NEW YORK (KWR) - October 28, 2007 -- In October 2007 Taiwan held its first National Day military parade in 16 years. The demonstration of military might was clearly evident in being pointed vis-à-vis Beijing. That is because Taiwan's ongoing debate over its status in the world remains a key factor in Asian geo-politics.

Over the past year, Taiwan's effort to re-join the United Nations has been rebuffed, but the issue of the island's status will not go away. In fact, we expect it will be a constant factor through next year and the Beijing Olympics. In late September it resurfaced with the convention for the ruling Democratic Progressive Party (DPP) and was a factor at the CCP's (Chinese Communist Party) National Congress in October.

During the DPP convention, a resolution was passed to assert the island's separate identity from China, which claims Taiwan as part of its territory and often threatens war if the island's government were to formally declare independence. The DPP resolution also called for a referendum on Taiwan's sovereignty and enactment of a new constitution. However, the same resolution stopped short of declaring Taiwan an independent country.

There are three issues that come out of the DPP resolution and are worth noting in the broader context to Asia. First and foremost, the DPP resolution has tremendous domestic political content. The DPP wants to remain in office and such grandstanding plays well with a substantial number of Taiwanese. At the same time, a more radical resolution, much closer to a formal move to "independence" from China (be it the People's Republic or the Republic of China on the island) was voted down. The DPP's candidate Frank Hsieh is clearly aware that a more radical approach could provoke mainland China into doing something rash. Considering that outgoing President Chen Shui-bian has had an up and down career as national leader (hit by corruption scandals last year) and that his main rival, the Kuamintang's (Nationalist's) Ma Ying-jeou is popular, there is a need to make certain that the political middle ground of voters is not scared away.

Secondly, mainland China finds Taiwan an ongoing headache, reflecting its own largely inflexible stance. Beijing's response to the DPP's resolution stated: "Taiwan is an inalienable part of China and has never been a country. This is an inalterable truth recognized by the international community." The problem here is that Taiwan has not been ruled by Beijing since 1949, despite the Koumintang's maintaining the Republic of China standing based on the view that it would eventually return to the mainland as the legitimate government of all of China. Demographics and political reality has changed that, with Taiwan's democratic form of government resulting in the Taiwanese (as opposed to mainland Chinese who moved to the island) gaining political dominance through the DPP.

For Beijing this situation is problematic on two fronts - it runs the risk of the Taiwanese refuting their being Chinese and the political system represents a challenge that if political reunification (through a negotiated settlement) were to occur it is not likely that either the DPP or Koumintang would simply disappear. This explains President Hu Jintao's October offer to discuss a peace treaty with Beijing. He stated: "Let us discuss a formal end to the state of hostility between the two sides. We are ready to conduct exchanges, dialogue, consultations and negotiations with any political party in Taiwan as long as it recognizes that both sides of the strait belong to one China." To some Taiwanese, this translates into the mainland being willing to negotiate as long as Taiwan agrees to what Beijing wants.

Another factor for mainland China is that any Taiwanese move to establish a more separate identity comes at a bad time. The Chinese leadership is working hard to present a modern, efficient China to the world with the summer Olympics in 2008. There must be considerable apprehension within President Hu Jintao's government that some such move looms on the horizon, aiming to embarrass Beijing in the run up to the games. China has repeatedly indicated that any outright move to independence would be tantamount to declaring war. What complicates matters for Beijing is that while most topics of political discussion are severely curtailed, nationalism over Taiwan has been allowed considerable leeway. Indeed, any moves by Taiwanese leaders to declare formal independence would probably unleash demonstrations that could be hard to control as well as showing an unpleasant side to China just as the Olympics loom.

The third factor coming out of the DPP resolution is that Taiwan remains one of the unsettled issues from the Cold War. This casts a longer shadow than the tone of relations between the island and the mainland. Beyond the obvious connection to the United States as the major great power supporter of Taiwan, a nasty spat over the island in which the U.S. and China end up in confrontation, puts two nuclear-powered countries at loggerheads. It would also generally poison the investment and trading environment in the rest of Asia, clearly having a huge impact on the tone and stature of relations between China and Japan, South Korea and India and the United States and the same set of countries. If nothing else, Taiwan could spark a bigger conflict that would function as a wind-chill factor to this latest round of globalization.

Taiwan represents a major challenge for Asia's political stability and prosperity in the years ahead. A war over the island would leave a negative legacy as it would represent a forceful reunification, damaging mainland China's effort over the last decade to maintain a non-confrontational and cooperative regional foreign policy. Equally significant, if a military option were pursued and failed, any government in Beijing would have to face severe repercussions - not the least for a disgruntled population. Mainland China could end up with some type of regime change and not necessarily for the better - Beijing could become home of a hard-line military regime, leaving the world of economic development behind for more tangible and deadlier objectives of national power. Along these lines, Taiwan remains very much in the driver's seat of events - its leaders understand and have long lived within the parameters of balancing local aspirations with the mainland's concerns. This remains a difficult balancing act, but the alternative paths are too gruesome to contemplate.

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KWR International Advisor

Editor: Dr. Scott B. MacDonald, Sr. Consultant

Deputy Editors: Dr. Jonathan Lemco, Director and Sr. Consultant and Robert Windorf, Senior Consultant

Publisher: Keith W. Rabin, President

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