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110 Appendix II Key Developments and Trends, Japan-Taiwan-China-U.S. Interactions, September 2004–March 2005 The following key developments and trends lend perspective and facilitate deeper understanding of the extant thinking and processes underway during research and analysis of the key questions posed durings this projects and are included for easy reference. Key Developments Japan October 2004 • The Araki Commission Report of October emphasizes the need for a more outward-looking Japanese security strategy and defense priorities. December 2004 • The National Defense Program Guidelines (NDPG) state that Japan will be attentive to Beijing’s emerging military capabilities and discusses the need for Japan’s Self-Defense Forces to be more responsive to external threats. August 2005 • Japan publishes Defense White Paper. September 2005 • Prime Minister Koizumi calls snap elections and his Liberal Democratic Party wins 296 seats in the lower house—its largest majority since 1986. China 2004 • China (including Hong Kong) officially becomes Japan’s largest trade partner for the first time since 1947. November 2004 • A Chinese Han-class nuclear submarine in Japanese waters off of Okinawa greatly agitates the Japanese public.  “China Becomes Japan’s Largest Trade Partner: Ministry” People’s Daily Online, January 26, 2005, cn/200501/26/eng20050126_172005.html.  Mark Magnier, “China Regrets Sub Incident, Japan Says,” Los Angeles Times, November 17, 2004, 3. 111 appendix December 2004 • China’s Fourth Defense White Paper notes adjustments in Japan’s security strategy and reemphasizes Beijing’s imperative to stop moves by Taiwan toward independence. March 2005 • The National People’s Congress passes an “Anti-Secession Law” that legalizes Chinese use of “nonpeaceful means” to prevent Taiwan independence. May 2005 • Taiwan opposition leaders Lian Chan and James Soong (from the KMT and PFP, respectively) visit China. July 2005 • PRC drops RMB peg to U.S. dollar, pegging instead to basket of currencies. Taiwan December 2004 • President Chen’s pan-Green coalition does not win a majority of seats in the legislative elections. February 2005 • Historic direct flights between China and Taiwan during the Chinese New Year raise hopes for future cross-Strait reconciliation. March 2005 • President Chen responds to the passage of China’s “Anti-Secession Law” by participating in massive rallies in the streets of Taipei. August 2005 • Taipei mayor Ma Ying-jeou becomes head of KMT. • Defense Minister Lee Jye decides to remove PAC-III missile batteries from Special Budget and instead include in regular defense budget. United States January 2005 • President Bush’s second inauguration speech, with its emphasis on upholding democracy, appears to bolster Taiwan’s standing.  Information Office of the State Council of the People’s Republic of China, “China’s National Defense In 2004,” December 2004,  The full text of the “Anti-Secession Law,” adopted on March 14, 2005 at the Third Session of the Tenth National People’s Congress, is available at 176746.html  Edward Cody, “Chen Dealt Setback in Taiwan Election” Washington Post, December 12, 2004, A16.  Stephen Grauwels, Associated Press, “Taiwanese Hold Major Protest Against China,” ABC News International, March 26, 2005, nbr analysis 112 February 2005 • The U.S. intelligence and defense establishments indicate that China’s modernizing military is a concern and will be a focus of the ongoing Quadrennial Defense Review. • The United States and Japan issue a “2+2” Security Consultative Committee Joint Statement, which Beijing opposes for its implied meddling in China’s sovereign affairs. June 2005 • U.S. Secretary of Defense Donald Rumsfeld addresses Shangri-La Dialogue meeting in Singapore. July 2005 • DoD releases Annual Report to Congress on the Military Power of the People’s Republic of China. Key Trends Growing Intra-Regional Trade and Economic Interaction 2003 • To further economic integration between Taipei and Tokyo, Taiwan calls for a Japan-Taiwan bilateral free trade agreement. 2004 • China (including Hong Kong) surpasses the United States as Japan’s largest trading partner for the first time in fifty years. 2005 • Mainland China (excluding Hong Kong) trade with Japan is expected to exceed United States trade with Japan. • Japan is Taiwan’s largest source of imports, and exports to China (including Hong Kong) comprise the largest share of Taiwan’s exports. Declining Defense Budgets in Japan and Taiwan April 2004 • The U.S. Department of Defense notes alarmingly that Taiwan’s defense budget has been declining in real terms and as...


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