General Secretary Xi Jinping maneuvered the Chinese Communist Party (CCP) into removing term limits so that he can lead China indefinitely. Beijing has increased pressure on Taiwan, but also rolled out new measures aimed at increasing Taiwan’s economic and social integration with the mainland. On Taiwan, pro-independence elements continue pressing President Tsai Ing-wen. The passage of the Taiwan Travel Act (TTA), which was generally welcomed in Taipei, created a new US-China controversy. The appointment of John Bolton as national security advisor and the Trump administration’s tariff and technology actions against China have renewed fears in Taipei that Taiwan will become a bargaining chip or suffer collateral damage in a US-China confrontation.

Xi Jinping consolidates control

The March National People’s Congress (NPC) removed term limits on China’s presidency, clearing the way for Xi Jinping to continue leading China indefinitely. Statements at the NPC concerning Taiwan adhered to the policy line laid down at the 19^th Party Congress detailed in our last report. However, the main political message in Xi’s new era, which was made clearer at the meeting, is that the Communist Party must exercise leadership in every aspect of society. This underlines the growing political, economic, and social gulf between Taiwan and the mainland.

The NPC announced appointments of personnel who will handle Taiwan issues under Xi. Most were expected. Wang Yang was appointed chairman of the Chinese People’s Political Consultative Committee (CPPCC), the lead organization implementing the party’s united front work. Politburo Member Yang Jiechi will continue to coordinate policy from the Politburo. Liu Jieyi was appointed the new minister in the Taiwan Affairs Office (TAO). You Quan was named to lead the party’s United Front Work Department (UFWD), replacing Sun Chunlan, who was promoted to vice premier. Later, former TAO Minister Zhang Zhijun was appointed the new president of the Association for Relations Across the Taiwan Strait (ARATS).

There has been considerable speculation about the implications of the consolidation for Xi’s leadership on Taiwan. The popular perception in Taiwan is that China had chosen a “new emperor.” Commentators in Taiwan and the mainland believe Xi’s consolidation will not change China’s Taiwan policy in the short term. However, as Xi is a Chinese nationalist determined to see China unified, over the longer-term, assuming his leadership is successful, Taiwanese expect that Xi will seek to coerce Taiwan into unification. CCP Party spokespersons have exuded confidence. Outgoing TAO Minister Zhang Zhijun acknowledged that in 2018 Beijing faces increasingly complicated challenges, but he expressed confidence in Beijing’s ability to overcome them. The immediate challenge that Beijing perceives comes from the Democratic Progressive Party (DPP) and “separatist forces” promoting Taiwan independence. In his speech at the conclusion of the NPC, Xi told delegates that China has the “firm resolve, full confidence and sufficient capability” to defeat separatism in whatever form.

President Tsai’s policy

President Tsai maintained a consistent cross-strait policy despite Beijing’s efforts to weaken her stature. Like Beijing, she has adopted a soft and hard approach. She and her senior officials call consistently for goodwill, increased communication, and better relations, but occasionally strike a defiant tone. In January, Tsai said in a television interview that increased pressure from China will only serve to unite Taiwan. She identified three elements in achieving this: the president’s strong will, the government’s ability to withstand pressure, and the people’s solidarity. She noted that experience proves that unnecessary compromises do not generate lasting goodwill from China. In a speech in February, she said that her inaugural address remains her maximum expression of goodwill, implying that she will not bend on the 1992 consensus. On the softer side, in late April following the meeting in Korea of Moon Jae-in and Kim Jong Un, Tsai said that no Taiwan president would refuse to meet a Chinese counterpart – provided they can meet on an equal footing and without political preconditions.

In late February, Tsai reassigned several members of her cross-strait and foreign policy teams to new roles, most importantly promoting Joseph Wu Jau-shieh from secretary general of the presidential office to foreign minister. Wu was chairman of Chen Shui-bian’s Mainland Affairs Council in 2004-2007 and Taiwan’s representative in Washington in 2007-2008. He has been at Tsai’s side since she became DPP chair in 2014. David Lee Ta-wei, who had been foreign minister, took over as secretary general of the National Security Council; NSC secretary general Yen Teh-fa became defense minister; and MAC Minister Katharine Chang became chair of the Straits Exchange Foundation.

Chen Ming-tong became MAC minister on March 18, returning to the post he held under Chen Shui-bian in 2007-2008. Chen Ming-tong is a “deep green” academic, but in one of his first statements as minister he echoed Tsai’s pledges to conduct cross-strait relations on the basis of the ROC Constitution and the Act Governing Relations between the People of the Taiwan Area and the Mainland Area. He repeated this in April and added that maintaining the peaceful status quo of cross-strait relations and ensuring regional security and prosperity in the Asia-Pacific region are the administration’s goals.

Tsai has kept important DPP politicians in the fold. In April, Chen Chu, the popular mayor of Kaohsiung, replaced Joseph Wu as secretary general of the presidential office. Tsai announced her support for the nomination of former premier (2006-2007), DPP chairman (2012-2014), and occasional rival, Su Tseng-chang, as the DPP’s candidate for mayor of New Taipei City, Taiwan’s largest municipality, in the Nov. 24 municipal elections.

Another leading DPP figure, William Lai Ching-te, continues to serve as Tsai’s premier. At the Legislative Yuan in March, he said Taiwan is a “sovereign nation” and that it is unnecessary to worry about China’s “unreasonable opinions” on Taiwan-US relations. At a freedom of speech seminar in April, he repeated a previous statement that again provoked controversy saying he is a “Taiwan-independence worker.” At a media roundtable later in April, he reiterated both assertions. The TAO branded Lai’s statements as threats to peace and stability and said that the DPP authorities bear responsibility for them, and later ascribed the comments as one reason for the April 18 live-fire drills (see below). Tsai tolerates Lai’s occasional references to Taiwan independence, possibly seeing them as a pressure relief valve for pro-independence sentiments, and Lai has acknowledged that cross-strait policy is the responsibility of the president.

But pressure on Tsai continues to build in other parts of the system. In early April, a new civil society group, the Formosa Alliance, launched an initiative to hold a referendum on Taiwan independence. Former presidents Lee Teng-hui and Chen Shui-bian announced their support for the initiative, along with New Party Power Chairman Huang Kuo-chang and others. These supporters are well known but, with the exception of Huang, are marginal figures at this point. Taiwan’s recently amended referendum law does not allow referenda on issues related to sovereignty – a restriction that was supported by Tsai Ing-wen. There is also a referendum proposal calling for Taiwan’s Olympic team to participate under the name “Taiwan” in 2020 rather than “Chinese Taipei.”

Beijing increases pressure

Beijing has ratcheted up political, military, diplomatic, economic, and social pressures to induce the Tsai administration to accept the 1992 consensus on one China. In early January, Beijing unilaterally announced new airline flight routes in the Taiwan Strait. In 2015, Beijing and Taipei had reached agreement for its airlines to fly north to south along a route (M503) west of the median line in the strait. In January, without consultation, Beijing announced that its airlines would fly south to north along this route and for the first time permit its airlines flying this route to take side routes to and from three cities on the mainland coast in the strait. Taipei immediately protested, charging that the new routes posed serious safety and military concerns and called for consultations. Beijing denied that consultations were necessary, claimed disingenuously that the International Civil Aviation Organization (ICAO) had approved the routes and proceeded to implement them.

With broad public support, Taipei repeatedly called for consultations, attempted to apply counter pressures, sought international support and tried to engage ICAO. Washington expressed concern that the changes had been made without consultations, called for dialogue and contacted ICAO. Beijing parried all of Taipei’s efforts and did not budge from its position that consultations would not be possible until Taipei accepted the 1992 consensus. The controversy dragged on for almost two months. Beijing’s purposes seemed to include humiliating the Tsai administration and underlining the costs Taiwan bears for refusing to accept the 1992 consensus. Fortunately, there have not been any incidents on these routes, except once in April when weather required Chinese flights to fly close to Taiwan-controlled Kinmen.

In recent months, the PLA has conducted increasingly complex military exercises around Taiwan. The Liaoning carrier group made several passages through the Taiwan Strait. In late April, the carrier group sailed to the east of Taiwan returning to its home base after an exercise in the South China Sea. PLA aircraft have frequently flown through the Miyako or Bashi Straits to conduct exercises in the western Pacific east of Taiwan. In March, the PLA conducted an exercise to practice rapidly mobilizing its marine amphibious forces that reportedly involved some 10,000 marines.

On April 12, the Fujian Maritime Security Agency (MSA) announced that the PLA would conduct live-fire exercises off Quanzhou in the Taiwan Strait on April 18. Initial international media reports described the exercise as the first live-fire exercise since September 2015. Commentators in Beijing’s hawkish Global Times also hyped the exercise. However, a few days later, the Ministry of National Defense (MND) in Taipei described the exercise as a routine drill. On April 18, the Fujian MSA reported that the exercise was located close to the coast and its scale was limited. The MND commented that to equate it to earlier live-fire exercises would be to exaggerate its scope. On April 18 and again on April 19, PLA aircraft conducted “island encircling exercises,” which were publicized in videos released by the PLA. On April 24, the TAO spokesperson stated that the exercise expressed Beijing’s determination to defeat separatist schemes, mentioning specifically Taiwan Premier Lai Ching-te’s statements, and warned that further actions could be taken. On April 26, the PLA Air Force staged “combat drills” from several air bases flying through the Bashi and Miyako straits, saying these drills put Taiwan “in the embrace of the motherland.”

In February, an earthquake in Hualien on the east coast of Taiwan caused serious damage and loss of life, including the deaths of six mainland tourists. Beijing chose to bypass the Tsai administration and deal directly with the Hualien magistrate, Fu Kun-chi, an independent with ties to the opposition KMT. This was an effort to exploit political divisions and was interpreted as such in Taiwan. Subsequently, the Tsai administration accepted a rescue team from Japan but declined similar offers from Beijing and others. The Mainland Affairs Commission (MAC) offered help to the families of mainland victims. Beijing sent an official from the Beijing municipal TAO office to accompany family members to Hualien. In the end, the TAO offered belated thanks to the “Taiwan authorities,” Hualien County, and the rescue squads for their assistance.

International participation

China continued its comprehensive effort to minimize Taiwan’s international presence, and the Tsai administration continued efforts to develop diversified economic and political links. Taiwan approached the 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) about joining if it is ratified by members and takes effect, likely in 2019, and apparently has support from Japan. Taipei worked to enhance ties with Southeast Asia and Africa, highlighted by Tsai’s official visit to Swaziland in April.

Taiwan is unlikely to receive an invitation to the annual World Health Assembly, which convenes in Geneva on May 21-26. President Tsai noted in March that oppression by China is unlikely to win hearts and minds. On April 26, Taiwan’s Foreign Ministry angrily accused China of endangering health. Joseph Wu had said earlier in April that, even if Taiwan is not invited, its minister of health and welfare will lead a delegation for sideline meetings, as he did in 2017. At a WHO Executive Board meeting in January the United States, Japan, and seven of Taiwan’s diplomatic allies spoke in favor of Taiwan’s participation as an observer. The US has expressed its support at other times as well. Some countries have reportedly engaged the new WHO director general directly, only to be told that the one China principle does not permit Taiwan’s participation. A TAO spokesman reiterated on April 25 that acceptance of “one China” was a prerequisite for participation. Some in Taiwan put their own preconditions on possible participation: DPP and NPP legislators have expressed opposition to observership under nomenclature that would downplay Taiwan’s sovereignty.

On May 1, the foreign ministers of China and the Dominican Republic signed in Beijing a communique establishing diplomatic relations and severing the Republic’s ties with Taiwan. Taiwan’s Foreign Ministry said in a statement that the Dominican Republic had been persuaded by “false promises of investment and aid by China.” President Tsai said the action meant that China had unilaterally changed the status quo, and she expressed her determination to defend Taiwan’s freedom, dignity, and democracy. “Even if the external pressure increases,” she said, “we will not submit.” The US State Department said this change to the status quo was unhelpful to regional stability.  The Dominican Republic had approached Beijing previously about establishing relations. Editorials in Taiwan opined that Beijing was reacting to recent steps in US-Taiwan relations.

There was much speculation that China and the Vatican would sign an agreement in March or April on the appointment of bishops – which may pave the way for an establishment of diplomatic relations. But momentum appeared to stall in late March, when a Vatican spokesperson said that signing an agreement was not imminent. Such starts and stops are typical in China-Vatican relations. Among possible influencing factors are a personal approach to Pope Francis in January by Cardinal Joseph Zen, the outspoken former bishop of Hong Kong (who suggested publicly that Vatican emissaries may not have reported fully or accurately to the Pope); Beijing’s implementation on Feb. 1 of guidelines that strengthen the state’s role in managing religion; or the reported detention before Easter of an underground bishop (which China denies). But Taiwan was almost certainly not a factor.

Representative offices in several countries with which Taiwan does not have formal relations, including Bahrain, Dubai, Ecuador, Jordan, and Papua New Guinea, were forced to remove “Republic of China” from their names and in some cases to turn in diplomatic license plates. In February, the Swedish Tax Agency changed its designation of Taiwan from “Republic of China, Taiwan” to “Taiwan, Province of China.” Sweden’s foreign minister expressed support in December for Taiwan’s international participation, and Taiwan remains “Taiwan” on the website of the Foreign Ministry.

China increasingly interfered in nongovernmental and commercial forums, pressuring student groups, cultural activities and organizations, and multinational corporations to describe Taiwan as belonging to China or to exclude Taiwanese participation altogether. A number of corporations altered their websites, some issued public apologies to China for listing Taiwan generically as a country, and one fired a social media manager in Nebraska for “liking” a tweet that referred to Tibet, Taiwan, and Hong Kong as countries. The Shanghai Cyberspace Authority cloaked this pressure in the rule of law: “Cyberspace is not an extralegal place, multinational corporations should abide by relevant laws and regulations,” and offenders should conduct “a comprehensive self-examination.”

The “31 Measures”

On March 28, the TAO announced 31 incentive measures to make it easier for the people of Taiwan to study, find employment, open businesses and live on the mainland. Beijing had been talking about such measures for over a year and had announced several individual steps during 2017. The 19^th Party Congress report indicated that these measures would become an important element in Beijing’s overall “peaceful development” approach toward Taiwan. The February announcement launched a major campaign to develop and implement these incentives. The measures that focus on youth included the relaxation of regulations and financial subsidies to make it easier for young Taiwanese to study, find internships, pursue advanced degrees, and find employment. Several of the economic steps offered to treat Taiwan companies the same as domestic Chinese firms, including with respect to the “Made in China 2025” program. In his meeting with former Vice President Vincent Siew’s business delegation at the Boao Forum, Xi Jinping praised the role of Taiwan business and said “equal treatment” for Taiwan firms is now PRC policy and would be implemented.

The 31 measures involve many different ministries in the State Council. While the TAO is the public face of the program, it is led behind the scenes by the CCP’s United Front Work Department. The goal, as indicated by CPPCC Chairman Wang Yang at the annual Taiwan Affairs Work Conference in early February, is to increase Taiwan’s economic and social integration with the mainland. As Beijing has chosen not to deal with the Tsai administration, it must pursue this goal through unilateral measures. From another perspective, efforts to further integrate Taiwan economically will counter Tsai’s desire to reduce Taiwan’s economic dependence on China. In 2017, the percentage of Taiwan exports going to the mainland and Hong Kong was 40.1 percent, the same as in 2016.

The 31 measures have provoked considerable discussion in Taiwan. A few commentators have noted that some of the measures are not new. Others have said that many of the economic measures are in effect promises that may or may not be meaningfully implemented. However, President Tsai has treated them seriously. A government panel led by Vice Premier Shih Jun-ji concluded that the measures could exacerbate the brain drain of technology talent from Taiwan and significantly encourage Taiwan investment in the mainland. To counter the measures, Shih said the government would adopt additional measures to retain talent and improve Taiwan’s investment climate.

Other actions related to the united front

Beijing’s influence operations have continued apace. In January, Taipei prosecutors charged that the TAO had offered New Party (NP) spokesperson Wang Bing-chung funds to operate the pro-unification Fire News Website. Also in January, a video entitled “Believe in China 2018” produced by the state-owned CCTV appeared on an advertising jumbotron in downtown Taipei. The Ministry of Transportation and Communications quickly determined that the ad was illegal, and it was removed the next day. In early February, TAO Minister Zhang Zhijun met former Straits Exchange Foundation (SEF) Secretary General Chang Hsien-yao in Beijing. Later in February, Chang announced that he would seek the KMT nomination for mayor of Taipei in the November elections. In February, Beijing appointed Zheng Jianmin, who was originally from Taiwan, as deputy governor of Fujian Province.

Several opposition leaders have visited the Mainland. For example, KMT New Taipei Mayor Chu Li-lun visited in March and met newly appointed TAO Minister Liu Jieyi in Shanghai. In April, former KMT Chairperson Hung Hsiu-chu and NP Chairman Yok Mu-ming joined Liu Jeiyi in a symbolic trip to Shaanxi to commemorate Huangdi, the progenitor of the Chinese people. In late April, KMT Chairman Wu Den-yih’s special advisor, Chou Jih-shine, led a business delegation to Beijing and met Liu Jeiyi to plan for the 10^th KMT-CCP Forum.

In March, in an example of punitive messaging, Beijing canceled the opening of the Taiwanese film Missing Johnny because its star was considered a Taiwan independence supporter. The TAO spokesperson said productions with Taiwan independence entertainers would not be allowed in China. The PRC has continued to hold Taiwan democracy activist Lee Ming-che in prison, presumably to deter other activists from coming to the mainland. In April, Beijing authorized Lee’s wife to travel to Hunan for a brief visit.

US policy and PRC reaction

The Trump administration has established a track record of rhetorical and policy support for Taiwan, but concern remains that Taiwan’s interests may be harmed as US-China relations deteriorate over trade, technology issues, the South China Sea, and possibly North Korea; if not intentionally as a “bargaining chip,” then perhaps as collateral damage. On March 16, President Trump signed the Taiwan Travel Act, which expresses the sense of Congress that the US should allow exchanges between US and Taiwan officials at all levels. While the law does not require any action and the president already had the ability to authorize high-level visits, he chose to sign the bill; had he ignored it, the bill still would have taken effect. China expressed opposition before and after the president’s signature, warning that the act seriously violates China’s one China principle. Taiwan welcomed the law and President Tsai tweeted her thanks to Trump. The TAO warned Taiwan against relying on foreigners, saying that doing so “will only cause you to be burned.”

The following week, Deputy Assistant Secretary of State for East Asian and Pacific Affairs Alex Wong made a well-publicized visit to Taipei. In a speech to the American Chamber of Commerce in Taipei, with President Tsai in attendance, Wong said that the US intent to strengthen ties “with the Taiwan people” and enhance Taiwan’s ability to defend its democracy has never been stronger.

In an interview on April 5, Chinese Ambassador to the US Cui Tiankai reiterated China’s firm opposition to arms sales. He said China will achieve reunification through any means necessary. On April 7, Taiwan announced that the State Department had approved marketing licenses for two US companies to sell technology to Taiwan that will help it build its own submarines. In late March, Republican Senators John Cornyn and Jim Inhofe sent a letter to Trump urging him to approve the sale of F-35 or F-16 fighter jets to Taiwan to counter China’s increasingly assertive stance. In his April 12 confirmation hearing, Secretary of State-designate Mike Pompeo said that arms sales to Taiwan are important.  Contracts for previously agreed procurement of service of surface to air missiles, torpedoes, and radar were also announced. As noted, China conducted live-fire drills and air patrols near Taiwan on April 18 and later.

In January, images of the ROC flag were removed from certain US government websites. Acting Assistant Secretary of State for East Asian and Pacific Affairs Susan Thornton said that the ROC flag can’t be displayed on US government websites because the ROC is not recognized as a country with which the US has official relations. In his confirmation hearing, Pompeo acknowledged the basic principles of US-Taiwan-China relations and the one China policy. He said he would work with professionals at the State Department for guidance on specific issues.

The Trump administration’s efforts to address trade imbalances with China and to limit Chinese access to US technology have the potential to seriously damage Taiwan, both directly and indirectly. Taiwan’s steel exports to the US will face tariffs, and Taiwan has significant trade with China and other targets for steel tariffs. Taiwan firms are also integrated into the international supply chains for Chinese high-tech products. Taiwan representatives have expressed concern about the impact of US sanctions against China’s ZTE corporation and its investigation of Huawei because Taiwan firms have extensive relations with both companies. Following the sanctions on ZTE, Taipei added ZTE to the list of companies for which high-technology export licenses will be required.

John Bolton’s appointment as national security advisor on April 9 provoked considerable comment and uncertainty in Taipei.  Since taking office he has not made any statements on cross-strait relations or Taiwan, but he has favored using Taiwan as leverage in US-China relations. In a Wall Street Journal op-ed on Jan. 17, 2016, the day after Tsai was elected president, he proposed playing the “Taiwan card” and sketched out a “diplomatic ladder of escalation” vis-à-vis China, centered on increasingly better diplomatic treatment of Taiwan “if Beijing isn’t willing to back down” from its territorial assertiveness in the East and South China Seas. A year later in another op-ed, he suggested revisiting the one China policy and “increasing U.S. military sales to Taiwan and by again stationing military personnel and assets there.” This would enable the rapid deployment of US forces throughout the region, which would help guarantee freedom of navigation, deter military adventurism, and prevent unilateral territorial annexations.

Looking ahead

The uncertainties with respect to cross-strait relations come primarily from Washington. Will the president’s new advisors implement the Taiwan Travel Act and the Taiwan provisions in the National Defense Authorization Act in a manner that challenges the longstanding US stance on the one China policy? The opening of the new AIT office building in June is an early test. Trump’s trade and technology confrontation with China has already affected Taiwan. How Trump handles these issues with China could have a significant impact on Taiwan’s economy.