Simmering tensions across the Taiwan Strait were a concern in May at the World Health Assembly meeting, along with President Tsai’s second inauguration, China’s National People’s Congress, and the 15^th anniversary of the Anti-Secession Law. The beginning of Tsai’s second term was defined by Taiwan’s success in overcoming the health and economic impacts of COVID-19. Taiwan failed to win a seat at the World Health Assembly, but won unusually broad and public support from Washington and other typically silent partners. Taiwan offered assistance to victims of the Beijing’s National Security Law for Hong Kong, prompting Beijing to warn of Taiwan’s “black hand.” Taiwan’s ties with the US were showcased by the August visit of Secretary of Health and Human Services Alex Azar to Taipei.

Elsewhere, seeking to jumpstart negotiations on a bilateral trade agreement with the US, Tsai announced that Taiwan will allow imports of US pork and beef. The Nationalist Party’s recent presidential candidate Han Kuo-yu was recalled as Kaohsiung mayor and replaced by DPP candidate Chen Chi-mai. Meanwhile, the new KMT leadership’s initiative to sever ties to the “1992 Consensus” provoked generational dissension and a sharp warning from Beijing. Lee Teng-hui was mourned at his death as a democratic hero.

The Annual Frustration of the World Health Assembly

Two days before Tsai’s inauguration, Taiwan Foreign Minister Joseph Wu informed reporters that Taiwan was abandoning its bid for observer status at the World Health Assembly, saying he wanted the World Health Organization to use the two-day meeting to focus on pandemic response. As it has every year since Tsai became president, Beijing blocked Taiwan’s participation as an observer. However, Taiwan could take some solace in having won a broad range of public international support. The US statement of support was issued by Secretary of State Mike Pompeo, an unusually high level. Japan, Australia, and New Zealand, which had been quiet in the past, spoke out as well. Then, a report in Foreign Policy claimed that Beijing had written WHO Director-General Tedros Adhanom Ghebreyesus, insisting that the “one-China principle” precluded Taiwan’s participation. However, the momentum Taiwan may have gained this year in its observer bid was undercut by the US announcement that it would withdraw from the WHO, potentially depriving Taiwan of its most vocal and influential advocate.

Tsai’s Inauguration–A High-Profile, Socially Distanced Celebration

On May 20, Tsai was inaugurated for her second term as president. Restrictions imposed by the COVID-19 pandemic meant the event lacked the scale and pomp of previous inaugurations. Tsai opted instead for a small celebration in front of a few dozen local dignitaries and resident foreign diplomats. The inability to host visiting heads of state focused more attention on congratulatory statements, such as Pompeo’s press statement and US National Security Council Senior Director Matthew Pottinger’s video statement in Chinese, both of which were highlighted during the event. Though not mentioned during the ceremony, Democratic candidate Joe Biden also publicly congratulated Tsai, as he had on her election in January. But, unnerving some in Taiwan, the Vatican did not join the congratulatory chorus.

Figure 1 Tsai Ing-wen takes the oath of office to begin her second term as Taiwan’s first female president on Wednesday, May 20, 2020. Photo: CNA

The president used her inaugural address to thank “the people of Taiwan” for handling COVID-19 calmly and responsibly, which also enabled her to claim credit for the success with which the Taiwan government managed both the pandemic and the economic downturn it engendered.

As in her 2016 inaugural address, Tsai focused first on domestic reforms before turning to regional and international relations, and then to relations with China. She repeated her commitment to conduct cross-Strait relations according to the Constitution of the Republic of China and to maintain a “peaceful and stable status quo.” She called for cross-Strait dialogue, repeating the call in  her election victory statement in January for cross-Strait relations based on “peace, parity, democracy, and dialogue.” She specifically rejected “one country, two systems” à la Hong Kong, which she said would only “undermine the status quo.”

Tsai stressed a commitment to national defense reform, a theme not included in her 2016 inaugural address, promising that Taiwan will accelerate development of its asymmetrical capabilities and strengthen defenses against “threats of cyber warfare.” She promised to strengthen Taiwan’s reserve forces and mobilization capabilities while improving the military’s prestige and morale.

COVID-19: A Crisis Well-Managed

Taiwan’s successful management of COVID-19 highlighted President Tsai’s steady low-key managerial skills. By mid-May, new infections declined sharply, deaths remained in the single digits, and life returned to near-normal. By the end of August, foreign students were allowed to return to Taiwan universities, including mainland Chinese students.

As a result of the pandemic, the economy slowed significantly. In response, the Ministry of Finance introduced a pair of programs to revitalize investment in core industries, including bio-tech and cyber security. At the beginning of July, Premier Su Tseng-chang announced a series of vouchers to stimulate consumer spending. On June 29, Taiwan began to reopen to business travelers from low-risk areas, including Hong Kong and Macau. Despite these efforts, the Ministry of Labor reported that the number of furloughed workers had exceeded 31,000, the highest level in 11 years.

By the end of July, economic analysts, including the Taiwan Institute for Economic Research (TIER), were beginning to increase their GDP forecasts for the year—which, though still anticipated to show less than 2% growth, were still better than the negative growth in other Asian tigers.

Beijing Signals Restrained Displeasure

China’s Taiwan Affairs Office (TAO) and Ministry of Foreign Affairs both issued the obligatory statements rejecting Tsai’s inaugural address as another attempt to create “Taiwan independence.” China’s National People’s Congress (NPC) opened its 2020 annual meeting on May 22, after a delay from March due to the pandemic, with Premier Li Keqiang presenting the government’s work report. As always, it included a statement of the government’s commitment to reunification and opposition to Taiwan independence. In reiterating those commitments, the premier’s work report failed to say that the reunification China would pursue would be “peaceful” and based on the 1992 consensus. The omission of these two standard elements prompted many analysts to wonder what policy changes or warning they might signify. Whatever the omissions were intended to have signaled was clearly limited since Li used both “peaceful” and “1992 consensus” in discussing Taiwan in his press conference at the conclusion of China’s NPC, and they were later added to the official NPC text of his work report online.

Hard on the heels of the NPC, Politburo member Li Zhanshu took a somewhat harder line at a forum marking the 15^th anniversary of China’s Anti-Secession Law, saying that the law provided grounds for taking “necessary actions” against any Taiwan move toward independence. Taiwan’s Mainland Affairs Council (MAC) in turn rejected any use of force against Taiwan and repeated Tsai’s call for the mainland to accept “peace, parity, democracy and dialogue.”

As the Anti-Secession Law was ratified by the NPC on March 14, 2005, it is interesting to speculate whether the anniversary was pushed back to late May because it was packaged together with the NPC as a follow-on event. While that seems likely, it is also possible that the Chinese leadership saw celebrating the Anti-Secession Law as a convenient cudgel to swing after Tsai’s celebration of Taiwanese identity in her inaugural address. Certainly, Beijing had to be disconcerted at how Taiwan burnished its reputation by overcoming difficulties like COVID-19 and exclusion from the WHA.

Visibility Defines US-Taiwan Relationship

The US was unusually forthright in its praise for Taiwan and critical of China both at the World Health Assembly opening and Tsai’s inauguration. Secretary of Defense Mark Esper later went to Twitter to emphasize the US defense commitment “to a democratic Taiwan,” and the joint statement of the annual meeting of the US and Australian ministers of foreign affairs and defense (AUSMIN) highlighted their “renewed resolve to support Taiwan.” In a Fox News interview on the opening day of the Republican Nominating Convention, when asked what he would do if China invaded Taiwan, President Trump responded “China knows what I’m gonna do. China knows.”

In early July, the head of the Taiwan Economic and Cultural Representative Office (TECRO), Stanly Kao, completed his term and departed Washington; his successor Bikhim Hsiao arrived a few days later. What would have been an inconsequential formality for any other ambassadorial-level change of the guard, departure, and arrival courtesy calls, led to TECRO’s first ever publicized meetings in the State Department with the Assistant Secretary of East Asian and Pacific Affairs David Stilwell. Both Kao and Hsiao were photographed standing next to Stilwell in his office. For China, these two photos marked a visible and troubling departure from the custom since 1979 that TECRO-State meetings were held quietly and outside Department offices to underscore that US-Taiwan relations were unofficial. A/S Stilwell’s Aug. 31 speech before the Heritage Foundation praising Taiwan as “one of America’s most reliable partners in the Indo-Pacific, and indeed in the world” would have reinforced their concerns.

On Aug. 9, Secretary of Health and Human Services Alex Azar visited Taiwan in the first secretary-level visit since 2014, which the US characterized as the most senior-level cabinet official to visit Taiwan since 1979. Azar called on President Tsai, lauded Taiwan’s handling of COVID-19, and rebuked China for failing “to warn the world and work with the world on battling the virus.” Even before Azar arrived in Taiwan, the Chinese foreign ministry spokesman warned the US to “refrain from sending any wrong signals to the ‘Taiwan independence’ forces, so as not to seriously damage Sino-US relations and relations.”

Figure 2 Taiwan President Tsai Ing-wen wearing a face mask speaks during a meeting with U.S. Secretary of Health and Human Services Alex Azar at the presidential office, in Taipei, Taiwan, Aug. 10, 2020. Photo: Central News Agency/Reuters

The US Congress was also active on Taiwan. On May 11, the Senate passed S.249 “to direct the Secretary of State to develop a strategy to regain observer status for Taiwan in the World Health Organization.” On July 21 and 23, the House and Senate passed S.4049/H.R.6395, the Defense Authorization Act for 2021, which included four provisions related to Taiwan: (1) calling on the Defense Department to fully support Taiwan’s defense, as called for in the Taiwan Relations Act; (2) endorsing port calls in Taiwan by the USNS Comfort and Mercy; (3) calling for DOD to fully implement “regular defensive arms sales to Taiwan” as stipulated in the 2018 Asia Reassurance Initiative Act; and (4) requiring that a report from the Director of National Intelligence on high-technology trends assess the potential impact of “significant geopolitical trends, including those related to Taiwan.” In addition, the Armed Services Committee report on the bill required DOD to report to Congress on the feasibility of providing a senior officer to teach at Taiwan’s National Defense University.

Reps. Mike Gallagher (R-Wisconsin), and Ted Yoho (R-Florida) and Sen. Josh Hawley (R-Missouri) introduced the “Taiwan Invasion Protection Act,” HR.7423/S.3936, declaring it US policy “to deny a fait accompli by the People’s Republic of China against Taiwan.” Finally, Sen. Ed Markey (R-Massachusetts) and Rep. Yoho introduced S.4327/H.R.741 directing the State Department to establish a two-year fellowship program for US government employees to study in Taiwan and work in a Taiwan government agency. This last provision, if implemented, would carve another salami slice from the eroding US policy of unofficiality.

Military and Security Tensions Mirrored Political Tensions

Over these four months, cross-Strait and US-China tensions were reflected in Chinese and US military operations near Taiwan.

The US Air Force conducted a series of flights past Taiwan past or near Taiwan. One reportedly entered Taiwan airspace and prompted warnings by China’s TAO and Ministry of National Defense. In mid-August, the Arleigh Burke-class guided-missile destroyer USS Mustin transited the Taiwan Strait, and drew a routine rebuke from China’s MND. Taiwan media highlighted reports that the carrier USS Ronald Reagan moved closer to the northern tip of Taiwan as Azar completed his visit to Taiwan. Although the US, following standard practice, did not explain the movement, they appear more related to the increased pace of US military activities in the South and East China Seas than any signaling over Taiwan.

Signaling a new US willingness to advertise military operations with Taiwan, the US Special Forces posted a promotional video clip showing training with Taiwanese forces  in Taiwan, and AIT posted photos of a US Air Force tanker refueling Taiwan F-16s during a training exercise.

Figure 3 Taiwanese F-16 fighter jets flying in formation at an inauguration ceremony held in Taichung, Taiwan in August 2020. Photo: Reuters

People’s Liberation Army Air Force combat and reconnaissance aircraft repeatedly flew along the median line of the Taiwan Strait and edges of Taiwan’s air defense identification zone (ADIZ) in what Foreign Minister Joseph Wu described as “virtually a daily occurrence,” all chronicled nervously by the Taiwan press.

Beijing generally refrained from explaining this PLA activity, although it seemed clearly intended as a warning, leaving it to Taiwan to read the tea leaves (or flight paths). The exception was an announcement by the PLA Eastern Theater Command in early August that it was conducting live combat drills near Taiwan, including a crossing of the median line in the Taiwan Strait by two PLA aircraft during Secretary Azar’s visit. The PLA spokesman said these demonstrated the PLA’s resolve to defend China’s national sovereignty and were a warning against increasing US official contacts with Taiwan. On Aug. 23, when President Tsai was joined by AIT Taipei Director Brent Christensen at a memorial service on Kinmen of the 1958 Taiwan Strait Incident, a PLA combat aircraft entered the Taiwan ADIZ as Tsai flew back to Taipei. On Aug. 24, the PLA announced an additional series of four military exercises in the Taiwan region aimed at deterring Taiwan secessionists and the US.

For its part, Taiwan’s MND indicated that its 2021 budget will rise 3%, or 7% if the first payment for 66 new F-16s is included.

Hong Kong National Security Law and Taiwan

Reports that the NPC was about to promulgate a National Security Law (NSL) for Hong Kong, barely a month after Tsai was inaugurated, reinforced for many Taiwanese the fear of China that caused them to reelect Tsai as president. On May 24 Tsai posted on her Facebook page that the Taiwan government would take “necessary emergency measures” to assist Hongkongers and loosen visa conditions for entry into Taiwan. When the NSL became law on June 30, China’s TAO accused Taiwan of being a “black hand” interfering in Hong Kong’s internal affairs, and Taiwan’s Cabinet spokesman responded by warning Taiwanese to beware of new risks in traveling to Hong Kong. On the day the NSL became law, Taiwan’s MAC announced the opening of the Taiwan-Hong Kong Services and Exchanges Office to assist Hongkongers seeking to escape to Taiwan. Tsai said that the NSL proved that China has broken its promise to Hong Kong of a high degree of autonomy for 50 years and repeated that “one country, two systems” is not feasible for Taiwan.

On July 6 Hong Kong authorities published implementation rules for article 43 of the NSL. The rules threatened criminal sanctions for “foreign and Taiwanese political organizations and agents” if they failed to cooperate with Hong Kong police investigations under the NSL. Ten days later, MAC Minister Chen Ming-tong complained that Hong Kong was imposing additional political conditions on TW representatives, reportedly requiring that they sign a statement accepting “one country, two systems” in order to renew their Hong Kong visa. In retaliation, Taiwan refused to extend visas for Hong Kong’s representative office in Taiwan. The Taiwan National Immigration Agency reported that the number of Hongkongers granted residency in Taiwan in the first half of 2020 was up 116% over 2019. Despite this uptick, some economic analysts expressed concern that excessive regulation might make Taiwan less attractive to Hong Kong investors and skilled professionals than competing destinations.

Trade and Investment Caught Between China and the US

The trade dispute between China and the US continued to have a major impact on Taiwan companies and the Taiwan economy. In May, Taiwan Semiconductor Manufacturing Company (TSMC) decided, in response to US sanctions on Huawei, to discontinue taking new orders from the Chinese company starting in September. Despite cutting off this major customer, it was reported that TSMC expected to sell all its anticipated production of five nanometer chips.

TSMC also announced May 15 that it was looking to build a new chip foundry in Arizona to ensure access to the US market. As TSMC negotiates with state and local governments for financial and tax incentives to offset startup costs, it is also encouraging its Taiwan suppliers to open operations in the US as well.

Three Taiwanese producers of iPhone components announced plans to begin production in India. Despite these moves, in the first six months of 2020, over 40% of Taiwan’s exports were destined for China, the highest level in 10 years. Chinese media reported that Taiwanese companies like Foxconn continued to expand their production in China.

Taiwan’s efforts to win a bilateral trade agreement (BTA) with the US have long been stalled by its refusal to allow US pork and beef into Taiwan’s market. To break this logjam, Tsai announced on August 28 that Taiwan would open its market to US pork and beef. US officials, but not the USTR, quickly welcomed Tsai’s move, and the KMT as quickly denounced it. Three days later, Assistant Secretary Stilwell announced “a new bilateral economic dialogue.” Rapid progress toward a BTA will likely be slowed by the US election campaign and a possible change of administrations as the new team at USTR sorts out its and the president’s international trade priorities.

Will Its Kaohsiung Defeat Slow KMT Reform?

Kaohsiung Mayor Han Kuo-yu of the Nationalist Party (Kuomintang or KMT) was recalled on June 6, suffering the after-effects of a perceived lackadaisical performance as mayor and the breaking if his promise not to run for president against Tsai in January. The recall vote was marred by the suicide of the speaker of the Kaohsiung City Council, Hsu Kun-yuan, shortly after Han conceded. On Aug. 15 former DPP Vice Premier Chen Chi-mai won the byelection to replace Han with 70% of the vote. This was the first electoral test for newly elected KMT chairman Johnny Chiang Chi-chen. In the wake of the defeat, Lin Wei-chu, KMT caucus whip in Taiwan’s Legislative Yuan, said it was time to say goodbye to the “Han wave,” and KMT party officials insisted that there was no reason for party chairman Chiang to resign to take responsibility.

The more fundamental issue facing the KMT has been how to adjust its public posture on cross-Strait relations, which many assess led to its defeat in January’s presidential and legislative elections. On June 19, the KMT Reform Committee rolled out its draft proposal, which will be submitted to the KMT’s National Party Congress on Sept. 6. The Committee and its Cross-Strait Task Force rejected China’s “one country, two systems” and insisted that Beijing must respect the sovereignty of the Republic of China. It then said that the “The ‘92 Consensus’ is the key factor” in the recent deadlock between China and Taiwan. It had been the basis for substantial improvements in cross-Strait political and economic relations under former President Ma Ying-jeou (2008-16), they said, but it has been distorted by both the DPP and the Communist Party of China. The Cross-Strait Task Force called the 1992 Consensus “a historical description of past cross-strait interaction” rather than a basis for future cross-Strait dialogue. This discarding of the 1992 Consensus immediately drew the ire of the older generation of KMT leaders, who accused the reformers of mimicking DPP policy, while younger party activists called on the party not to saddle them with a policy that only serves to alienate young voters. China’s TAO responded by claiming that the 1992 Consensus is the foundation of Beijing’s cross-Strait policy and trust between the Communist Party and the KMT.

Ma Ying-jeou became a flashpoint in this debate by asserting an approach to the 1992 Consensus unpopular with the new generation of KMT leaders, the DPP, and Beijing. He insisted that the 1992 Consensus, incorporating ROC sovereignty, remains the only approach to reducing cross-Strait tensions; He then said that the DPP and Tsai were “propelling Taiwan to the brink of war” by rejecting the 1992 Consensus and relying on the US, which could never respond in time to protect Taiwan if the mainland were to attack. On the day she visit Kinmen, Tsai responded, contrasting her support for Taiwan’s military with Ma’s weak approach to China, insisting that she would never fail to defend Taiwan’s sovereignty.

The Death of Former President Lee Teng-hui

Figure 4 Lee Teng-hui became the first native president of Taiwan and recent died on July 30 at the age of 97. Photo: Lam Yik Fei for The New York Times

Former President Lee Teng-hui died on July 30 at the age of 97. He was eulogized by Taiwanese and international leaders for laying the foundations of Taiwan’s democracy, building on the reforms of Chiang Ching-kuo and serving as the first Taiwanese president of the Republic of China. Lee held the first popular election for president on Taiwan, which he won in 1996. His increasing emphasis on Taiwan identity set the stage for the election in 2000 of Chen Shui-bian, a member of the pro-Taiwan identity and pro-independence Democratic Progressive Party, as president. Lee’s passing offered a reminder of Taiwan’s democratic transformation since Lee became president in 1988 and how far that transformation has distanced Taiwan from an interest in reunification with China.

Looking Ahead

As the US heads toward its presidential election and a possible change of administrations, US commentators are debating how Taiwan factors into increasingly acrimonious US-China relations. Is supporting Taiwan too risky, or must we deploy pressure and skillful diplomacy to prevent Taiwan from becoming the next Hong Kong? Is Taiwan worth no more to the US than the point of Trump’s sharpie, or is “strategic ambiguity” a thing of the past? Taiwan commentators, especially from the KMT, have wondered if the US will and can really defend against a Chinese attack.

Beijing finds itself confronted with a DPP president who has begun her second term with a string of successes—managing the COVID-19 crisis, seeing her party defeat the KMT in a key election in Kaohsiung, and winning full-throated support from the US as a “reliable partner.” Thus far, Beijing appears to be restraining its anti-Tsai rhetoric while slowly ratcheting up its military saber-rattling.

Tsai’s greatest challenge may be solidifying her strategic support in Washington and avoiding damage to Taiwan’s economic and trade interests from the US-China war over trade and technology. She must do that without provoking diplomatic or other threats from Beijing beyond Taiwan’s ability to handle. Tsai must also be conscious that potential presidential successors are in the wings, including her vice president. They may be encouraged to take a more confrontational stance by the series of polls stressing growing support for a separate identity from China and sympathy for Hong Kong. The Tsai administration has managed to avoid the political deflation that has usually struck Taiwan presidents within months of their election, thanks to its adroit management of the twin COVID-19 crises in public health and the economy. Once these crises pass, will Tsai’s popularity and DPP unity fade with it?

The KMT will go into its Party Congress in September seeking to build a younger renewed party that can overcome its stumbles in the 2020 elections and build a cross-Strait identity that can win elections in Taiwan without splitting the party. Beijing may be looking to see if and how it can influence some portion of the Taiwan political leadership to accept, or at least not reject, its terms for peaceful reunification. Can it build a bridge to the younger KMT generation or perhaps Taipei Mayor Ko Wen-je to have some hope of resuming cross-Strait dialogue on its terms? Or, will it see its only option as renewed diplomatic, economic, and military pressure?