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After The Taiwan Storm


International Business: TAIWAN

AFTER THE TAIWAN STORM

Both sides are making conciliatory gestures, but...

After weeks of escalating tensions in the Taiwan Strait, the situation suddenly appears calm. Following Taiwan President Lee Teng-hui's resounding victory in the island's presidential election on Mar. 23, both Taipei and Beijing have been making conciliatory gestures aimed at lowering the heat. Everything from opening direct trade links to holding high-level meetings is being bandied about. The U.S. aircraft carrier Independence is returning to its port in Japan, while other warships are scheduled to depart soon. "I think this particular crisis is behind us now," U.S. Defense Secretary William J. Perry said after the election.

Not so fast. While China and Taiwan are searching for ways to defuse tensions, they are a long way from bridging the deep rifts separating them. Distrust on both sides remains high, and China's military is determined to keep the pressure on Lee. "They're on their honeymoon," says Tai Ming Cheung, a Chinese military analyst at Kim Eng Securities in Hong Kong, "but it will end in a very acrimonious marriage."

RED TAPE. In the weeks before Lee's May 20 inauguration, both governments will likely float trial balloons in a push to get relations on track. The opening signals are coming from Taipei. Just days after the election, Economics Minister Chiang Pin-kung indicated that the government will go ahead with legislation to allow some direct trade and investment with the mainland. Taiwanese have invested about $25 billion there but have been hindered by restrictions forcing them to go through Hong Kong or other third parties. On another front, Lee knocked down speculation that he would make another high-profile international trip, saying he will be too busy to travel abroad this year.

In Beijing, where leaders want Lee to increase trade and lower his profile, those gestures may be well-received. The Chinese insist that Taiwan stick to a one-China policy and refrain from lobbying to upgrade its international status. After Lee's victory, more moderate policymakers in the Chinese leadership appear to have louder voices than the hard-liners, who clearly overplayed their hand with the military exercises. But the leadership will be monitoring Lee's every move. If he appoints members of the pro-independence Democratic Progressive Party to his Cabinet, revamps the constitution in a way that makes the island more independent, or purchases advanced U.S. weaponry, China could rev up the pressure again.

Indeed, hard-liners remain deeply distrustful of Lee, who says he still wants Taiwan to win a seat in the U.N. While hard-liners may take a back seat for now, the military option has not been discredited. A large number of troops is likely to be permanently deployed across from Taiwan in Fujian province, reports Hong Kong's pro-Beijing newspaper Wen Wei Po, which says that barracks that had long been empty are being reopened. Beijing's leaders "may not have hostile words for Taiwan, but that doesn't mean they have softened their position," says Andrew Yang, secretary general of the Chinese Council of Advanced Policy Studies in Taipei.

The Chinese military may be taking advantage of the pause to assess its needs. The American intervention in this showdown indicates to the People's Liberation Army that it needs both high-tech weaponry and improved strategies and tactics, particularly in dealing with carrier battle groups. Chances are the military will push for new weapons, such as better long-range missiles.

BUYING TIME. Lee is still in a delicate situation, needing to balance Taiwan's desire for greater global recognition with maintaining harmonious relations with the mainland. His goal is to buy time and hope for a day when China is more open and democratic. Many of his supporters, strongly anti-Beijing, want him to find a formula that will not lock Taiwan into the mainland's embrace. Hanging tough, Lee's Cabinet members insist that they will negotiate with China as "equals," something Beijing will not accept. Thus the two governments may not be able to agree on where to hold talks, what preconditions to attach, or how to handle protocol issues.

The Taiwanese also remain profoundly wary of China's intentions, particularly in view of its most recent moves in nearby Hong Kong. After the Taiwanese election, Beijing confirmed that it will disband Hong Kong's existing legislature, which--to China's dismay--has become more of a democratic decision-making body. Moreover, China demands that Hong Kong officials support a Beijing-backed provisional legislature if they want to serve in the Hong Kong government after the July, 1997, turnover.

In the weeks leading up to Lee's highly anticipated inaugural address, both Beijing and Taipei will find ways to renew contacts. "The Chinese don't expect all their demands to be met, and Taiwan really can't fold on all its demands," says a Western analyst in Hong Kong. "But they both want and need a way to get along with each other." That is easier said than done. In these sensitive times, today's becalmed Taiwan Strait could once again turn into extremely rough waters.By Joyce Barnathan in Hong Kong and Margaret Dawson and Pete Engardio in Taipai


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