Taiwan: Domestic Gridlock, Cross-Strait Deadlock

Yan Jiann-fa, a young politician in Taiwan's new ruling Democratic Progressive Party (DPP) who is responsible for policies regarding the People's Republic of China, recently observed, "Taiwanese politics have become a noisy flea market and are no longer made in an exclusive villa-resort, where a well-entrenched Kuomintang [KMT] elite, protected by security services, ruled supreme. The people want new policies internally and a new relationship with China externally. Everybody speaks his mind and the result is that there is no longer a consensus on anything." The nameplate on his office, Department of Chinese Affairs, speaks volumes. The equivalent department under the previous ruling party, the KMT, was called the Department of Mainland Affairs, a title suggesting that the mainland and Taiwan were once part of one country and should, or might, reunify again at some point in the future. "Look," says Yan, pointing at a map on the wall. "On this side of the straits is Taiwan and over there is China; two different countries!" Asked whether a vague, abstract compromise on "one China," Beijing's key demand for resuming the stalemated dialogue,is conceivable, Yan nods affirmatively, adding, "But they have to be polite to us first. Not ignore, bully, and threaten us. We don't trust them. Their way is to demand that we submit questionnaires like students. They are really mean. We have to sit down and talk as equals." ¹

Yan maintains that Taiwan's primary problem, however, is not its relationship with China, but rather the state of its economy. This position reflects the current political agenda of President Chen Shui-bian, in which cross-strait relations have far less importance than do domestic financial and economic reforms. In fact, financial reforms are a top priority of Chen's administration. The belated impact of the Asian financial crisis has necessitated that Taiwan adopt urgent measures to assure its financial and economic stability. Mountains of bad loans have not crippled Taiwan's banking system as badly as Japan's system has been, but according to a Nomura research report fiercely disputed by the government, it could well end up that way, dragging down the economy for years to come. ² Vitally, two key reform bills intended to consolidate and strengthen the banking system--one to enable foreign banks to assume 100 percent ownership of Taiwanese banks, the other to establish asset management companies to relieve banks of their nonperforming loans--have been stalled for months by the opposition-controlled legislature for no reason other than partisan feuding. ³

The 'One China' Principle

Yan's downplaying of the vexing problems with China reflects the state of denial of many, if not most, DPP members vis-à-vis the mainland. They believe that the problem will eventually be settled in their favor because democracy will eventually triumph over dictatorship and because Taiwan enjoys the support of the United States. The economic dimension of the cross-strait relationship, the massive capital outflow, and the industrial exodus to mainland China, however, are major causes of Taiwan's economic malaise. Yet, Taiwan's business community must handle this internal issue, with the Taiwanese government playing an increasingly passive role and the U. S. government playing no part at all.

In Taiwan, cross-strait and internal politics in the post-KMT era are even more interlinked than before. In fact, Chen began his presidency on the correct footing by distancing himself from his past as an activist for Taiwanese independence. Prior to Chen's inauguration on May 20, 2001, Beijing warned repeatedly throughout 2000 that Chen's assumption of power would be the deadline for acceptance of the one China principle. Thus, to ease cross-strait relations, Chen took a conciliatory stance in his inaugural address but refused to comply with mainland China's demand. Instead, he issued a doctrine comprised of four major principles signaling Taiwan's intentions not to drift further toward independence:

• no declaration of Taiwanese independence...