The First Woman President (No, Not Hillary)

On Saturday, the people of Taiwan elected Tsai Ing-wen of the pro-independence Democratic Progressive Party as the island’s first female leader. The soft-spoken graduate from the London School of Economics has a shy and underwhelming demeanor which resembles that of Germany’s Angela Merkel. And just like her, she will have to find a way to manage a divided country.

Tsai Ing-wen 2

Image Source | Tsai Ing-wen delivering a speech.

The landslide victory for her party came just two months after the historic meeting in Singapore between Taiwan’s then President, Ma, and his Chinese counterpart, Xi. Both sides will be watching closely for her next steps. This will not be easy, but she has had ample experience. The former chairwoman of Taiwan’s Mainland Affairs Council (responsible for cross-strait policies) has a reputation for being a seasoned negotiator – a trait most of her predecessors lacked.

I am usually detached from Taiwanese politics (despite my country of origin), but something about her struck my interest. Instead of the usual flip-flop between the anti and pro-unification stance of the two parties, she is treading on much murkier grounds. On many sensitive issues such as the definition of “One China,” she takes on a more subtle position that invites interpretation.

Her reputation for being more moderate than her predecessors will be welcomed by Xi, but she will still have to work hard for his approval acknowledgement. It is a deviation from mainstream politics, but completely warranted, in my view, given the recent economic developments.

It is no secret that politics and economics mix (will do a piece on the oil markets soon), but it is absolutely paramount in the context of China and Taiwan. Even though China is becoming less reliant on Taiwan’s expertise due to years of knowledge transfer, Taiwan remains heavily invested in China (~40% of export destination, including Hong Kong).

Trade Imbalance

Source: WTO, The Heritage Foundation | % Taiwan’s total exports to HK: 13.6%

What can either sides do?

Under these circumstances, a move towards independence from Taiwan would almost certainly provoke economic sanctions from China (if not the threat of invasion), which would effectively dismantle Taiwan’s economy. Tsai would know better than to make a decision like that. After all, it was a stagnant economy that led to the fall of the Kuomintang (Ma’s opposition party).

Even if the government can convince its citizens that independence is a good idea, the plan would be met with heavy opposition from the international community. The United States would be the first of many countries to condemn the act, as any inaction would be seen as a willingness to go to war – something not many people have an appetite for. Ultimately, Taiwan will be forced to back down, leaving behind only a crippled economy and a humiliated government.

But what about China? Politicians there have long touted the idea of re-unification. However, with international interests in the region, coupled with China’s desire of playing a bigger role in the world economy (see inclusion into SDR), military intervention seems extremely unlikely.

The United States will not let this happen either. As opposed to Tibet, Taiwan’s location is of significant strategic value. If the United States surrenders a major piece of their pacific network to China, it would severely undermine their influence on countries such as South Korea and Japan. If a conflict breaks out between the two neighbors, America may be forced to intervene.

For China, this is too big of a gamble given how little annexing Taiwan would actually achieve. If China really wants to control the island, economic subjugation would be a much easier route. Exports are the backbone of Taiwan’s economy. Without trade independence, political autonomy would only be a matter of formality. And given Taiwan’s unilateral reliance on China, many would argue that economic annexation is well under way.

This is not the Taiwan nationalists envisioned. But without access to FTAs due to its status as an almost-country, there isn’t much Taiwan can do. I don’t see the threat of war as a voice of intent, but as a way to legitimize the country’s own regime. After all, Taiwan is a civil war left unfinished. If there is one solution both sides would benefit from, it is to maintain the current status quo.


As an aside, I would like acknowledge the victims of Nexen’s Long Lake accident. I was only there for 8 months, but it felt very close to home.


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