Taiwan: Issues of Economics, Not Politics

Author Gary Moreau

On December 2 Tsai Ing-wen, the political leader of Taiwan, spoke by phone to President-elect Trump, igniting a firestorm of conjecture and no small amount of indignation. China lodged a formal complaint, as would be expected, but the incident seems to have gained far more media attention than it deserves. Nothing, in the end, is likely to come of it.

Taiwan, historically known as Formosa, is an island that lies approximately 140 miles to the east of the Chinese province of Fujian, with which it shares a common native dialect. It is home to 25 million people, roughly the population of Shanghai or Guangzhou, two of China’s larger urban centers.

The original inhabitants of Taiwan are thought to have journeyed from southern China and after a brief stint as a Dutch colony, the island fell under the rule of the Qing Dynasty until 1895, at which time the island was forcibly ceded to Japan as a result of the First Sino-Japanese War.

At the conclusion of World War II, most of China was still under the control of Chiang Kai-shek and the Kuomintang (KMT) government, to which the Allies gave control of the island. Mao Zedong and the Communists, however, ousted the KMT and created the People’s Republic of China in 1949.

At the time, Chiang Kai-shek and his followers fled to Taiwan and created the Republic of China (ROC). It is estimated that roughly 15% of Taiwan’s current population has ancestral ties to that one mass migration.

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To further muddy the waters of history, the KMT, after fleeing to Taiwan, initially claimed sovereignty over all of China, which it claimed it would ultimately re-occupy. The KMT was, in fact, given China’s seat on the United Nations Security Council and was recognized by many Western governments as the only legitimate government in China.

Mao Zedong, however, and virtually all subsequent Chinese leaders, never saw Taiwan as anything more than a renegade province that would eventually be reunited with the mainland, by force if necessary. And that remains China’s official policy.

In 1971 the UN finally concurred and China’s seat on the Security Council was granted to Beijing. In 1979, moreover, the US and then-President Jimmy Carter formally severed diplomatic ties with Taiwan, leaving the ROC in the political no-man’s-land in which it currently finds itself. No US president since has communicated directly with the leader of Taiwan.

And hence the flap. As far as China is concerned the move was akin to having the governor-elect of Missouri communicating directly with German Chancellor Angela Merkel on matters of state.

But here’s where context becomes so important. Hong Kong, Taiwan, and Macau are all governed on the principle of “One China.” They are officially part of China but have been given great latitude to operate independently, within limits, as long as that principle is not violated. Mainland Chinese can travel easily to both places but require some special documentation.

The problem in the West is that many people, including a good swath of the media, wants to see the One China policy done away with. To these folks, the overriding issues are political and individual freedoms. Many, as a result, are cheering Tsai Ing-wen on, just as they cheered on the Umbrella Movement in Hong Kong in 2014.

What’s happening in Taiwan and Hong Kong, however, is not that different than what happened in the US during the 2016 presidential election, or during the Brexit vote, or even during the Italian vote this past weekend that led to the resignation of Italy’s PM. These are all economic movements driven by populist sentiment reacting to increasing income disparity, slow economic growth, and the growing sense by many that the country is leaving them behind. They are losing hope.

Contrary to a lot of the Western media innuendo, in fact, Tsai Ing-wen was not elected in May, 2016 on a platform of political independence from Beijing. She was elected on a platform of greater economic independence. Many young Taiwanese feel, as many feel elsewhere, that China’s burgeoning economy and financial strength might well squeeze them out of the career opportunities their parents enjoyed.

The simple reality is that no poll has demonstrated that anything beyond a small minority of Taiwanese want anything to do with political independence from China. They want an economic future, plain and simple.

I have done business in both Hong Kong and Taiwan and can tell you from firsthand experience that the idea of separating either territory from China is akin to wishing for the cessation of Texas. It’s not going to happen. And no one really wants it to. (There are always outliers, of course.)

Both Taiwan and Hong Kong are among the biggest investors in Mainland China. The financial districts of Beijing, Shanghai, and Guangzhou are awash with Taiwanese and Hong Kong businessmen who have never had it so good. (Your Apple device was probably assembled in Mainland China by a Taiwanese company.)

The real lesson here, as well as in the US, is that people need to have hope. When they lose that, all is lost and they will ultimately do what they feel they must do to get it back.

No one – perhaps even the man himself – knows what Trump will actually do as President. And he unnecessarily added fuel to the Taiwan fire by tweeting about currency manipulation and the South China Sea. To date, however, I don’t believe he has done anything to sour the relationship between the US and China longer term. There is just too much at stake for both sides.

As in all of life, however, there are limits to everything.

Contact: You may reach the author at understandingchina@yahoo.com