Zhao Zhai, MPP, Staff Writer, Brief Policy Perspectives

Background

As China assumes an increasingly important role in the global economy, and ascends to the status of a world superpower, Taiwan faces additional pressure to unify with the mainland. Though it would be a decision fraught with political risk for both countries, reunification should nevertheless happen under the “one country-two systems” policy, which currently governs Hong Kong and Macau. Integrating into the Chinese market would give Taiwan a competitive advantage on the international stage while conflicts between the two countries would be reduced as the two countries become more economically interdependent. Reunification would also lead to more voluntary agreements between China and Taiwan and allow the two to develop closer relations in other policy areas. However, political disputes and tensions still remain in the region and the growing Taiwanese independence movement threatens to provoke China into using military threats to intimidate the Taiwanese electorate.

China and Taiwan were once ruled by the same government. However, the two have been divided since the first Sino-Japanese War in 1895. In 1949, the ruling Kuomintang party in China lost control of the mainland to the Chinese Communist Party and fled to Taiwan.  Today, two governments claim to be “China” – the People’s Republic of China (PRC) located on the mainland and the Republic of China (ROC) on the island of Taiwan.

Over the past 20 years, due to economic development, the relationship between mainland China and Taiwan has improved significantly. The two territories share a similar culture and language, which has led to more cultural, economic, and political cooperation. In 2010,  ROC president Ma Ying-jeou signed the Economic Co-operation Framework Agreement, which removed tariffs on hundreds of goods between the two countries. President Ma also opened tourism from China and mainland Chinese visitors now account for almost half of all tourists in Taiwan. In 2016, China was Taiwan’s largest trade partner, absorbing nearly 30% of Taiwan’s exports by value. Exports are critical to Taiwan, accounting for 53% of its GDP.

One-China Policy

The PRC has made significant efforts to prevent Taiwan from becoming independent. The “One-China policy” insists that both Taiwan and mainland China are inalienable parts of a single “China“, yet it allows Taiwan to maintain control over its own political, legal, economic, and financial affairs.

First, economic integration is the key for bringing together mainland China and Taiwan. Many Taiwanese companies move their business operations to mainland China because of geographic proximity, cultural familiarity, and the size of the Chinese market. In 2016, foreign direct investment from Taiwan to China exceeded $10 billion. As the international business landscape becomes more competitive, Taiwanese companies may demand that Taiwanese authorities issue more preferential policies with towards mainland China, such as tariff and tax discounts. This would give Taiwanese firms an advantage in the Chinese market over America, Korea, Japan and Europe. Furthermore, mainland China has a much larger economy than Taiwan, creating an asymmetric link between the two. As Taiwan becomes more dependent on mainland China’s market, it will become more adverse to any disruptions such as economic sanctions from a PRC government weary of Taiwan’s burgeoning independence movement. Sanctions of this sort could be a more effective policy tool than military threats. Thousands of Taiwanese companies would suffer significant losses and Taiwanese unemployment could increase. This could make Taiwan unstable. Taipei authorities may then be forced to compromise and become more deferential toward PRC.

Additionally, the PRC has three more primary tactics in implementing the One-China policy and maintaining its dominance over Taiwan: political propaganda, diplomacy, and military threats. First, over the last six decades, the PRC consistently released nationalistic propaganda to promote the One-China policy. PRC uses nationalism as central motif to legitimize its claims of sovereignty over Taiwan. However, this propaganda is not convincing to most Taiwanese people because Taiwan has not experienced any major political, social, or economic upheavals in the last 60 years. They do not need to seek protection or financial support from China to deal with these threats. Second,  the PRC demands that any country seeking diplomatic relations with PRC cannot have official relations with Taiwan, which isolates Taiwan internationally. Third, the PRC continues to threaten to use military force  to prevent Taiwan from moving towards independence. Under this military threat, Taiwan is forced to defer any plans for independence. However, frequent military threats may tarnish PRC’s international image and undermine the present peace between PRC and ROC. These three policy tactics have not made China and Taiwan come together, but they have only made Taiwan fearful and angry toward mainland China.

On the other hand, Taiwan’s independence movement remains popular. Pro-independence advocates such as the pan-green groups and the Democratic Progressive Party insist that Taiwan should become a sovereign nation. They insist that it is unrealistic for the ROC to continue to claim sovereignty over mainland China. Indeed, Taiwan enjoys more a democratic political system and a better welfare system than PRC, so most Taiwanese prefer maintaining the status quo and self-governance. They do not want excessive interference from PRC.  

Next Steps

As history professor Murray Rubinstein wrote Taiwan “may yet once again become part of a larger China or serve as an example of what China might become.” Mainland China and Taiwan could eventually come together through stronger economic ties. As China and Taiwan are becoming more similar and interdependent, both sides would benefit from more cooperation and communication across the strait. Although there are many obstacles for cross-strait relations, including 122 years of division and the popular Taiwan independence movement, dynasties breaking apart and later reunifying is a pattern in Chinese history. With economic development, this trend may happen again with Taiwan.

At the same time, China does not have to have jurisdiction over Taiwan. China could study the European Union model as well as federalist governments, such as in the United States, to find a model for “one country, two systems.” China should permit self-governance and provide more incentives for Taiwan to work with China. This way, Taiwan and China would have a more consolidated foundation to come together and build mutual benefits and trust.