Beijing allowed Taiwan's China Air Lines Ltd. to set up an office in the Chinese capital. And China's central bank has approved the first joint-venture bank between China and Taiwan, to be set up in Shanghai. Beijing also wants direct mail and air-transportation links.

Working in Beijing's favor is the warming trend in U.S.-China relations. "We are worried that the U.S. could sacrifice Taiwan's interests in the process of making a reconciliation with China," says Yang. But it will take more than a shipping deal to convince Taiwan of Beijing's good intentions.

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