Taiwan's legislative election - Bowing out

Jan 17th 2008 | TAIPEI
From The Economist print edition
Electoral humiliation marks the end of the Chen Shui-bian era

CHEN SHUI-BIAN, Taiwan's president, called it the worst defeat in the history of his Democratic Progressive Party (DPP). After eight years of Mr Chen's lacklustre rule, it was routed in the legislative election on January 12th. The opposition Nationalist party, the Kuomintang (KMT), which wants much closer ties with China, is girding itself to return to power.

Having won more than 70% of the parliamentary seats, the KMT hopes its candidate, Ma Ying-jeou, will stroll to victory in the presidential poll on March 22nd. Under Mr Ma, the KMT—which ruled all of China until it fled the Communists to take refuge in Taiwan in 1949—predicts rapid improvements in relations with China: regular direct flights between Taiwan and the mainland (non-existent since 1949); many more Chinese tourists; and fewer investment barriers between the two sides.

But Mr Ma cannot rest easy. As they announced their victory in the legislative polls, he and his colleagues did not look jubilant. The DPP's share of the seats had fallen from nearly 40% to under a quarter. The Taiwan Solidarity Union, whose support had helped it control about 45% of the seats in 2004, was wiped out. Yet the DPP's share of the vote, 38%, was much the same; and turnout, at under 60%, was low. The DPP believes many of its voters stayed at home. They could still, despite what the polls say, tip the balance in favour of the DPP's presidential candidate, Frank Hsieh.

Mr Hsieh must be feeling a little happier now that he has taken over the chairmanship of the DPP from Mr Chen, who stepped down to atone for the defeat. (He will relinquish the presidency in May, on reaching the two-term limit.) Mr Chen had tried in vain to rally support for the DPP by playing up Taiwan's separateness from China. Mr Hsieh is more loth to provoke the Chinese and shares the KMT's desire for closer economic ties. He will want to distance himself from Mr Chen, some of whose family members and aides have been dogged by allegations of corruption.

The economy will be a big issue in the presidential poll. Taiwan's GDP has been growing at 4-5% annually for the past three years. Unemployment has stayed at around 4% and inflation last year averaged below 2%. But despite these respectable figures, many in Taiwan believe the economy would do better still if opened further to China. The DPP's fears of a “hollowing out” of Taiwanese manufacturing as the island's industries move to the mainland have failed to materialise.

The DPP administration has tried some opening up. In the face of China's bar on direct contact with Taiwan's government, it has allowed negotiations between quasi-private bodies from the two sides, aimed at allowing 1,000 mainland tourists a day to visit the island without having to pass through a third country, as Taiwan now requires. At present only a couple of hundred Chinese tourists come each day. Agreement has been held up by bickering over whether such tourism should be described as between countries. China apparently believes that it would be easier to deal with Mr Ma, who wants 3,000 a day.

Taiwan's hoteliers and shopkeepers, mindful of how big-spending Chinese tourists have helped Hong Kong's economy, are anxious for a breakthrough. In the central city of Taichung, the mayor, Jason Hu of the KMT, says three five-star hotels have been built in the past two years to prepare for the Chinese influx. With no sign yet of its arrival, the hotels are suffering. Despite the KMT's own stand-offishness towards China until the 1990s, Mr Hu unabashedly blames the DPP.

The KMT's supporters say that if their party held both the presidency and the legislature, it would end the deadlock of Mr Chen's rule, during which the KMT and its allies have controlled enough seats to block DPP legislation. The KMT's plans are ambitious. It says it will boost GDP growth to at least 6% a year, with the help of more than $80 billion in government spending over the next eight years on a variety of big projects ranging from sewage-treatment plants to public-transport projects. Vincent Siew, a former prime minister and Mr Ma's running-mate, says the party may even revive plans—vigorously opposed by the DPP—to expand the country's nuclear-power capacity.

The KMT's ideas for dealing with China are no less ambitious. Mr Siew says a cap on investment in China by any Taiwanese company—of 40% of its net worth—would be lifted. Direct Chinese investment in Taiwan would be allowed for the first time. Su Chi, a KMT legislator, says an agreement with China on direct scheduled flights and cross-strait shipping would be reached within a year.

Mr Ma has said that as president he would not enter talks with China about reunification. But if China removed the hundreds of missiles it has pointed at Taiwan, he would discuss a peace agreement. Last October China's president, Hu Jintao, also called for a peace accord, but on “the condition of the one-China principle”. That is, Taiwan would have to accept it is in effect part of the People's Republic. Even the KMT balks at that.