Taiwan’s grand old party, the Kuomintang (KMT), espouses the former, while the opposition Democratic Progressive Party (DPP) favours the latter.
The stakes, obviously, are high for Beijing. In the past, Chinese leaders have tried — unsuccessfully — to bully, coerce and persuade Taiwanese voters. But the stakes are also high for the Indo-Pacific region because Taiwan is critical to the stability of US-China relations, especially at a time when they are both attempting to move away from the confrontation of the past two years.
Neither China nor the US want the Taiwanese voter to rock the boat. Both have let it be known they would prefer the incumbent president, KMT’s Ma Ying-jeou to win. In the event, the Taiwanese people agreed, with Ma winning 51.6 per cent of the vote, while the DPP’s Tsai Ing-wen received 45.6 per cent. This result came after pre-election opinion polls showed the election would go down to the wire, prompting thousands of expatriate Taiwanese to crowd onto flights and return to cast their ballot.
That Ma found himself neck-to-neck with Tsai is interesting. Four years ago, he was voted in after many voters felt the DPP’s Chen Shui-bian was taking Taiwan into dangerous waters with his pro-independence line. Ma delivered on his campaign promise of closer ties with the mainland. In 2010, he sealed a major trade deal with China, boosting trade, travel, communications and investments between Taiwan and the mainland. In fact, the annual value of trade between China and Taiwan is currently around US$160 billion. Taiwanese businesses invested close to US$40 billion in the four years of Ma’s first term. Chinese investment also increased, albeit only to the tune of US$170 million. The number of daily direct flights increased to almost one hundred, which brought in 2 million Chinese tourists and US$3 billion in receipts annually. There has been a parallel improvement in official relations between Beijing and Taipei as well.
Why, then, did Ma face a tough election? One answer is the ‘anti-incumbency effect’. As Ma admitted last month, there are some economic goals his government failed to achieve, especially those relating to employment and income growth. The other answer, one that goes beyond economic angst and back to the China–Taiwan question, might be a voter preference for centrist policies. The majority of Taiwanese people seem to support the status quo and will punish politicians who stray too far from it. This might help explain the closeness of the contest and the verdict itself.
In Beijing, Ma’s victory will be seen as vindication and a political triumph for President Hu Jintao. In the internal dynamics of the Communist Party of China, it is likely to empower individuals and factions close to Hu, influencing the pecking order of the new administration that will take over after this year’s party congress. To the extent that the issue of Taiwan’s status becomes less of a thorn in Beijing’s side, the political salience of the hawkish factions will diminish. This in turn could help reduce tensions with the US.
In Washington, some commentators have already begun asking whether it makes sense to allow Taiwan to influence relations between the US and China. While a policy reversal is unlikely, it is clear that Washington would prefer a Taiwan that does not inflame tensions in East Asia. Washington’s strategic calculus, like that of the other major powers in the Indo-Pacific region, is about shaping a favourable balance of power, not triggering a military confrontation.
India also faces a dilemma here. On the one hand, the geopolitical stability of a re-elected KMT government means greater economic opportunity for India to engage with Taiwan. The level of bilateral trade and investment between India and Taiwan is negligible; Taiwan accounts for a mere 1 per cent of India’s foreign trade. And Taiwan is responsible for only 0.03 per cent of total FDI in India, less than countries like Chile and Turkey. Bilateral trade agreements can help, but only if domestic reforms make India relatively more attractive as an investment destination. On the other hand, a Beijing less preoccupied by issues in its backyard will find it easier to project power elsewhere, including against India.
China and the US should be content with the re-election of Ma. For India, economic opportunities are stacked against geopolitical risks. Unless New Delhi uses the space created by the recent elections to rapidly scale up economic ties, it will find little upside in Ma’s success.
Nitin Pai is a Founder and Fellow at the Takshashila Institution. A version of this article was first published here in the Business Standard.