Why is China giving Taiwan some space?

By Nicholas Consonery

Last week, in a major policy shift, Chinese officials gave Taiwanese President Ma Ying-jeou and his ruling Kuomintang (KMT) party a big victory by signaling that China will not block Taiwan's trade negotiations with Singapore. In the past, Beijing has used heavy diplomatic pressure to block all but five of the island's potential bilateral trade agreements as part of a long-term campaign to limit Taiwan's global recognition.  

What's more, the Ma administration appears convinced that Beijing will allow them to pursue trade agreements with other Southeast Asian governments in the months and years ahead. Malaysia, Thailand and the Philippines are the likeliest partners. Officials in Taipei also announced last week that they're pursuing an investment agreement with Tokyo that they hope will produce a trade agreement down the road. A higher level of economic integration with the broader Asian economy will encourage domestic restructuring in Taiwan and will boost the island's exports -- and therefore its economic strength. And all with Beijing's blessing. 

What's going on here?

The Chinese government is looking for ways to bolster support within Taiwan for Ma and the KMT -- and, by extension, for the current direction of cross -- Strait relations. Ma's government has moved Taiwan toward ever-closer economic integration with the mainland and is probing the political implications of this integration. But Beijing is aware that skepticism of the mainland's intentions remains strong in Taiwan, and that Ma must avoid being cast as overly solicitous of Beijing. 

That said, a major driver of Beijing's approach is a trend I laid out on this blog last year: Beijing is seeking to avoid steps that create opportunities for Taiwan's major opposition party -- the Democratic Progressive Party (DPP) -- and is working hard to avoid any risk of a DPP resurgence. The Chinese leadership does not want to revisit the lows reached during the presidency of former DPP head Chen Shui-bian in Taiwan.

Beijing is playing this game deftly. For the past year, Ma has promised Taiwanese voters that he would boost Taiwan's international profile by signing the controversial Economic Cooperation Framework Agreement (ECFA) with China, a deal he said would open the door to trade agreements with other countries. If Beijing had pressured Singapore to back away from these negotiations with Taiwan after ECFA, it would not only have raised Taiwanese ire toward Beijing -- it would have inflicted serious harm on Ma's domestic credibility and strengthened DPP arguments that Taiwan should simply go it alone.

Beijing has made clear that any potential trade agreement must acknowledge the "One China" policy, a caveat that suggests the agreements will be pitched as economic cooperation pacts rather than formal free trade agreements between countries. Beijing will also insist that the agreement refer to Taiwan as something other than Taiwan. Taiwanese officials have already acknowledged this necessity. The joint statement from Taiwan and Singapore announcing the deal referred to Taiwan as the "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu," the title with which Taiwan was recognized by the World Trade Organization and the GATT.

For their part, DPP officials are arguing that Ma's willingness to compromise on the names undermines Taiwanese sovereignty.

A portion of the Taiwanese electorate will have their chance to decide who's right during five upcoming mayoral elections on November 27. The outcomes will be cast as an important indicator of popular support for Ma, foreshadowing his own reelection prospects in 2012 -- and the shape of things to come for cross -- Strait relations.

Nicholas Consonery is an Asia analyst with Eurasia Group.

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