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Taiwan - PRC Relations

Over the past several years, Taiwan has relaxed restrictions on unofficial contacts with the P.R.C., and cross-Strait interaction has mushroomed. In 1945, Taiwan was restored to Chinese rule after 50 years as a Japanese colony. In 1949, Chiang Kai-Shek's Nationalist army retreated to Taiwan and the Nationalist (KMT) party ruled the island until 2000. The Taiwan authorities several years changed policies and now no longer insist that they are the sole legitimate rulers of all of China. The United States believes that differences between Taipei and Beijing should be resolved peacefully in a manner acceptable to people on both sides of the Taiwan Strait.

Cross-Strait trade has grown rapidly over the past 10 years. By 2011 China was Taiwan's largest trading partner, and Taiwan was China's seventh-largest. Estimates of Taiwan investment on the mainland, both officially approved by Taiwan authorities and investment made by Taiwan firms through third parties, range from $150 billion to over $300 billion, making Taiwan and Hong Kong by some measures the two largest investors in the P.R.C. This trade generally runs in Taiwan's favor and continues to grow, providing another engine for the island's economy.

Taiwan's relationship with the Peoples Republic of China remains problematic. Despite their long-standing enmity, commercial ties between the two sides of the Taiwan straits have grown rapidly since the late 1980s. Taiwan is a major investor in China, and China recently passed the United States as Taiwan's largest export market. Taiwan enjoys a huge trade surplus with China. Its role in the China market has continued to increase. Taiwan wants to establish itself as a regional operation center for third country businesses aiming at the greater China market. Taiwan is also an important trading and investment partner for Southeast Asian countries.

The development of semi-official cross-Strait relations has had ups and downs. In April 1993, the first round of high-level cross-Strait talks was held in Singapore between the heads of two private intermediary organizations--Taiwan's Straits Exchange Foundation (SEF) and the P.R.C.'s Association for Relations Across the Taiwan Strait (ARATS). These talks primarily addressed technical issues relating to cross-Strait interactions. Beijing suspended lower-level talks from 1995-97 following President Lee's U.S. visit. SEF Chairman Koo Chen-fu visited the mainland in October 1998 for the second round of high-level talks. In 1999 Beijing once again suspended the cross-Strait dialogue, canceling plans for a visit by ARATS Chairman Wang Daohan to Taiwan, because of statements by President Lee that relations between the P.R.C. and Taiwan should be conducted as "state-to-state" or at least as "special state-to-state relations."

The Kuomintang (KMT, or Nationalist Party), which ran the previous authoritarian government on Taiwan, held most of the key political posts on the island until the March 2000 election. The Democratic Progressive Party's (DPP) most salient policy difference with the KMT had been the controversial issue of Taiwan independence. As the DPP has matured and gained a significant role in the LY, it modified its demand for immediate Taiwan independence. Some members of the party called for the people to decide Taiwan's future through a plebiscite, while others assert that Taiwan was effectively independent already so a formal declaration of independence is unnecessary. The DPP has also staked out generally populist positions of concern for the environment and for working people.

The KMT was historically associated on Taiwan with ethnic Mainlanders (i.e., people who fled to Taiwan with the KMT in 1949 and the descendants of those people). The DPP has sought to identify itself with the ethnic Taiwanese (Chinese who immigrated to Taiwan during the past 300 years, mostly from Fujian Province). As the democratization process proceeded, the ethnic Taiwanese role expanded.

Following his May 20, 2000 inauguration, President Chen called for resuming the cross-Strait dialogue without any preconditions, but the P.R.C. insisted President Chen must first acknowledge what it claimed was the "1992 consensus" on one China reached by the two sides. The cross-Strait dialogue remained suspended for the entire eight years of President Chen's two terms. Nonetheless, economic and social ties continued to develop rapidly despite the "one China" obstacle. In January 2001, Taiwan formally allowed the "three mini-links" (direct trade, travel, and postal links) from Kinmen (Quemoy) and Matsu Islands to Fujian Province and permitted direct cross-Strait trade in February 2002.

The March 2004 election included two "defensive referenda." Historically, referenda have been closely tied to the question of Taiwan independence, and thus a highly sensitive issue in cross-Strait relations. Both referenda in 2004 failed to meet the required participation threshold of 50% of eligible voters, as did four more referenda held in conjunction with the 2008 legislative and presidential elections.

The 2008 DPP referendum on joining the UN under the name Taiwan was especially controversial.

The last military threat was made in 2005; three years later the two sides shelved political differences to sign economic, trade and investment deals that have lifted Taiwans economy. China and Taiwan shelved political hostilities since 2008 to reach a series of trade and investment deals, improving overall relations. Based on the progressive method of "tackling easy things first, difficult things later: economics first, politics later," the two sides of the Strait signed 19 agreements over the last five years and cross-Strait exchanges have generated direct air and shipping links, tourism, and cooperation in economic and judicial fields.

In February 2003, Taiwan and the PRC agreed to allow Taiwan carriers to fly non-stop (although routed via Hong Kong or Macau airspace) to bring Taiwan residents on the mainland home for the Lunar New Year holiday. Taiwan expressed resentment over the P.R.C.'s March 2005 "Anti-Secession Law," though the two sides were able through intermediary organizations to reach agreements on holiday cross-Strait charter flights. The two sides agreed to conduct Lunar New Year charter flights again in 2005, with flights operated by both Taiwan and PRC carriers flying over, but not having to land in, Hong Kong or Macau. Over time these flights were expanded to cover three other major holidays. In July 2008, Taiwan and PRC carriers began operating cross-Strait charter flights every weekend. These flights are open to mainland tourists, as well as Taiwan and foreign travelers.




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