Heat rises across Taiwan Strait


By Eva Cheng

In an act of defiance towards Beijing, Taipei test-fired two US-made surface-to-sea missiles on April 1, two days after China's President Jiang Zeming offered Taipei leaders a vice-presidential position in exchange for their agreement to unify Taiwan with China.

On the day of Jiang's offer, Newt Gingrich, speaker of the US House of Representatives, declared during an official visit to Beijing that the US would militarily defend Taiwan in the event of a mainland attack. US secretary of state Madeleine Albright confirmed that such an attack would be of "grave concern" to the US.

Taiwan quickly rejected Jiang's offer. Kao Koong-lian, chairperson of Taiwan's Mainland Affairs Council, ridiculed Jiang's idea of "assigning" a leadership position — something, he said, a democratic system would select through election.

When the missile drills were under way, Gingrich repeated the military backing for Taiwan. Beijing responded that the US was interfering in Chinese domestic affairs and warned against further sales of high-tech weaponry to Taiwan. A spokesperson said the sales would fuel Taiwan's "dream" of independence.

Also on April 1, Taiwan's Central News Agency, controlled by the ruling Kuomintang (KMT) revealed that the US recently agreed to sell to Taiwan 54 AGM-84A Harpoon ship-killer missiles and 21 Super Cobra attack helicopters armed with Hellfire missiles.

Though Taipei's request for submarines was rejected, its order last year for three units of the improved US Patriot anti-missile system was approved. The missiles in 12 of Taiwan's 17 missile bases — including those on its offshore islands — have recently been upgraded.

Taipei's fighting capability will be further enhanced when last year's order of 150 F-16 fighter jets from US Lockheed Martin Corporation is delivered, with the first batch due mid-1997.

Washington sold another 150 F-16 fighters to Taiwan in September 1992, worth US$5.8 billion then, after a 10-year ban. (France quickly followed the US lead and sold 60 Mirage 2000 jet fighters and at least 1000 short- and medium-range missiles to Taiwan. Profits had earlier prompted some European countries to make smaller sales to Taiwan, despite risking angering Beijing: six frigates in 1990 and 10 more in 1991 by France; torpedoes by Italy in 1990; rocket guidance and propulsion systems a bit later by the Belgian affiliate of the French-owned Thomson CSF, and four minesweepers from Germany.)

The ban, part of the second Sino-US 1982 Shanghai Communiqué, was part of a deal to give the US access to the Chinese market and a consolidation of the decade-long alliance against the USSR. But US support for the KMT regime in other vital ways has never stopped.

The significant growth of the Taiwanese economy, averaging 8.9% per year 1953-89, wouldn't have been possible without privileged access to the US market. Taiwan's trade surplus with the US, which peaked in 1987 at US$16 billion, amounted to 86% of its total surplus.

The KMT, the corrupt capitalist party which ruled China before the 1949 revolution, would have great difficulty ruling Taiwan in the absence of US backing. The US actually sent warships to Chinese waters in 1955, 1958 and, more recently, last year, to defend Taiwan.

Washington's derecognition of Taiwan in favour of Beijing, a move copied by many other countries, left the island regime isolated. But Taiwan's position has much improved after an aggressive pursuit since the late '80s of de facto recognition by a large number of countries, helped by new investments and aid.

Taiwan's winning of representation in international forums, such as the Asia Development Bank, Asia Pacific Economic Cooperation and the International Olympic Committee, did not please Beijing, which was further angered by Taiwan's pursuit of membership in the UN and the World Trade Organisation. The growing forces for independence in Taiwan preceding the March 1996 presidential election were the final straw, resulting in Beijing's bullying through repeated missile tests.

Tension between Beijing and Taipei is rising again following the death of Deng Xiaoping. The far from stable leadership of Jiang Zeming was keen to press for progress on the important question of Taiwan.

Taiwan's role in China's capitalist transformation has much increased since the influx of Taiwanese capital and trade, which started in 1987. With an estimated investment of US$30 billion in 30,000 projects, Taiwan has become the second biggest investor in China, after Hong Kong. Its trade with China totalled US$9.8 billion in 1994.

Profits in China are so lucrative that Taiwanese capital tirelessly seeks ways to circumvent official restrictions. After President Lee Teng-hui's last warning against further investment in August, major conglomerate Formosa Plastics was forced to cancel — at least formally — a US$3 billion power project in Zhangzhou, Fujian province, which would have been the biggest Taiwanese investment in China.

It revived the project again in late March, but was summoned immediately by Taiwanese authorities, leading to a further announcement a few days later that the project was abandoned again. Analysts said the project could still be revived through companies registered in another country.

Taipei's top worry is the structural dependence of the Taiwanese economy on China. It has been aggressively promoting investment and trade in south-east Asia, Europe (including the east) and Russia in recent years, but Taiwanese capital seem to have responded more to profits than to government command.

A more immediate question is Taiwanese trade and investment in China through Hong Kong. Taipei officially bans direct links with China, business or otherwise, making Hong Kong a convenient transit point.

The British hand-over on July 1 will leave Taiwan vulnerable. Chinese foreign minister Qian Qichen recently warned Taipei not to use Hong Kong as a base to promote two Chinas. The Taiwan-based China Times reported on April 7 that Taiwan would pull out all its intelligence agencies in Hong Kong.

Taipei recently proposed creating free trade zones in the Taiwanese ports of Kaohsiung and Taichung to process trade with China. It would pretend that those zones are not part of Taiwan, thus maintaining the official fiction that there is no direct trade with China.

Last December, the KMT planned to spend US$1 billion on basic infrastructure to turn Ishigaki, a remote island near Okinawa, into a main hub for its trade with China. It also planned to spend US$100 million creating an industrial zone in Okinawa itself to help process that trade.