By Cary Springfield, International Banker
By winning Taiwan’s presidential election on January 13, Lai Ching-te, the island’s current vice president, secured a third consecutive term for the ruling party, the Democratic Progressive Party (DPP). Although the president-elect’s winning vote share—just over 40 percent against two opponents—was less than that of outgoing President Tsai Ing-wen (who received 57 percent for her second term in 2020), and while the DPP lost its majority in the Legislative Yuan, his triumph will have profound implications for Taiwan’s economic and political prospects over the ensuing four years—not least regarding the Chinese mainland.
With Taiwan a crucial pawn in the escalating big-power competition playing out between China and the United States, the election—and the DPP’s victory—will have serious geopolitical implications over the coming years. “I want to thank the Taiwanese people for writing a new chapter in our democracy. We are telling the international community that between democracy and authoritarianism, we will stand on the side of democracy,” the president-elect declared in his victory speech, a clear rebuke of China’s political system by the leader of a party seeking independence as one of its key political goals.
Indeed, the DPP’s official platform states that its primary goal lies in establishing the Republic of Taiwan as a sovereign, independent and autonomous nation. “The establishment of national sovereignty and national identity is the prerequisite for legal and political orders in a modern sovereign state domestically and the expansion of diplomatic ties externally,” the platform’s documentation states, placing national sovereignty at the top of its list of fundamental principles. “Taiwan is a sovereign state. It is a historical fact and a de facto status quo that Taiwan is not a part of the People’s Republic of China, nor does her sovereignty encompass Mainland China. Such is also the consensus reached by the international community.”
This position, however, stands in stark contrast to that long held by the People’s Republic of China (PRC) in Beijing, claiming that it is the sole legitimate government for both the mainland and Taiwan. The island itself first came under Chinese rule in 1683, during the reign of the Qing dynasty, before being ceded to Japan in 1895 following the First Sino-Japanese War. But Japan’s defeat in the Second World War at the hands of the Allied powers—the Republic of China (ROC) (as it was known then) and the US among them—annulled Tokyo’s claim to Taiwan and restored it to the ROC through such legally binding legislations as the Cairo Declaration in 1943, the Potsdam Proclamation in July 1945 and the Japanese Instrument of Surrender in September 1945. And in 1952, a peace treaty was finalised, transferring Taiwan from Japan back to the ROC.
However, the end of China’s decades-long civil war between the ROC’s governing Kuomintang (KMT) party (under the leadership of the US-backed Chiang Kai-shek) and the forces of the Communist Party of China (CPC) in 1949 brought more complexity to the Taiwan issue. With CPC leader Mao Zedong establishing the PRC that year and Kuomintang’s forces (Chiang Kai-shek included) promptly fleeing to Taiwan, the retreat marked a prolonged period of separation for the two sides of the Taiwan Strait, despite the newly relocated ROC government in Taipei claiming to represent the whole of China.
In 1971, the United Nations General Assembly Resolution 2758 confirmed the PRC as “the only legitimate representative of China to the United Nations”; it removed “the representatives of Chiang Kai-shek” under Taiwan’s ROC government from the UN altogether. A joint communiqué the following year with the PRC resulted in the US confirming that it “acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China” and “does not challenge that position”.
The PRC’s One China principle remains in force today, stipulating that there is only one sovereign state under the name China, with the PRC serving as the sole legitimate government of China, including Taiwan as an inalienable part of China. In 1992, Taiwan’s ruling Kuomintang party, meanwhile, had asserted in the 1992 Consensus that both the PRC and ROC agreed that there was “one China”, but rather than being represented by the PRC in Beijing, all of China was instead represented by the ROC in Taipei. Today’s ruling DPP party rejects the 1992 Consensus outright and instead seeks to establish a standalone sovereign state and a new constitution.
As virtually the entire world—save for a dozen or so United Nations (UN) member states—regards Taiwan as an inalienable part of China in line with the One China principle, it would be a mammoth uphill task for the DPP to accomplish its goal anytime soon. Moreover, Beijing remains defiant that the recent election results will not impact its determination to eventually reunify with the island. China’s minister of foreign affairs, Wang Yi, reiterated shortly after the conclusion of the election that any move towards Taiwanese independence would be “harshly punished by history and the law”. In response, Taipei’s diplomats have urged Beijing to “respect the election results, face reality and give up suppressing Taiwan”.
Chinese state media outlet Global Times, meanwhile, quoted a PRC spokesperson for the State Council of the People’s Republic of China’s Taiwan Affairs Office, who insisted that the DPP’s victory would not change the basic landscape and development trend of cross-Strait relations—nor would it alter the shared aspiration of compatriots across the Taiwan Strait to forge closer ties or impede the inevitable trend of China’s reunification. “Our stance on resolving the Taiwan question and realising national reunification remains consistent, and our determination is as firm as rock,” the spokesperson, Chen Binhua, added. “We will adhere to the 1992 Consensus that embodies the one-China principle and firmly oppose the separatist activities aimed at ‘Taiwan independence’ as well as foreign interference.”
His reference to “foreign interference” is mostly aimed at the United States, which, despite not formally recognising Taiwan’s sovereignty, continues to pursue stronger unofficial diplomatic, economic and military relations with the island province—much to the ire of Beijing. For instance, the Wall Street Journal revealed in October 2021 that US troops had been deployed on Taiwanese territory for at least a year, then later reported in February 2023 that this military presence was being dramatically increased to further ratchet up tensions with its superpower rival.
The United States Congress has also stepped up its approvals of billions of dollars’ worth of military support packages for Taipei, the most recent being in November for the purchase of American military equipment, which China said it “deplores and opposes”. As such, China continues to press the US to “exercise extreme prudence in handling Taiwan-related issues”, with President Xi Jinping reiterating to his American counterpart, President Joe Biden, that the issue remains the most sensitive in China-US relations.
But perhaps the most influential aspect of the entire issue is that Taiwanese citizens clearly favour the current status quo as the preferred option for relations with the mainland—that is, neither independence nor unification—and as such, one might reasonably expect a similar dynamic to that of recent years to continue playing out. As Taiwan’s representative to the US, Alexander Yui Tah-ray, recently acknowledged, President-elect Lai Ching-te is open to engaging with Beijing. “We want the status quo. We want the way it is—neither unification, neither independence. The way it is is the way we want to live right now,” Alexander Yui Tah-ray told the Associated Press (AP), adding that this position is widely supported at home and will guide the new administration.
It should also be noted that the DPP’s position on Taiwan’s cross-Strait relationship with China was not the only issue that propelled Lai Ching-te to victory, possibly not even the most important one. Economic health plays a crucial role in influencing voter decisions in most electorates worldwide. It was no different in Taiwan, with the DPP’s handling of economic challenges, such as spiralling living and housing costs in recent years, being perceived positively overall, especially compared to many neighbouring economies that have fared much worse.
“Taiwan’s economy picked up over…2023, with growth of 3.4 percent in Q2 and 2.3 percent in Q3,” the US Center for Strategic and International Studies (CSIS) noted on January 19. “A key concern for voters is the cost of living. Though some blame high interest rates, the cost of housing in Taiwan’s main cities is high by international comparison. Inequality in Taiwan is still low compared to elsewhere, but it has crept up [in] the last decade.” The Washington, D.C.-based think tank highlighted Taiwan’s service sector as the sole source of growth last year. “At the same time, even with China’s massive manufacturing capabilities, Taiwan has managed to maintain a large manufacturing sector itself, with manufacturing contributing over 30 percent of GDP [gross domestic product] and 24 percent of employment in 2023.”