Taiwan: So Much for Independence?

Business wants closer ties to China, and pols are listening

Beijing must be gloating over the political turmoil in Taiwan these days. Less than three years ago, President Chen Shui-bian's Democratic People's Party won a landmark election in part because the DPP pledged to pursue independence from China. But now, local political maneuvering--not overt pressure from the mainland--is making independence seem farther off than ever.

Chen's popularity is plummeting. He and his cabinet have angered special interests, including the powerful farm lobby, through clumsy attempts to reform rural credit cooperatives. And they have alienated business executives by dragging their feet on full-fledged economic and commercial integration with the mainland. Chen's approval rating is now at an all-time low of 31%, and candidates of the DPP face a rout in municipal elections scheduled for Dec. 7 in Taipei and Kaohsiung, Taiwan's second-largest city. "This election is becoming more and more a vote of confidence or no confidence for Chen," says Su Chi, a professor at Tamkang University's Institute of China Studies.

The likely victor in Taipei is incumbent Mayor Ma Ying-jeou of the opposition Kuomintang Party (KMT). In preelection polls, Ma has won the support of nearly two-thirds of likely voters. Although Ma claims he has no presidential ambitions, he could use the Taipei mayoralty as a stepping stone to the presidency--just as Chen did before him. A landslide victory would set up the Harvard-educated Ma, 52, as the logical choice to lead the KMT's national ticket in 2004.

Ma's candidacy would perfectly suit Beijing's strategy of patiently pulling Taiwan into ever-closer orbit. The KMT favors deeper integration with the mainland through direct transport, postal, and trade links. While China is now Taiwan's biggest export market, and Taiwanese businesses have invested more than $50 billion there, trade and travel must still be diverted through Hong Kong or Macau.

Ma has already made several overtures toward the mainland since he took office in 1998. On a trip to Hong Kong in February, 2001--the first high-level visit from Taipei since the 1997 handover to China--Ma was the subject of the sort of media frenzy normally reserved for rock stars. He has since urged senior-level talks with Shanghai officials. And in his reelection campaign, he has suggested direct flights to Shanghai from Taipei's domestic airport--which his opponent wants to turn into a park.

Ma's rising popularity is putting Chen under increasing pressure to develop a pro-China policy of his own. That would be a big change from just a few months ago, when Chen tried to score political points by declaring China and Taiwan separate countries and calling for a national referendum on independence. The move backfired: It prompted a truculent response from Beijing, caused consternation in Washington, and did nothing to shore up Chen's domestic support.

His gambit also failed to distract attention from the hot-button issue of Taiwan's economy. This year, it is expected to grow just 3%--well below its long-term average of 7%. Business groups want closer ties with the mainland, where the economy is zipping along at 7% to 8%. Chen's best bet for recapturing votes for the DPP is ever-more cooperation with Beijing. "President Chen will [have to] be more conciliatory to secure his incumbency in 2004," says Andrew Yang, secretary general of the Chinese Council for Advanced Policy Studies, a Taipei think tank.

There are already signs that Chen is adopting a more pragmatic stance. Earlier this year, he eased restrictions on Taiwanese high-technology investments on the mainland, and is expected to grant Taiwan Semiconductor Manufacturing Co. (TSM ) permission to build an $898 million wafer plant in Shanghai. And in late November, his cabinet gave Taiwanese airlines the go-ahead to operate charter flights to the mainland during Chinese Lunar New Year in February. Although the planes will have to stop in either Hong Kong or Macau, the move gives hope to Taiwan's business community that Chen is finally willing to heed their call for direct links. "This is his final card in [preparing for] his reelection campaign," says Yang. These days, playing the China card seems to be the only way a Taiwanese politician can win.

By Frederik Balfour in Hong Kong

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