Is a Storm Brewing Behind the Post-Election Tranquility in Taiwan?

On January 13, 2024, Taiwan held elections to decide the island’s next leader and legislators. Democratic Progressive Party (DPP) candidate Lai Ching-te won with slightly more than 40% of the vote and will be inaugurated on May 20, 2024. Kuomintang (KMT) candidate Hou Yu-ih came in second with 33.5% of the vote, while Taiwan People’s Party (TPP) candidate Ko Wen-je came in third with 26.5% of the vote. Although Lai won the election, he did not receive the majority of the votes cast. In the legislative elections, the KMT won 14 seats, bringing its total to 52, slightly higher than the DPP’s 51 seats, and causing the DPP to lose its majority in the legislature. The TPP, on the other hand, won three seats, bringing its total number of seats to eight. Additionally, there are two independent legislators with no party affiliation. This is the first time since 2004 that no party possesses a majority of seats in the legislature.

The perception of DPP as a “Taiwan independence party” remains unchanged, but in the face of the realities on both sides of the Taiwan Strait, it will need to make compromises. Lai won only 40 percent of the votes in the election, the smallest percentage of votes since 2000. At the same time, 60 percent of Taiwanese voters cast their ballots for the KMT and the TPP, which are more friendly to the mainland China and have drawn a clear line between them and proponents of “Taiwan independence”. By contrast, incumbent Tsai Ing-wen was elected with a majority in the 2016 and 2020 elections, receiving about 56 percent and 57 percent of the vote, respectively. Although voters may not base their votes solely on the candidates’ cross-Strait policies, this at least proves that the public opinion base for “Taiwan independence” is not indestructible and there are a growing number of voters who are not averse to moderate cross-strait policies. More importantly, the DPP has lost control of the legislature. In the future, to pass any laws, the formation of a party alliance will be imperative.

With the TPP leaning towards cooperation with the KMT, it will be challenging for Lai’s administration to push through the legislative process on any law designed to further the cause of “Taiwan independence” during his term. The United States, as Taiwan’s political supporter and military supplier, expressed its support for Taiwan’s democratic election and sent a congratulatory message after Lai’s victory. However, it has also frequently reiterated that Washington’s One China Policy toward Taiwan will not change, and has made it clear that it will not support Taiwan’s independence. In the current environment, although Lai claimed himself to be a so-called “pragmatic worker for Taiwan’s independence” in 2017, in his victory speech this time, he also suggested that “maintaining peace and stability in the Taiwan Strait” is an “important mission”.

Consequently, it seems that although the DPP has won the election again, it is unlikely to cause a deterioration of the status quo in the short term. Since both the United States and the DPP have adopted a relatively restrained attitude, the mainland has also been restrained since the election. In contrast to the harsh statements and naked threats issued before, the statement from the Taiwan Affairs Office of the State Council was quite soft: “Taiwan is China’s Taiwan. This election cannot change the basic pattern and development direction of cross-Strait relations. The common desire of compatriots on both sides of the Taiwan Strait to get closer and closer grow stronger. The motherland will eventually be unified and will inevitably be unified.“ The mainland has also refrained from massive displays of force after the elections, which contrasts sharply with the large-scale live-fire military exercises of the People’s Liberation Army (PLA) in the wake of then-Speaker of the U.S. House of Representatives Nancy Pelosi’s visit to Taipei in August 2022.

Of course, this multilateral restraint also stems from the importance attached to the future stabilization of China-U.S. relations. The current China-U.S. relationship is deeply affected by the Taiwan issue. When China and the United States were enjoying prosperous economic, trade, and cultural exchanges, as well as strong military and diplomatic ties, the instability stemming from the Taiwan issue was easily diluted or offset by positive factors in other areas of the relationship. Today, however, with areas of cooperation between the United States and China shrinking rapidly and competition becoming the new normal, the buffer against the Taiwan issue has been significantly weakened. When the situation in the Taiwan Strait escalates, relations between the two countries will immediately and rapidly deteriorate. The U.S. presidential election will be held in November this year. China does not want to create a bad atmosphere for the next four years of relations because of the tense Taiwan Strait situation at the beginning of Biden’s new term or a new president’s rise to power. Especially at a time when China’s economic development is under growing stress, China needs to stabilize relations with the US and the situation in the Taiwan Strait to promote foreign trade and attract investment. However, whether the current restraint and relative tranquility can be sustained in the next four years remains a huge question.

First, the DPP has rejected the “1992 Consensus” since 2016 but has failed to come up with a new framework for dialogue that includes “the two sides of the Taiwan Strait belonging to one China”. Although the DPP keeps calling for cross-Strait communication, the lack of a clear definition of the political relationship leaves the two sides unable to engage in any official dialogue. This continue to be the case under Lai’s tenure. And although Lai may not be pushing for “de facto Taiwan Independence,” he has put forward a so-called “Two Promises, Eight Propositions” of cultural policies, starting from language, art, law, culture, ideology, and other fields, in an attempt to systematically minimize the historical, cultural, and ethnic ties between Taiwan and the mainland. In the long run, not only will suspicion and distrust between the two sides of the Taiwan Strait become more and more serious, but even the people to people ties among the two sides will be at risk of being severed.

Moreover, the Tsai Ing-wen administration has been vigorously pursuing the “New Southbound Policy” for the past eight years, aiming to promote Taiwan’s economic and trade cooperation, exchange of talents, resource sharing, and regional linkages in a total of eighteen countries in Southeast Asia, South Asia and Oceania. Although the Tsai Ing-wen administration has always explained that the goal of the “New Southbound Policy” is not to abandon the mainland market, this policy has objectively weakened the mainland’s economic influence on Taiwan.

In 2022, Taiwan’s investment in the eighteen countries covered by the “New Southbound Policy” totaled $5.27 billion, exceeding the $5.05 billion invested in the mainland. Also in 2022, Taiwan’s total trade with the “New Southbound” countries exceeded $180 billion, and exports to these countries totaled $96.9 billion, an increase of 88% and 64%, respectively, compared to 2016, when Tsai Ing-wen first came to power. In stark contrast, although the mainland remains Taiwan’s largest trading partner, Taiwan’s exports to the mainland in 2023 decreased by 18% compared to the previous year, accounting for only 35.2% of Taiwan’s total exports, a sharp decline compared to the share of 38.8% in 2022, the lowest level since 2002. From January to October 2023, Taiwan’s trade surplus with the “New Southbound” countries has reached $21.154 billion, an increase of 39.3% compared to the same period in 2022, while the trade surplus with the mainland has decreased by 21.2% compared to the same period last year. If this trend continues, the economic ties between the mainland and Taiwan will be gradually eroded by the “New Southbound Policy”, and it is possible that the total trade between the “New Southbound” countries and Taiwan will eventually surpass that with the mainland.

Third, at a time of strategic competition between China and the United States, the Tsai Ing-wen administration has elevated the “New Southbound Policy” to the level of the Indo-Pacific strategy, whereby Taiwan’s ties with the countries of the “New Southbound” are no longer limited to the economic dimension, but rather are intended to jointly address so-called regional challenges, including regional security and stability, democratic values, and restructuring of global supply chains. In line with these goals, the original eighteen-country scope has also been expanded, and the United States, Japan and other countries will be the focus of future cooperation. The emergence of Taiwan’s “Indo-Pacific Strategy” is deeply connected to the U.S.’ own Indo-Pacific Strategy, as they both confront a common opponent, the mainland. What Tsai Ing-wen wants is to integrate Taiwan’s “New Southbound Policy” with the U.S. strategic plan, with a view to enhance its own position in the region, and to gain more leverage to deter the mainland. Such a grandiose alliance against the mainland will undoubtedly aggravate the relationship between the two sides of the Taiwan Strait and make the situation in the Taiwan Strait more complicated.

Tsai Ing-wen is not the first Taiwan leader to promote such a policy, nor will she be the last. Her current policy is essentially a replica of the “New Southbound Policy” proposed by the Chen Shui-bian administration in 2002. As early as the 1990s, the Lee Teng-hui administration also proposed a “Southbound Policy”, which was aimed at promoting the transfer of overseas investments by Taiwanese businessmen from the mainland to Southeast Asia, with the intention of using economic power to expand political influence. The leaders who are keen to deepen the economic, cultural, and even security ties between Taiwan and its southward-facing neighboring countries are all, with no exception, of “Taiwan independence” background. Lai, who has pledged to continue Tsai’s policy line, will surely continue the “New Southbound Policy” and the Indo-Pacific strategy. With the weakening of cross-Strait economic ties, the intensification of ideological confrontation, and the involvement of external actors, the mainland’s control over the Taiwan Strait situation will weaken and concerns in the mainland about “Taiwan independence” will intensify.

More importantly, the DPP administration has been increasing Taiwan’s defense spending and deepening its military ties with the United States. Taiwan’s defense budget has reached a record high of $19.1 billion in 2024, up almost 3.5% from $18.5 billion in 2023. That compares to Taiwan’s defense spending of just $11.1 billion in 2016, when Tsai Ing-wen took office. And compared to her predecessor Ma Ying-jeou, both the number and total amount of U.S. arms sales to Taiwan have been on the rise since Tsai came to office. The U.S. made more than twenty arms sales to Taiwan during Tsai’s presidency, totaling about $24 billion. Among them, the $8 billion F16 fighter jets sales to Taiwan in 2019 is the largest one-time arms sale from the United States to Taiwan. There was another very sensitive arms sale in 2023, namely, the Taiwan authorities spent $500 million to purchase the U.S. infrared search and track system for the F-16 fighter aircraft, which is currently the world’s most advanced guidance system and is widely equipped with the U.S. stealth fighters. This equipment will pose a grave threat to PLA’s aircrafts.

It is worth noting that Taiwan’s defense spending is currently 2.5% of GDP. By comparison, South Korea’s defense spending is 2.8% of GDP and Singapore’s is 3.2%. This means that there is potential for significant growth in Taiwan’s defense spending and U.S. arms sales to Taiwan after Lai takes office. The growth in Taiwan’s defense spending and the inflow of advanced weapons from the United States will inevitably upset the mainland, leading the PLA to deploy more military assets around the island of Taiwan, which, in turn, will serve as a justification for Taiwan to continue to boost its defense spending. As a result, the two sides of the Taiwan Strait appear caught in an arms race, and the danger of accidental clash between the two sides of the Taiwan Strait, or even between China and the United States, will rise sharply.

Restraint is the key word in the current situation. Taiwan, the mainland, and United States prefer the cross-Strait situation to be stable and under control. However, there are many changes that may occur in the next four years. DPP is drifting further away from the “1992 Consensus”, ” Taiwan cultural independence” is getting more traction, the “New Southbound Policy” is eroding cross-Strait economic ties, Taiwan leadership’s decision has tied the island to the militarized Indo-Pacific strategy, and the pace of military cooperation between Taiwan and the U.S. is quickening.

Under such circumstances, how long can the restraint of all parties last? With political, economic, cultural, and military factors creating a centrifugal force away from the mainland, when will the mainland decide Taiwan has drifted too far? With Taiwan serving as a strategic asset of the U.S. Indo-Pacific strategy and intensification of U.S.-China rivalry, will the U.S. government still be able to strictly adhere to its One China Policy and oppose “Taiwan independence”?  In my view, the next four years will be critical in terms of the overall interaction between the mainland and Taiwan and between Beijing and Washington. The current tranquility may lead to wishful thinking that everything will remain the same as the previous eight years. All the developments mentioned above may coalesce into sides need to be clear-eyed about these slow-moving factors that, if not well managed and controlled, will throw the Taiwan Strait into a sea of fire.