President Chen: Taiwan's Angry Man

Will his independence rhetoric provoke Beijing?

It's just what this fragile world doesn't need: another full-blown Taiwan-China crisis. One that hammers investor confidence in the Pacific, undoes months of fence-mending between Washington and Beijing, and pushes Beijing into truculent actions it doesn't want to take.

The odds of such a crisis increased dramatically on Aug. 3. Taiwan President Chen Shui-bian declared in a speech that China and Taiwan are separate countries and called for legislators to consider authorizing a referendum on independence. Beijing has long threatened to invade should Taiwan officially break from the mainland. On Aug. 6, Chen stepped back a bit, saying that China and Taiwan enjoy "equal sovereignty." And Taiwan's military canceled exercises planned for Aug. 15. Even so, the Communist Party's mouthpiece, People's Daily, warned on Aug. 7 that "the chances of Beijing using military force to settle the Taiwan question may be heightened" if Chen pushes for a referendum.

Why would Chen risk ending the recent dance of detente between Taipei and Beijing--a dance he has helped choreograph? Political analysts say Chen is willing to gamble that he can score points politically at home without provoking China to launch any truly dangerous military action. His ruling Democratic Progressive Party, of which he recently became chairman, is facing an uphill battle in key mayoral elections in Taiwan's two largest cities in December. Another worry: Former President Lee Teng-hui's new pro-independence party, the Taiwan Solidarity Union, appeals increasingly to hardcore Beijing-haters in the DPP. And the politically weak Chen may simply have wanted Beijing to take him seriously.

That's probably why Chen chose to make his comments to a pro-independence group. If China responds with heavy-handed rhetoric or military exercises in the Taiwan Strait, that could inspire voters to rally around the DPP in the local elections, which will set the stage for the next presidential vote in 2004. "It relates very much to domestic Taiwan issues," says a Western diplomat in Beijing. "Chen has just taken over the [party] chairmanship, and he wants to define his cross-strait position."

Chen may also have been sending a signal to Washington not to back away from its support of Taiwan. His gambit comes at a time when the Bush Administration is trying to ease tensions with China, especially since the U.S. is anxious to avoid Chinese opposition to military moves against Iraq. Deputy Secretary of State Richard L. Armitage is due in Beijing later in August, and President George W. Bush will host Jiang at his Texas ranch in October. "The Sino-U.S. relationship is getting back on a more stable path, and [Chen and his advisers] feel uncomfortable about this," says Philip Yang, a professor at National Taiwan University in Taipei. "They want to tell Washington that we are the democratic government and have the right to exercise self-determination."

But the Taiwanese President may have miscalculated. The Taiwan Stock Exchange index plunged 7% in the two trading days after his Aug. 3 speech, largely because of fears of political instability, before recovering some ground. Chen's critics argue that Taiwan has no choice but to integrate further with the mainland, where Taiwanese companies are estimated to have invested more than $50 billion. Mainland China has recently surpassed the U.S. as Taiwan's biggest export market. Now, progress on easing restrictions on direct links between Taiwan and the mainland could be slowed.

Privately, the Bush Administration was none too pleased with Chen's remarks, either. Like previous Administrations, the Bush White House supports a one-China policy, wants differences settled peacefully, and opposes provocative acts from either side. Although Bush has declared that he would do "whatever it takes" to defend Taiwan, even hard-liners such as Deputy Defense Secretary Paul D. Wolfowitz oppose independence for Taiwan.

So what now to expect from China and Taiwan? One indicator of China's fury will be its annual summer military exercises, which start in late August. These could be ratcheted up in force to send a signal of displeasure over Chen's latest moves. If the exercises get too threatening, that could send Asian markets into paroxysms--just when the region's bourses are giving up gains from earlier this year. One wild card is the current struggle among top Chinese leaders over who, if anyone, will succeed President Jiang Zemin as general secretary of the Communist Party at this autumn's Party Congress.

Chen may have timed his remarks to take advantage of that power struggle: Cadres maneuvering for position may be slower to react to the pesky Taiwanese than a unified Chinese leadership. As for a referendum on independence, analysts say it's unlikely to happen before the next presidential vote in two years. In politics, that's an eternity. But if Chen's pronouncements win his party big gains in December, Beijing may consider such a victory another provocation--and take provocative steps of its own.

By Bruce Einhorn in Taipei, Dexter Roberts in Beijing, and Stan Crock in Washington

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