Taiwan: Identity Politics and Economic Free Fall in the Other China

TAIWAN-CHINA/by Collin Spears, BFPR Chief Foreign Policy Correspondent

The Other China, The Republic of China (Taiwan) does not have the myriad ethnic diversity of the People’s Republic of China (China). The latter has 56 ethnicities, minorities making up 8% of its 1.3 billion citizens. Taiwan has 23 million people, ethnic Han Chinese making up 98% of the population. The remaining 2% is composed of various aboriginal tribes. Unlike China, Taiwan is a young democracy and its politics have historically been affected by group affiliation, but these ethnic factions are all within the Han majority. Taiwan’s identity politics has and will continue to affect, not only its internal politics during the current economic crisis, but also Cross-Straits relations.

The Taiwanese Han population is divided into Mainlanders (waisheng ren) and “Native Taiwanese” (bensheng ren). The Mainlanders are primarily Chinese National Party (Guomindong, KMT) loyalists who retreated from China with the military at the conclusion of the Chinese Civil War in 1949. This group, from various provinces, used Mandarin as a lingua franca. Although, currently 13% of the population, they have historically held disproportionate political power until the early 1990’s. The Native Taiwanese can be further divided into Fujianese (Fujian ren), the vast majority of Taiwan’s population, and Hakka (Kejia ren). Although linguistically distinct groups, both have resided on the island for at least 4 centuries; combined they are roughly 85% of Taiwan’s population. The Natives were culturally and politically oppressed by the military dictatorship that ruled Taiwan during a period of marshal law known as the “White Terror”, which lasted from 1949 to 1987. During this period, for many Natives, the Mainlanders were seen as oppressors and the KMT was viewed as their instrument. The reality is more complicated, as neither group has been completely endogenous.

Politically, this ethnic divide is mirrored the Pan-Blue and Pan-Green political coalitions. The KMT and Pan-Green by the Democratic Progressive Party (DPP) lead Pan-Blue. The KMT favors a more active engagement with China and have always favored eventual unification. The DPP favors the formal independence of Taiwan; however, they have been hesitant due to the threat of military conflict with China.

On March 22, 2008, the fourth time the Taiwanese elected a president, DDP candidate Frank Hsieh lost to the Nationalists’ Ma Ying-jeou, by 17 points (AP 2008). Two months earlier, the KMT won 82 out of 113 seats in the Taiwan legislature. Before the election, the KMT had a slight majority, only enough to create political deadlock. The election was a referendum on the 2 term former president, Chen Shuibien’s administration and by proxy the DDP, Chen being the first non-KMT Taiwanese head of state. The results did not reflect a shift by Taiwanese voters toward a pro-China position, instead, more a pulling back from the previous Chen administration’s more extreme rhetoric, which was ethnic divisiveness, corruption, and what many saw as economic incompetence. Hsieh tried to moderate Chen’s hard-line stance and separate himself, but failed. Currently, Chen and members of his family are facing multiple corruption charges that could lead to long jail sentences.

Although economic stagnation was a key issue during the election, the current recession is now the preeminent issue in Taiwanese politics. Ma Ying-jeou won the presidency campaigning on a platform of increased economic growth and the establishment of better ties with China. His primary economic slogan was “6-3-3”: 6% GDP growth, 3% unemployment, and US$30,000 a year per capita income by the end of his second term in 2016 (Adams 2009c). These goals are now far less realistic, the Ma Administrations 2009 forecast is 3% GDP growth and a drop in per capita GDP from last years US$17,600 (Adams 2009). January’s unemployment rose to 5.3%. Real average wages have fallen by 5%, which has triggered a drop in retail sales (Adams 2009). Many companies are ordering employees to take unpaid leave or face layoff. Hong Kong-based CLSA predicts that Taiwan’s economy will contact by 11% in 2009. The Directorate General of Budget, Accounting and Statistics reported that in the third quarter of 2008, Taiwan’s Real GDP dropped by 1 percent (Hsu 2009).

The global recession has made export dependent Taiwan very vulnerable, as exports are 65-70% of Taiwan’s total gross domestic product (GDP), but they have dropped almost 30% since February 2008, significantly worse than analyst predictions(Editor 2009). China is Taiwan’s largest trading partner. Exports to China currently account for about 40% of total exports or 25% of Taiwan’s GDP (Editor 2009). There has been a 59% drop in exports to China over the last year, higher than the overall export trend of -44% (The Economist 2009). These exports to China are largely electronic. In addition to the global recession, some economists believe Chinese domestic electronic goods are supplanting Taiwanese imports, thus exacerbating Taiwan’s decline (Tsai et al. 2009).

In an attempt to counteract the sharp economic decline, Ma has several major proposals, including 12 major infrastructure projects and a NT$500 billion stimulus package. The cornerstone of Ma’s recovery plan lies in Taiwan’s relationship with China. Many business leaders heavily back the liberalization of trade with China, as one million Taiwanese already work there. Taiwanese firms have invested close to $150 billion in their large neighbor. Ma’s proposed Chinese – Taiwan trade initiative was called the Comprehensive Economic Cooperation Agreement (CECA).

Notably, the previous Chen Administration initially came into office promising win-win economic policies in relation to China. This included direct commercial flights. These flights did not actually begin until the Ma Administration, in December of 2008. China largely repudiated Chen, due to his Taiwanese nationalism.
In November 2007, Chinese President Hu Jintao gave a speech at the 17th National Congress; he officially offered a “peace agreement” with Taiwan, if the government acknowledged the “One-China Policy”*. Amazingly, Hu said that issues related to China’s sovereignty and territory should be decided by “all of the Chinese, including Taiwanese” (Tsai 2007). It is likely that Hu was talking to the Taiwanese electorate and the KMT.

Pleased with the election and Ma’s promotion of the shared Chinese and KMT belief that both sides of the Straits are inhabited by Chinese people (zhonghua minzu**), Chinese Premier Wen Jiaboa recently called for increased economic cooperation and also spoke of a possible peace deal to bring an end to the 50 year “Chinese Cold War”. China has even hinted they expect a basic resolution on closer ties to come out of high-level talks planned for May or June 2009. Still, progress on trade is easier than political issues, because a significant portion of the Taiwanese population does not share Ma’s enthusiasm for China beyond mutual economic interests.

After Hu’s 17th National Congressional speech, Chen Shui-bian cited polls that concluded 85% of people in Taiwan believed Taiwan’s territory only includes Taiwan, Kinmen, Penghu and Matzu. Further, 70% consider themselves as Taiwanese but not Chinese (Tsai 2007). A poll from the September 2008 edition of “Global Views” magazine asked, “If both sides of the Taiwan Strait one day match each other in terms of the economy, politics and society, would you support unification?” 66% of respondents said “No”, up sharply from May 2004, when only 38% rejected the idea (Adams 2008b). There are many reasons for this, many Taiwanese see the Chinese as backward and unfit to share a nation with, and some Taiwanese do not see themselves as Chinese at all.

Ma’s approval rating has continued to slide along with the economy, but Ma also faces some opposition from within his party. After Hu’s 17th speech, even the KMT, which has interacted closely with the CCP since 2005, rebuked Hu’s remark. One official stated that the island’s people should determine Taiwan’s future, and no Chinese interference would be tolerated. Since the election, some KMT officials have also commented that Ma is going around the countries democratic institutions, but there is not a large enough opposition to block Ma’s agenda, yet.

Ma has tried to calm fears, even going as far as to rename the CECA to Economic Cooperation Framework Agreement (ECFA). It was felt that CECA sound too similar to the pact Hong Kong signed with the Mainland in 1997. Many saw the former name as an indication of Ma’ s true intent. ECFA would only regulate economic cooperation and not issues of sovereignty, unification, or independence. Originally, Ma would not have signed any package until 2012, but the timing has been pushed-up due to the global economic crisis. China and ASEAN (Association of Southeast Asian Nations) are scheduled to complete a free trade agreement in 2010. Trade tariffs will be reduced on over 90% of products (Xinhua 2006). This will only put Taiwan at a further competitive disadvantage.

Part of Ma’s problem is that the framework is vague; Due to this, Ma’s opponent are providing the narrative and the pro-independence opposition is entrenched on this issue. Many feel any such economic framework is a slippery slope to Chinese absorption to Taiwan. They also contend that Taiwan is over dependent on China, concerning imports, which they believe will only be made worse by ECFA. At the same time Chinese agricultural imports will increase, putting Taiwanese farmers at a disadvantage. Opponents are also concerned with the expected increase in manufacturing job losses as ECFA will likely precipitate relocation of production facilities to China. Since ECFA will be signed under the “One-China” condition, Taiwan will become subordinate to China, possibly unable to instate future anti-dumping duties. The pact could also mean that more Chinese will come to Taiwan for work and tourism, which they view as a cultural and security threat. In the oppositions view, none of these things will compensate for the global downturn or improve the economy for the average Taiwanese.

Since early fall of 2008, there have been violent anti-China demonstrations in Taiwan, especially in the south, the “Native Taiwanese” heartland. In one such protest, Chinese official, Zhang Mingqing was roughed-up. Anti-Chinese xenophobia maybe growing; according to a recent government-commissioned poll, 65% of Taiwanese think China’s government is unfriendly to Taiwan’s government, and 46% think it’s unfriendly to Taiwanese people (Adams 2008b). Despite this, the majority still want closer commercial ties (Editor. 2009a).

For many Native Taiwanese, the recent ascent of their distinct local culture in all aspects of Taiwanese life should locally progress to independence from China, but much like the Mainlanders and their Han cousins across the Taiwan Strait, they are inherently practical. Political ideology does not trump their practical instinct to avoid conflict and increase economic prosperity. Taiwan’s newly elected President Ma Ying-jeou seems to understand this well. Time will tell if he can survive the global economic crisis politically, long enough to exploit this situation.

China has 1.3 billion people; the manufacturing hub of the world; nuclear capable; a very large army that is growing in its ability to project force; an economy that will soon be the 2nd largest in the world and still growing; a populace that is highly nationalistic and believes Taiwan to be an inseparable part of their nation; and a government that cannot afford to “lose face” domestically over the issue again. It is also worth noting that China has not re-targeted its missiles, as many as 1,500, away from Taiwan nor stopped its general military build-up. This prompts the question, what if Taiwan’s electorate turn out to be fickle and reelect the DDP in a landslide in the next 8 years? What will be China’s response?

These questions are why it is key for the United States to sell arms to Taiwan, the balance of power enables peaceful integration, eventually though, Taiwan will not be able to purchase enough weapons to overcome a Chinese onslaught. Due to the ambiguous security commitment from the United States, Taiwan must continue to form a working relationship with its much larger neighbor. The economic relationship is not enough, as Ma seems to understand, cultural exchange is also necessary, because the longer Taiwan stays separated from the Mainland, the more disconnected Taiwanese will feel.

* An understanding between China and Taiwan that there is only one China and Taiwan is part of that China, therefore not politically independent. Both the Taiwanese and Chinese governments claim sovereignty over all of China, although Taiwan no longer actively pursues its claim.

**In Mandarin, Han Ren, Hua Ren, and Zhonghua Minzu generally refer to ethnic Han Chinese people, the majority population in China, Taiwan, and Singapore. This is different from Zhongguo Ren, which refers to Chinese as a nationality, which is more expansive than just the Han; this would include all minority groups that hold a Chinese passport. In English, the distinction is usually not made, as all these groups are referred to as Chinese.


Adams, Jonathan. 2009a. “Taiwan debates cross-strait trade pact” Global Post.

Adams, Jonathan. 2009b. “‘Dynasty” meets ‘Law and Order’ as the trial of Taiwan’s former president morphs into a media circus.” Global Post.

Adams, Jonathan. 2009c “Why these Taiwanese call their president a “liar” Global Post.

Adams, Jonathan. 2008a. “China, Taiwan expand ties via trade” The Christian Science Monitor.

Adams, Jonathan. 2008b. “So Near And Yet So Far” Newsweek International.

Adams, Jonathan. 2007. “The Key to Cross-Strait Détente” Far Eastern Economic Review.

Associated Press (AP). 2008. “Opposition wins easily in Taiwan” International Herald Tribune.

Cha, Ariana Eunjung. 2008. “Taiwan, China Negotiating a Landmark Free-Trade Agreement” The Washington Post Online.

The Economist. 2009. “Taiwan’s Economy: Mirror, mirror on the wall” The Economist.

Editor. 2009. “EDITORIAL: Facing the cruel economic truth” Taipei Times.

Editor. 2009a. “Twisted polls cannot back Taiwan-PRC ECFA” Taiwan News Online.

Xinhua News Agency. 2006. “Lower Tariffs Help Promote Trade with ASEAN”

Ministry of Foreign Affairs People’s Republic of China.
Glaser, Bonnie. 2008 “Critical Questions: The Taiwan Election”

Center for Strategic & International Studies (CSIS).

Hsu, Crystal. 2009. “GDP growth could shrink by 11%: CLSA” Taipei Times.

Lin, Jerry. 2009. “Business leaders bat for CECA” Taipei Times.

Murphy, Daniel. 2008. “Critical Questions: Developments in Taiwan” Center for Strategic & International Studies (CSIS).

Staff Writer. 2009. “Chiu denies CECA sells out Taiwan” Taipei Times.

Reuters. 2009. “CLSA slashes South Korea and Taiwan outlooks” Emirates Business 24-7.

Staff Writer. 2007. “Lee Teng-hui pans Chen, has hopes of third election force” Taipei Times.

Tsai, Ting-I and Johnson, Ian 2009. “Taiwan Exports Fall 28%” Wall Street Journal Online.

Tsai, Ting-I. 2007. “Hu’s ‘olive branch’ breaks in Taiwan” Asia Times Online.

Unknown. 2009. “DPP against signing CECA with China: Chairwoman Tsai” The China Post.

Unknown. 2009. “EXCLUSIVE MA YING-JEOU INTERVIEW: Nothing to fear from a CECA with Beijing: Ma” Taipei Times.

Unknown. 2008. “Taiwan and China in ‘special relations’: Ma” The China Post


4 thoughts on “Taiwan: Identity Politics and Economic Free Fall in the Other China

  1. ‘The economic relationship is not enough, as Ma seems to understand, cultural exchange is also necessary, because the longer the Taiwanese are separated from the Mainland, the more disconnected Taiwanese will feel.’

    Yeah. It has only been 114 years since a part of Taiwan (note the whole island was never claimed by the Qing Dynasty) was part of China. Ma better get a move on because some people are beginning to forget what it feels like!

  2. That poll cited above is… it is a government poll run by the very organization responsible for negotiating and promoting the ECFA. What do you think is going to be the result?

    Other polls by neutral or pro-Blue (pro Ma Ying-jeou) media organizations have shown a majority of Taiwanese don’t even know what the heck ECFA is. Surveys of business owners have shown the same phenomenon! That is for good reason, as the government refuses to spell out what an ECFA will involve exactly.

    Thus, it is incredible that a government poll would show a majority of people supporting something most of them don’t understand. Even more unbelievable is that an administration elected with supposedly a strong mandate needs to use such transparent shenanigans like this to drum up support for this agreement.

    Many other polls have shown that a strong block of Taiwanese, 40-60%, have very big reservations about increased dependence on China.

  3. J Kratsky:

    “Many other polls have shown that a strong block of Taiwanese, 40-60%, have very big reservations about increased dependence on China.”

    Oh I’m certain of this and I have seen other polls since the publication of this article. I think in the end Taiwanese are pragmatic and although they have reservations they will accept strong ties with China in most industries if they believe it results in economic benefit. Taiwanese do not accept political unification with China, now or in the near future. I guess the fear is that greater economic ties will lead to “forced” political unification but at this point I just don’t see Ma going that far, even he has to fake some pseudo-Taiwanese nationalism.

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