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[轉載] China and Taiwan-From Flashpoint to Redefining One Chin

China and Taiwan-From Flashpoint to Redefining One China

Dr Gary Klintworth
Foreign Affairs, Defence and Trade Group
7 November 2000



Major Issues


Taiwan's Strategic Importance to the US

China and the 1995-6 Missile Crisis

Clear Communications and Signalling
Return to Normalcy

Developments in 1999
China's Taiwan Focus
The Constraints on China

Militarily, a no-Win Situation for China
A Blockade?
The US Factor
Japan Might Become Involved

China's Dilemma

China's White Paper on Taiwan

The Chen Shui-bian Factor
How has China Responded?

Back to the 1992 Agreement

Common Interests
Outlook: Is War Possible?
Australia-Taiwan Relations
The China-Taiwan Dispute-Implications for Australia
A Role for Australian Diplomacy?
China Trade Tables
Appendix I: Balance of Forces: China and Taiwan, 2000





Australia New Zealand United States Security Alliance


Asia-Pacific Economic Cooperation


Association for Relations Across the Taiwan Strait


ASEAN Regional Forum


Association of South East Asian Nations


Chinese Communist Party


Conference on Security Cooperation in the Asia-Pacific


Department of Foreign Affairs and Trade


Democratic Progressive Party


Gross Domestic Production


Inter Continental Ballistic Missile


Intermediate Range Ballistic Missile




Mainland Affairs Council


National Missile Defence


Pacific Basin Economic Cooperation


People's Liberation Army


Permanent Normal Trade Relations


People's Republic of China


Republic of China


Strait Exchange Foundation


Submarine Launched Ballistic Missile


Conventional Submarine


Ballistic Missile/Nuclear Submarine


Conventional Submarine with Non-Ballistic Missile launchers


Nuclear Submarine


Short Range Ballistic Missile


Theatre Missile Defence


United Nations


United States


United States Information Agency


United States Information Service


World Trade Organisation

MAP: Taiwan's Location in the Asia-Pacific Region

MAP: Taiwan's Location in the Asia-Pacific Region

Source: Gary Klintworth, New Taiwan, New China, St Martins Press, New York, 1995, p. 9.

MAP: China and Taiwan

MAP: China and Taiwan

Source: The Perry-Castañeda Library Map Collection, The University of Texas at Austin,

Major Issues

Taiwan's future has profound strategic implications for the Asia-Pacific region. For Chinese leaders in Beijing, the recovery of Taiwan is 'a matter of supreme national interest' for which China must be prepared to fight 'at any cost'. Most Taiwanese, however, do not want to become a part of a China that is ruled by the Chinese Communist Party. Taiwan has not been ruled from Beijing since 1895, apart from an unhappy interlude in 1945-49 at the close of China's civil war when a defeated Kuomintang fled to Taiwan.

Many Taiwanese would like Taiwan to be independent. The majority prefer the status quo-neither independence nor rule from Beijing-but with the option of association with a new non-socialist China at some time in the future.

Mainland China, however, has warned that the Taiwan issue cannot drag on indefinitely. It worries that time is running in Taiwan's favour, that any display of weakness on the issue threatens the integrity of China and that this can only advantage the US and Japan, its strategic competitors.

Militarily, however, China is in no position to successfully use force against Taiwan. This outlook is unlikely to change in the next few years given the strength of Taiwan's defences and continued US support. Over the next several decades, moreover, China faces a daunting array of critical economic, demographic and environmental challenges. It has to resolve the perennial contradiction between scarce and diminishing resources and meeting the basic needs of a huge and expanding population.

From a broad national and historical perspective, China can ill-afford to make mistakes that jeopardise the delicate balance it has achieved between survival, and development. In this regard, both Taiwan and the US are crucial for the success of China's modernization. Economically, for instance, Taiwan is the most important source of direct foreign investment in China while the US is China's largest export market. Rationally, such considerations ought to have positive implications for the way in which China deals with the Taiwan issue and how it engages with the US.

The Asia-Pacific community has a common interest in advancing stability, transparency and cooperation in regional trade and security. Achieving this goal will depend on the way in which China handles its dispute with Taiwan over the meaning of 'one China' and the way in which Taiwan's new President, Chen Shui-bian, responds.

  • If Taiwan fails to placate China on the 'one China issue', and if the mainland leadership, for one reason or another, determines that it must use force, the United States could intervene.

  • US intervention might well lead to an upwards spiral of hostility and possibly a major war, with disastrous consequences for China, Japan, the US and the wider region.

  • The U.S. would expect its allies such as Japan and Australia to support its intervention.

  • Even a misunderstanding between China and the US over Taiwan, resulting in tension short of actual conflict, would adversely affect the smooth functioning of key regional trade and security building blocks such as ASEAN Regional Forum (ARF), the Conference on Security Cooperation in the Asia-Pacific (CSCAP) and Asia-Pacific Economic Cooperation (APEC).

  • Distrust and non-cooperation between China and the US because of the Taiwan issue could negatively affect efforts to ease tension in South Asia and stabilise the Korean peninsula. It would undermine China's commitment to strengthening arms control regimes and the non-proliferation of weapons of mass destruction and their delivery systems.

What are the chances of conflict in the Taiwan Strait? Is the Taiwan Strait really a flashpoint?

This paper argues that China and Taiwan are not on a collision course and that indeed, negotiations are the endgame that both sides have in mind. How they proceed, however, is still subject to domestic political variables in both Beijing and Taipei and the perspectives that each side has of the other.

China has been forced to make concessions that promise Taiwan equality at the negotiating table and much more autonomy than it has been prepared to give Hong Kong and Macao. China has tended to rely on the threat to use force as a last resort and will have to use more persuasive means if it hopes to convince Taipei of its bona fides. One of the other pieces still missing in the package that China is pressing on Taiwan is a public declaration that 'one China' does not mean the People's Republic of China per se and that it can be stretched to mean a new China or a united China in the near future, as demanded by Chen Shui-bian.

The final deal will require more trust and more concessions from both sides. This will not be easy to achieve given the level of their mutual distrust. China is also still trying to understand Taiwan's new President while at the same time it must grapple with its own leadership transition and the uncertainties of a new US Administration. On the other side of the Taiwan Strait, new President Chen Shui-bian is struggling to cope with the support of a factionalised Democratic Progressive Party and a Legislative Yuan (Taiwan's Parliament) that is dominated by the Kuomintang. Thus, the possibility of renewed tension between China and Taiwan and between China and the US over the Taiwan issue cannot be entirely discounted.

In the author's view, however, the gap between the two sides over the meaning of the key issue-'one China'-has narrowed significantly over the last few years. Furthermore the risk of misunderstanding in the two key relationships-China and Taiwan and China and the US-could be minimised if Australia and other like-minded states helped build up trust and understanding in cross-Strait relations and provided some of the neutral ballast that is needed to stabilise an often turbulent Sino-US relationship.


We will do all we can to achieve peaceful reunification but we must tell Taiwan's separatists in all seriousness that those who stir up a fire will burn themselves and choosing independence for Taiwan means choosing war. Chi Haotian, Minister of National Defence, Xinhua, 'PRC Defense Minister warns against Taiwan independence', 6 March 2000.

The Chinese people are ready to shed blood and sacrifice their lives to defend the unity of their motherland and the dignity of the Chinese nation: Premier Zhu Rongji, Press Conference, Xinhua, Beijing, 15 March 2000

We want peace and we also fully realize that our countrymen in Taiwan also yearn for peace. Although Taiwan independence can only mean war, not peace, we will continue to implement the basic principle of peaceful reunification, and one country two systems: Vice Premier Qian Qichen, Xinhua, Beijing, 28 January 2000 'Qian Qichen on Jiang's Proposal for Taiwan'

Chinese people will absolutely not sit by and watch Taiwan become independent. On issues that concern the fundamental interests of the Chinese nation, the Chinese people have never wavered ... if 'Taiwan independence forces' on the island dare to make any reckless moves ... they will certainly be engulfed in the sea of flames of a just war for China's reunification: PLA Daily, 29 May 2000

The world community should not ignore Beijing's military. The danger exists and it is a wrong judgement that communist China will not invade Taiwan. There are crazy elements in China who are eager to launch a war. This is a very critical moment: Wei Jingsheng, Taipei Times, 21 May 2000.

The Taiwan Straits situation is complicated and grim ... The new leaders on Taiwan have adopted an evasive and obscure attitude to the one China principle. Separatist forces in Taiwan are scheming to split the island province from China in one form or another. This has seriously undermined the preconditions and foundation for peaceful reunification...The Chinese government will do its utmost to achieve peaceful reunification but 'Taiwan independence' means provoking war: White Paper on China's National Defence in 2000, State Council of the PRC, 16 October 2000.

Despite the rhetoric, China and Taiwan are not on a collision course just yet. On the contrary, both sides appear to be in a bargaining mode and, in the author's view, they are heading towards the negotiation of a practical solution to a semantic problem, that is, the meaning of 'one China'.

The future of Taiwan is one of the most sensitive challenges facing China and Taiwan. It has profound implications for China's foreign relations, its domestic politics and the course of China's social, political and economic development. It also has important strategic implications for Sino-US relations and the outlook for peace and stability in the wider Asia-Pacific region.

According to some mainland analysts, support in Taiwan for independence is growing and, because China is opposed to such an outcome, war at some stage is inevitable.(1) To stress the point, China straddled Taiwan with short range ballistic missiles in 1995-96.(2) In its White Paper on Taiwan of 21 February 2000, China's State Council warned that it would use force in the following circumstances:

  • if there was a grave turn of events leading to the separation of Taiwan from China in any name

  • if Taiwan was invaded and occupied by foreign countries, and

  • if Taiwan refused sine die (indefinitely) to negotiate on reunification.(3)

Across the Taiwan Strait, the ruling Democratic Progressive Party (DPP) stated when in opposition, that its goals were:

  • to establish a sovereign and independent Republic of Taiwan

  • to revise Taiwan's Constitution to reflect that reality

  • to renounce the one China principle, and

  • to seek international recognition and pursue Taiwan's entry to the UN.(4)

Thus, the election of the DPP candidate, Chen Shui-bian, as Taiwan's new President on 18 March 2000 seemed to pose a direct and provocative challenge to Beijing's plans for Taiwan.

A war with Taiwan, however, is fraught with risk. Critical Taiwanese investment in the mainland would dry up. The logistical nightmare just to prepare for a successful crossing of the 130 km wide Taiwan Strait would derail China's modernisation.(5) As well as the economic costs, an attack against Taiwan could end in humiliation that in turn might bring about the collapse of the Chinese Communist Party.

More fundamentally, China would have to confront the power and prestige of the United States. A conflict between China and the US over Taiwan would be a disastrous outcome for Australia and the Asia-Pacific community.

This paper aims to assess China's options on Taiwan and likely outcomes.


In 1949, Chiang Kai-shek's defeated Kuomintang fled to Taiwan with Mao Zedong's Red Army in hot pursuit. Taiwan was regarded by the US as being of no strategic significance and seemed destined to be taken over by the Chinese Communist Party. However, with the outbreak of the Korean War on 25 June 1950, Taiwan became 'an important anchor in a US defensive chain stretching from the Aleutians to Australia'.(6) According to the then US Secretary of State, John Foster Dulles, the collapse of Chiang Kai-shek's Government on Taiwan would so jeopardise America's offshore defences that 'it would only be a matter of time before [the US] was forced back to Hawaii or the West Coast'.(7)

Over the next two decades, Taiwan became an American fortress. It promoted itself as the Republic of China representing all of China, including the mainland, and was formally recognised as such by the US and its allies, such as Japan and Australia. US economic aid, preferential market access, technology transfers and training in capitalist ways underpinned Taiwan's postwar take-off. US security guarantees helped consolidate Taiwan's status as an independent island state. During this period, the People's Republic of China on the mainland and the Republic of China on Taiwan vied physically and diplomatically for the title of being the sole legal government representing all of China.

By July 1971, the US quest to extricate itself from Indochina and outflank a surging Soviet Union led to a breakthrough in Sino-US relations. In the Shanghai Joint Communique of 27 February 1972, the US declared that it did not challenge the claim by all Chinese on either side of the Taiwan Strait maintain that there was one China. It also reaffirmed its interest in a peaceful settlement of the Taiwan question.(8) The US maintained diplomatic relations and a security treaty with Taipei until 1 January 1979. In a second Joint Communique (dated 15 December 1978), the US stated that as of 1 January 1979, it would recognise the government of the PRC as the sole legal government of China and that within this context it would maintain cultural, commercial and other unofficial relations with the people of Taiwan. There was no mention of Taiwan-US defence relations although the US stated that it continued to have an interest in the peaceful resolution of the Taiwan issue.(9)

Strategically, Taiwan looked vulnerable. The self-confidence of the ruling Kuomintang had been dealt a devastating blow. China, however, was strategically dependent on the US vis-a-vis the USSR. More importantly, the US Congress passed the Taiwan Relations Act in April 1979. It states inter alia that it is United States policy:

To make clear that the United States decision to establish diplomatic relations with the PRC rests upon the expectation that the future of Taiwan will be determined by peaceful means; to consider any efforts to determine the future of Taiwan by other than peaceful means a threat to the peace and security of the Western Pacific area and of grave concern to the United States; to provide Taiwan with arms of a defensive character; and to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardise the security or social or economic system of the people of Taiwan.

The Act was intended to be part of a transitional mechanism pending the settlement of the mainland-Taiwan unification issue.(10) Read literally, however, the Act left open the possibility of renewed US military assistance to protect Taiwan and deter the People's Liberation Army (PLA) if and when that was deemed necessary. And that indeed is how the Act has been subsequently interpreted and applied, notwithstanding an 18 August 1982 undertaking by President Ronald Reagan that the US would gradually reduce and eventually cease to sell any arms to Taiwan.(11)

By 1989, any rationale for the US to defer to Beijing over Taiwan disappeared with the collapse of the Soviet Union.The critical turning point for Washington came with the crushing of the pro-democracy protest in Beijing in June 1989, 'a brutal assault on core American values'.(12)

Taiwan, in contrast, found its star rising. It was more important than China as a US export market, at least up until 1994.(13) Taiwan's ruling Kuomintang had fortuitously undertaken a program of democratic reform so as to broaden its domestic political base and appeal to the anti-communist instincts of the US Congress. Ironically, this opened the door to opposition political parties, including the pro-independence DPP, (one of whose founding members, Chen Shui-bian, was to become President in March 2000).

From China's perspective, the critical turning point in its relations with the US came in August 1992 when President George Bush approved a $U5.8 billion deal for the sale of 150 F-16 fighter aircraft to Taiwan. The sale reversed a decade of steady decline in US arms sales to Taiwan.(14) It was also a breach of President Reagan's 1982 undertakings but it went ahead ostensibly because China had acquired modern Soviet Su-27 fighter aircraft.(15)

Taiwan's Strategic Importance to the US

With the disintegration of the Soviet Union and the rusting away of its once powerful Pacific Fleet, and with Japan confined to being a 'civilian' power, China was seen in Washington as the only country that might challenge US dominance in the Asia-Pacific region. In this context, Taiwan again became part of the Sino-US strategic equation, and a 'burr in the saddle' of Sino-US relations.(16)

Taiwan possesses not unimpressive military capabilities, a strong technical-industrial base and excellent transport facilities. It sits at the crossroads of the overlapping strategic and economic interests of Japan, China and the US. In addition, it is rich, democratised, capitalist and, being Chinese, it is contributing to the social, political and economic development of China by demonstrating an alternative model of development to Chinese communism. As President Clinton observed in September 1993, the overriding purpose of the US was 'to expand and strengthen the world's community of market-based democracies'.(17) Thus, a more or less independent Taiwan that can keep the mainland at arms length might appeal as a logical part of any US strategy that aims to change communism on the mainland and balance China's rise as a great power.

China and the 1995-6 Missile Crisis

In June 1995, the US Congress forced the Administration to allow Taiwan's President Lee Teng-hui to make an unofficial visit to Cornell University as 'the President of a model emerging democracy and America's fifth largest trading partner'.(18) China was vehemently opposed because the visit smacked of US support for an independent Taiwan, especially after the Chinese leadership had received high level assurances that the visit would not take place.(19)

Chinese leaders, annoyed with what they perceived to be US duplicity, feared that similar 'unofficial visits' to Japan and other countries might follow. Some senior PLA officers argued that if China did not stand up for itself against the US, it would continue to be treated in a 'disrespectful and insolent' way and Taiwan's quest for independence would strengthen.(20)

President Jiang Zemin, however, did not want an irretrievable breakdown in Sino-US relations.(21) Jiang sought an approach that was determined but reasonable, based on the assumption that it was not in the strategic interests of either the US or China to go to war over Taiwan.(22) Some hardliners in Beijing demanded a more robust response but the majority view in the central government-and in the PLA-was that actual use of force against Taiwan was impractical, premature and too costly.(23)

Jiang accepted the PLA's recommendation to test fire a few M-series short range ballistic missiles between July 1995 and March 1996.(24) In addition, the PLA was allowed to go ahead with several military exercises in July, August and December 1995, and January and March 1996. By firing missiles that straddled Taiwan and heavily used trade routes to and from the key ports of Keelung and Kaohsiung, China hoped to highlight Taiwan's vulnerability to a ballistic missile attack.

At the same time, nonetheless, officials from both sides were continuing to discuss cooperation in trade, investment, science and technology and cross-Strait links. The US and China too were engaged in their own round of reassurances. In September 1995, US Secretary of State Warren Christopher renewed US undertakings to adhere to a 'one China' policy in which the PRC was regarded as the sole legal government of China. He also promised that the US would not support the notion of 'two Chinas' or an independent Taiwan or the latter's attempts to join the UN'.(25)

Clear Communications and Signalling

The most positive aspect of the 1995-96 missile crisis was the extent to which it was not really a crisis. Beijing, Washington and Taipei minimised the risk of misunderstanding by clear signalling and communications, one of the basic rules for successful crisis diplomacy.(26) Intelligence agencies in Taiwan and the US always had good information on the limits of China's military activities such that when Taiwan's former Defence Minister Chen Li-an saw the scope, scale and location of the PLA exercises, he knew the PLA was not really serious and that the whole show was designed, in large part, to satisfy Chinese domestic audiences, just as the US carrier deployments were intended to quieten President Clinton's Congressional critics.(27)

One might surmise that China's posturing in the Taiwan Straits had strict limits that were clearly understood by the Taiwanese. Both sides played along with the game. President Lee put the Taiwanese armed forces on alert while China brandished its latest fighter aircraft, ships and submarines. But the PLA confined its activities to the mainland side of the median line in the Taiwan Straits and carefully announced the time and intended impact zone of all its missile tests. For their part, the Taiwanese cancelled or curtailed all military drills between mid-1995 and mid-1996.(28)

China also helped contain the crisis by constant repetition of the message that its preference was reunification by peaceful means. Force was not ruled out but reunification by peaceful negotiations was clearly demarcated as the foundation of China's Taiwan policy. (This approach was reaffirmed in China's White Paper, issued in February 2000).(29) Meanwhile, Taiwan's President Lee Teng-hui tried to reassure Beijing by declaring that his ultimate goal was unification, not independence, and that in due course leaders from both sides could meet.(30) President Jiang Zemin responded positively. He said Lee Teng-hui, as the leader of Taiwan, was his 'indispensable counterpart' who would be welcomed in Beijing; and that he was ready to go to Taipei.(31)

Jiang's offer, couched in terms that gave a nod to Lee's demand to be treated as an equal, was described by Taiwan's Premier Lien Chan as a positive sign that would help ease tension between Taipei and Beijing.(32)

As well as signalling to each other via the international news media, Lee and Jiang were also exchanging messages of reassurance through unofficial intermediaries. For example, Jiang passed a message via Liang Su-rong, an adviser to Lee Teng-hui, stressing three points: one, China and Taiwan should let bygones be bygones; two, provided Taiwan did not seek independence, everything else could be discussed; and three, the meeting between Lee and Jiang could be on 'an equal footing'.(33)

Lee Teng-hui's response, contained in his 20 May 1996 inaugural speech, was to announce a willingness to go to mainland China. Significantly, Lee dropped any reference to his previous demand that China must first renounce the use of force before talks or negotiations between China and Taiwan could take place.(34) Lee also hinted that he would give up any attempt to make a second visit to the US and would postpone Taiwan's bid to join the United Nations.(35)

This method of 'signalling from a distance' and conducting confidential meetings between key advisers at locations overseas or in Hong Kong suggests Lee and Jiang were negotiating in deadly earnest but were equally intent on containing their differences and avoiding the kind of hostility spiral that could lead to open conflict that might embroil them and the US in a larger war.(36)

Some evidence for the foregoing interpretation of events can be found in Taiwan's ambivalent response to the US carrier deployments in the East China Sea. Publicly, the Government welcomed the demonstration of US military support. However, a spokesman for the Ministry of Foreign Affairs said Taiwan hoped 'the US would not take any further action' because the dispute was one for Taipei and Beijing to resolve between themselves.(37) Presidential candidates Lin Yang-kang and Chen Li-an also opposed the carrier deployments and privately, many senior Taiwanese military officers expressed fears that the move would only complicate the situation by provoking China and increasing tension in the Straits.(38)

This was unlikely, however, because China and the US were engaged in their own round of crisis management and diplomacy. They had established a habit of regular and frequent contact in a variety of forums. For example, in Washington on 7 February 1996, Chinese Vice Foreign Minister, Li Zhaoxing had an intensive round of meetings with officials from the US State Department, the Department of Defense and the National Security Adviser's Office. On 7 March 1996, Liu Huaqiu, Director of China's State Council Office of Foreign Affairs, had three hours of talks on the Taiwan issue with US Secretary of State, Warren Christopher. The next day, Liu had a whole day of intensive talks on US/PRC differences over Taiwan with Anthony Lake, National Security Adviser to President Bill Clinton.(39)

During these meetings, the US warned that any use of force against Taiwan would have grave consequences and that China would be held responsible for anything that went wrong. China, however, gave strong assurances about the limits in time, scale and location of its military exercises and the missile tests. According to a US Defence Department spokesman, China had told the US, both in public and private conversations, that it had no intention of attacking Taiwan.(40)

These assurances seem to have been passed on to the Taiwanese well before China conducted its last large-scale military exercises along the coast of Fujian province in March 1996. Indeed, on 10 March 1996, just before China began its third round of missile tests, the US facilitated 'quiet cooperative talks' in Washington between China's National Security Adviser, Liu Huaqiu and Lee Yuan-tseh, a confidante of Lee Teng-hui (and now a key adviser to Chen Shui-bian).(41)

Thus, the American and Taiwanese governments were able to announce that the exercises were essentially routine and that war was not imminent.(42) If there was any need for confirmation of this prognosis, it was available from mainland television reports that revealed detailed information about the PLA's deployments (even down to the size and designation of the units involved). This effort by Beijing to minimise the risk of miscalculation was complemented by the PLA's use of an 'open skies' policy that allowed US intelligence satellites to monitor mainland areas adjacent to Taiwan.(43)

One might conclude, therefore, that while the PLA was able to let off a show of steam, defence planners in Taiwan and the US knew there was little likelihood of an actual military confrontation in the Taiwan Strait. Admiral Joseph Preuher, then Commander in Chief, Pacific Command and currently the US Ambassador in Beijing, concluded that both China and Taiwan were behaving 'responsibly'. Speaking in Tokyo at the time, Prueher stated that Chinese military movements in Fujian were 'moderate' and that in any case, China had every right to conduct the drills on its own soil.(44)

Nonetheless, US domestic political pressure required a symbolic American response. In early March 1996, it was announced that a carrier battle group led by the Independence, from Yokosuka in Japan, would move to a position east of Taiwan 'to be helpful if they need to be' and that it would be joined to the east of Taiwan by a second carrier battle group led by the Nimitz.(45)

The deployment was described in the media as the largest concentration of US firepower in the region since the Vietnam War but in fact both carriers deployed well to the east of Taiwan and no attempt was made to sail through the Taiwan Strait.

Return to Normalcy

By April 1996, the crisis, such as it was, ended with all sides more or less satisfied. At the Hague on 19 April, Chinese Foreign Minister Qian Qichen and US Secretary of State, Warren Christopher-meeting for the sixth time in less than twelve months-agreed that while their differences over Taiwan remained unresolved, Sino-US tension had eased. Qian reaffirmed China's commitment to peaceful reunification, along with the standard proviso about not renouncing the use of force. Christopher stated that the US side now clearly understood that Taiwan was a question of 'utmost concern for the Chinese government'. (46)Christopher promised that the US would stand by the one China commitment it had made in the three Sino-US Joint Communiques (of 1972, 1979 and 1982, see above) and would refrain from having official relations with Taiwan.(47)

The most important lesson learned by the US and China over the period 1995-6 was that both sides understood that conflict resolution, stability and prosperity in the Asia-Pacific region were contingent on a cooperative Sino-US relationship. Both sides were forced to clarify their common interests and the risks and the gains to be made from what is likely to be the most important strategic relationship in the Asia-Pacific region in the 21st century. Both sides understood the need for some minimum level of transparency and trust. They agreed to regularise the habit of holding high-level bilateral strategic talks on Taiwan.(48) They agreed that China and the US should stick to the rules of the game on Taiwan devised in 1972. That is, that China will not resort to force against Taiwan provided Taipei eschews independence; the US will only intervene if China does threaten to use force against Taiwan; and within those strict bounds, mutually profitable Sino-US and China-Taiwan relationships can continue to develop.

Developments in 1999

The next crisis involving Taiwan, China and the US occurred earlier this year. It followed a combination of events that seriously damaged Sino-US relations. There was the US bombing of the Chinese Embassy in Kosovo in May 1999, an incident suspected in Beijing of being a deliberate act.(49) On 25 May 1999, the Cox Report, commissioned by the US Congress, alleged that China was a serious threat to US national security because of China's systematic theft of sensitive technology from secret US weapons laboratories. (50)

The Cox Report, although subsequently discredited(51), was added to a list of US Congressional complaints about China, along with human rights, Tibet, weapons sales and religious freedom. Cumulatively, these complaints were used to try and bolster demands for increased US support for Taiwan, 'a friend and a good ally'.(52) Members of the US Congress set about lobbying support for the Taiwan Security Enhancement Act, designed to upgrade US military support for Taiwan, including missile defence.(53) The Act, passed by Congress' House of Representatives in an overwhelming and bipartisan 341-70 vote, was interpreted by the Chinese Government as 'a grave threat to China's security'.(54)

Against this background, President Lee Teng-hui stated in an interview on 9 July 1999 that China and Taiwan had 'a special state-to-state relationship'.(55) By that, he intended to say that the relationship was not one between a central and local government and nor was it one between two independent states-it was a special relationship between equals. Mainland analysts overlooked the word 'special' and focussed on the term 'state-to-state'. They interpreted Lee's remarks as tantamount to a declaration of statehood and independence. According to the PLA newspaper, anybody who split Taiwan from China would become 'the scum of the nation'(56) (although equally, this message may have been intended to apply to anyone within China who suggested compromising on Taiwan).

Chinese anxiety further increased in the lead up to Taiwan's Presidential elections, held on 18 March 2000. The elections boiled down to a race between the Kuomintang or affiliated political movements representing the status quo in Taiwanese politics, and on the other hand, the pro-independence DPP which represented the aspirations of a growing number of young people who identified themselves as Taiwanese, not Chinese.

On 21 February 2000, China issued a White Paper warning that it might resort to drastic measures in certain circumstances, 'including the use of force' if Taiwan 'refused, sine die (indefinitely) the peaceful settlement of cross-Straits reunification through negotiations'.(57)

On 18 March 2000, Chen Shui-bian was elected President of Taiwan. As a foundation member of the pro-independence DPP, his election seemed to pose a direct and provocative challenge to Beijing.

Some in Beijing proposed that China should use force against Taiwan sooner rather than later, on the rationale that a short sharp pain now was preferable to a long drawn out ache that culminated in Taiwan's independence.(58)

China's Taiwan Focus

The reasons why China sees reunification with Taiwan as a matter of 'supreme national interest' for which it claims it is prepared to fight 'at any cost' are as follows:

First, there is a firm belief in Beijing that Taiwan has been Chinese territory 'from time immemorial', and that, despite a Japanese colonial interlude in 1895-1945, it would have returned to China if the US had not intervened. For China, Taiwan is the last vestige of a century of Chinese humiliation at the hands of strong colonial powers.

Beijing's most recent and authoritative statement on the subject declared that China might have experienced invasions, disunity and dynastic change during the last 5000 years but it always reverted to a unified state.(59) This fixation on the cycle of Chinese history has made the recovery of Taiwan seem like a sacred mission. This is especially so after the return of Hong Kong in 1997 and Macao in 1999 and well-publicised support in the US Congress for an independent Taiwan.

Second, most mainland leaders are convinced that allowing Taiwan leeway to become independent sets a precedent for potentially rebellious parts of China such as Tibet, Xinjiang, perhaps Inner Mongolia and even Hong Kong. In other words, Taiwan's future as a part of China is perceived to be inseparable from the integrity of a unified Chinese state.

Third, there are strategic factors stemming from Taiwan's central location next to China's richest provinces.

During World War II, Taiwan was a launch pad for Japanese imperialism. In the 1950s and 1960s, it was a key link in the US strategy of containing China. Taiwan retains strong commercial ties with Japan and has established close economic and security links with the US. China fears that if it surrenders on Taiwan, it will cede strategic advantage to the US and Japan, its chief competitors in a triangular great power game in Northeast Asia.

Furthermore, from Beijing's viewpoint, if Taiwan is included in the proposed US-Japan theatre missile defence system (TMD), it would be a case of using 'part of China against the rest of China'.(60) By undercutting China's missile leverage, it would not only boost pro-independence sentiment in Taiwan but, combined with an national missile defence (NMD) system, it might also neutralise the deterrent value of China's strategic rocket force.(61)

Fourth, the development of Taiwan as a successful Chinese democracy contrasts with the mainland's authoritarian politics. Mainland knowledge of the Taiwanese modernisation experience has been spread by tourism, trade exchanges and the information revolution, including television.(62) In this sense, therefore, Taiwan is a model for political and economic reform in China but for the Chinese Communist Party (CCP), it is also a rival regime that challenges the legitimacy and pre-eminence of the CCP.

These considerations have sustained mainland possessiveness about Taiwan and make it difficult for Beijing to be publicly flexible on practical options for a future Taiwan-China relationship. This inflexibility leads many in China to argue, rather fatalistically, that the PLA has no choice other than to attack Taiwan-even if it loses the ensuing war-because the alternative is the collapse of the CCP's domestic legitimacy, credibility and self-esteem. Thus, instead of marketing the advantages that might accrue to Taiwan if it were to rejoin the mainland, China has-until recently-relied mostly on threat diplomacy.

The mainland threat has deterred the Taiwanese from seeking independence and to that extent, Beijing can claim its Taiwan policy has been very successful. But such a policy is outmoded and increasingly counterproductive. No Taiwanese President can accept reunification with China at the point of a gun. While mainland threats make the Taiwanese fear the consequences of supporting independence, they also engender deep Taiwanese distrust of the mainland and its reunification plans. If China wants to win over the Taiwanese, it will have to develop a much more sophisticated approach that moves beyond threats and offers more in the way of inducements for rapprochement and reunification.

The Constraints on China

China might reserve the right to use force against Taiwan but several factors make that option impractical and, on balance, unlikely (although the author does not rule out the possibility).

A war with Taiwan would dislocate China's economy and divert scarce resources away from more pressing nation-building priorities. Reform of China's state-owned enterprises and its banking and financial sectors have become a matter of urgency because inefficiencies, corruption and the lack of regulation threaten to drag down the nation's entire economy, despite the impressive expansion of China's non-state sector.(63)

China also faces the contradiction of scarce and diminishing resources and demands of a huge and expanding population. China's per capita average of forest, grassland and freshwater resources amount to one ninth, one third and one quarter of the respective world averages. It is plagued by chronic water shortages, especially in the north.

With 1.26 billion people, or one fifth of the global population, China must make do with about 13 per cent of the world's arable land. Although it ranks first in terms of grain output, population size means China's per capita share of grain is less than a quarter of America's. The ratio will remain low because of net population growth averaging 14 million per annum.

The precarious balance between China's population and resources is under increasing threat from the loss of arable land to urbanisation, soil erosion, salinity and desertification.(64) China also has the world's most polluted cities.

China, a net importer of petroleum since 1993, faces growing energy shortages that translate into oil import requirements of 100 million tons per annum by 2010.

Another looming crisis stems from a lack of social welfare and a rapidly aging population (accelerated by family planning policies and increased life expectancy). By 2020, there will be an elderly population of 300 million. By then, the ratio of workers to pensioners will be 3:1 compared to 10:1 in 1995.

China's economic growth is stable but uneven, ranging from about 12 per cent per annum in prosperous cities like Shanghai to negative growth in poor rural provinces. Worrying signs of fragility persist, including weak private investment, the widening of an urban-rural income gap and generally sluggish consumption levels. The World Bank estimates that about 13.5 per cent of the rural population (or 124 million people) still live in dire poverty.(65)

A growth rate of 8 per cent per annum is regarded as the minimum required if China hopes to reduce unemployment (10 per cent of the workforce or about 100 million people), provide jobs for young people reaching working age (estimated at 20 million per annum), open up new opportunities for surplus rural labor (estimated at about 120 million) and improve overall living standards.

Of China's present annual economic growth of around 7.5 to 8 per cent per annum, about 2 per cent comes from exports.(66) Since every one per cent increase in the ratio of trade to Gross Domestic Production (GDP) creates a 2-3 per cent increase in income per person,(67) and since the ratio of China's foreign trade to GDP has increased from 10 per cent in 1978 to more than 36 per cent in 1996(68) China is increasingly dependent on foreign trade to support its domestic economic goals. World Trade Organisation (WTO) membership, which is expected to deliver China a 13 per cent gain in GDP over the next decade, will increase this reliance.(69)

Since most (75 per cent) of China's foreign trade is conducted with the Asia-Pacific region, China's domestic social and economic prospects depend very much on the continued support and cooperation of the countries in its neighbourhood.(70)

That neighbourhood includes Taiwan, perhaps the largest source of foreign investment in China.(71) Taiwan is also China's seventh largest trading partner and (reflecting the role played by Taiwanese manufacturers based in the mainland), the source of around 12 per cent of its imports.(72) In 1995-99, two way trade between China and Taiwan via Hong Kong exceeded US$100 billion, or twice the amount in the previous five years.(73) Annual two way trade between China and Taiwan increased from $US4 billion in 1989 to $US25 billion in 1999 (with a surplus in favour of Taiwan of $US16 billion, and cumulatively, $US116 billion).(74)

The economic integration of Taiwan and the mainland will speed up when China and Taiwan join the WTO, possibly early in 2001. After entry, they must abide by the principles of a free market economy with minimum restrictions on access. This will force both sides to develop practical mechanisms to interact with each other, with positive benefits for cross-Strait relations.

Rationally, therefore, China can ill-afford a war with Taiwan. It would jeopardise the delicate balance China has struggled to maintain between mere survival and development. The reality for Beijing is that its long-term modernisation strate