China's one state solution

In May, a Taiwanese fisherman was shot dead by the Philippine coast guard, having entered disputed waters. In response, Taiwan promptly embarked on naval exercises off the coast of the Philippines. It was China’s reaction, however, that raised eyebrows elsewhere: it quickly sent a flotilla to join them. “China will not tolerate the shooting of our fishermen,” declared an article in the Chinese newspaper, the Global Times.

There is an increasingly vocal debate about whether Taiwan, for all its fierce sense of democratic freedoms and claims to nationhood, is being reabsorbed by China—and whether the government in Taipei since 2008 is too easily letting this happen. The argument gets its force from the depth of the new commercial ties springing up between Taiwan, with its own proud record of manufacturing success, and the economic superpower which has suddenly arisen to its west. But barriers of all kinds are vanishing between the one-time adversaries. China does not recognise Taiwanese passports but residents can now travel between the two using “compatriot permits”: a Taiwanese friend of mine who recently visited mainland China on business told me of her identity crisis when she arrived at the airport with her permit, unsure of whether to join the immigration queue for “Chinese” or “foreigners.” She was given a withering look when she asked for clarification and directed towards the Chinese queue.

When the Communist party seized control of the Chinese mainland in 1949, the previous government, led by the Kuomintang, retreated to Taiwan off the eastern coast. Beyond military threats, relations were more or less non-existent. The People’s Republic of China and the Republic of China (Taiwan’s formal name) agreed that they were part of the same country—but both claimed to be the legitimate government. Taiwan’s claim to leadership became less convincing when, in 1979, it lost its status as a member state within the United Nations, and US recognition of its independence, too. As the Carter administration established diplomatic relations with China, it terminated the Sino-American Mutual Defence Treaty, which had guaranteed Taiwan US military protection.

Under pressure from Beijing, few countries still recognise Taiwan as an independent state, although it has its own democratically-elected government, currency, economy, armed forces and tax and education systems. Its citizens have a strong sense of national pride; they make much of the cultural differences between themselves and the new tourists arriving from the mainland, whom they often regard as impolite or unsophisticated.

But the explosive growth of China’s economy, as well as its new assertiveness, has changed things. Tourist routes have opened, Taiwanese TV channels have started reporting on the mainland, and Beijing has offered Taiwan preferential treatment as a trading partner—China is now its single largest trading partner, buying about 40 per cent of its exports. The Kuomintang, the party in power for the past five years, is more in favour of encouraging such links than the nationalist Democratic Progressive Party. Last year, Taiwan was designated a remnimbi clearing centre, following Hong Kong and Macau. And in April, a day after Taiwan said it would relax curbs on Chinese investment in its financial sector, the Chinese bank ICBC announced plans to acquire a 20 per cent stake in one of its largest banks.

Independence supporters have become uneasy, accusing the government of selling Taiwan to China or of becoming too dependent on it (although ministers point to new free trade deals they are striking with other countries). But some Taiwanese—particularly businessmen—argue that economic links make reunification inevitable: Taiwan will eventually become a province of China.

That is clearly China’s hope. It has called for a “one country, two systems” solution (echoing its policy on Hong Kong), suggesting that, under reunification, Taiwan would lose its sovereignty but retain its armed forces and have a senior representative in Beijing. But at the moment, its tactic appears to be to knit the two economies together inextricably and to strengthen its claim simply by treating Taiwan as an internal region. In 2008, Beijing gave Taipei two pandas as a gift. Under international regulations it can only loan pandas to other countries: the message was that the transfer was domestic. The bears’ names together translated as “reunion.”

Perhaps because China is hoping for the success of this tactic, a military threat to achieve its aim seems far less likely than in the past; it has muted its old military rhetoric, although it continues to target missiles at Taiwan. China also cannot be sure of what a US response would be; the US, while having no commitment to defend Taiwan, carries out “unofficial” diplomatic relations under the Taiwan Relations Act 1979 and supplies it with extensive arms for its own defence—Obama has authorised $6bn in deals. Recently, the Republican majority in the House of Representatives has been championing the Taiwan Policy Act, which “will strengthen the relationship between our two nations—and I want to emphasis the word nations,” said Steve Chabot, Chair of the Subcommittee on Asia and the Pacific.

Even if the economic ties grow deeper, potential for tension remains because of the essential clash, which no amount of trade can disguise, in culture and in system of government. Taiwan is now profoundly liberal and democratic. It has some of the highest living standards in Asia. These are people convinced of their right to vote and to free speech—and who are accustomed to that. As one Taiwanese young professional put it to me, “what could China offer Taiwan that would make reabsorption attractive?”