Wu Jieh-min, 2016, “The China Factor in Taiwan: Impact and Response”, pp. 425-445 in Gunter Schubert ed., Handbook of T Modern Taiwan Politics and Society, Routledge. 27 THE CHINA FACTOR IN TAIWAN Impact and response Jieh-Min Wu* Since the turn of the century, the rise of China has inspired global a1nbitions and heightened international anxiety. Though Chinese influence is not a ne\V factor in the international geo­ political syste1n, the synergy between China's growing purchasing po\ver and its political \vill is dra\ving increasing attention on the world stage. With China's e111ergence as a global econontic powerhouse and the Chinese state's extraction of massive revenues and tremendous foreign reserves, Beijing has learned to flex these financial 1nuscles globally in order to achieve its polit­ ical goals. Essentially, the rise of China has enabled the PRC to speed up its n1ilitary moderniza­ tion and adroitly co1nbine econonllc measures and 'united front \Vork' in pursuit of its national interests. Hence Taiwan, whose sovereignty continues to be contested by the PRC, has been heavily i1npacted by China's new strategy. The Chinese ca1npaign kno\vn as 'using business to steer politics' has arguably been success­ ful in achieving inany of the effects desired by Beijing. For exan1ple, the Chinese government has repeatedly leveraged Taiwan's trade and econonllc dependence to intervene in Taiwan's elections. Such econonllc dependence n1ay constrain Taiwanese choices within a structure of Beijing's creation. In son1e historical 1no1nents, however, subjective identity and collect­ ive action could still en1erge as 'independent variables' that open up \Vindo\vs of opportun­ ity, expanding the range of available choices. Taiwan's trade dependence and Beijing's political action to\vards Tai\van have produced a number of subtle effects on Taiwanese conceptions of cross-Strait relations, and the China factor inay yet cause a profound change in Tai\van's 'urllfication-independence cognitive map'. Moreover, there is evidence that the strength of civil society can have a significant irnpact on the process. Tai\vanese civil society has responded to the influences of China \Vi th several \Vaves of pro­ tests, den1onstrated first by the anti-1nedia nlonopoly 1nove1nent in 2012 and the anti-Services Trade Agreen1ent (STA) protest, launched in the su1n1ner of2013. This developed unexpect­ edly into the 'Sunflo\ver Move1nent' that occupied the Legislative Yuan in spring 2014 and n1obilized half a nilllion den1onstrators in front of the presidential palace. These protests suc­ cessfully suspended the iinple1nentation of the STA.As a consequence, the hitherto unin1peded KMT-CCP rapprochement abruptly cooled by the end of the year.This tug-of-\var reveals that the itnpact of China and the societal response to the san1e appear to constitute an interrelated 'double inoven1ent', to borro\v the concept of Karl Polanyi. 426 The China factor: impact and response Several questions will be explored: First, what structural changes has the rise of China caused in cross-Strait ·relations? Second, ~hrough what mechanisms has the Chinese govern­ ment exerted its influences on Taiwan, and how has Taiwan's civil society responded? Finally, what empirical findings and theoretical innovations can we identify from the current literature? This chapter first reviews important issues in cross-Straitrelations and the impact of China over the last 20 years, followed by a definition of the 'China factor' in the context of international political economy and the 'united front work'. It then puts forward an analytical framework by illustrating an in-depth case study. The chapter concludes with several emerging research topics. Rediscovering the China factor The Cold War 'froze' socio-economic interchange across the Taiwan Strait for almost four dec­ ades. China began to improve its relations with the US in the early 1970s and subsequently launched market reforms, gradually opening the coastal areas to foreign direct investment(FD I). Taiwan started its own political liberalization in 1986, setting in motion social exchanges across the Strait. Simultaneously, Taiwanese businesspeople (Taishang) along with investors from the East Asian New Industrialized Countries and Japan began to establish export-processing factor­ ies in the mainland G.-M.Wu 1997; Hsing 1998; Cheng 1999).The budding export-oriented industrialization (EOI) helped China to create significant trade surpluses from the mid-1990s onwards and amass enormous foreign reserves, which paved the way for the 'rise of China' in this century (Figure 27 .1). Up to this period, scholarly concerns with cross-Strait relations were still focused on the conventional issues of diplomacy, geopolitics, sovereignty and national security (Copper 1992; Garver 1997; Nathan and Ross, 1997;Y.-S. Wu 1997). This research interest remains prevalent today, given the nature of the problem (Bush 2005; Wachman 2007; Friedman 2006; Su 2009; Nathan and Scobell 2015). The new issue of Taishang China became the largest destination for Taiwanese external investment in 1992, and overtook the US as Taiwan's largest export market in 2000, surpassing the US and Japan as Taiwan's top trading partner overall by 2002. Taiwanese business associations (TBAs) were established across 350 4,000 . _J_ 300 3,500 ec 250 3,000 .!!! tv~ ~ m ~ ., 2,500 ~ 200 ~ .,,~ 7_ ~ e 150 2,000 ~~ 100 l,500 ·t .~ 0 so fl 1,000 ~ ~ :;t - .......-/ 500 -50 - - Foreign trade balance ~Foreign reserves F(gure 27. 1 Trends in China~ foreign trade balance and foreign reserves, 1981-2013 (unit: US billion $) 427 Jieh-Min Wu China and played a role in developing information circulation, local-level lobbying and rec­ reational activities for the Taiwanese communities. The TBAs also served as a venue for indi­ vidual incentives for the board members of the association to pursue privileged treatment and 'economic rents' (Lin 2004). There is a debate in regard to how efficaciously the TBAs have achieved the desired collective goods. Some studies evaluated them positively (Chuang 2013) while others either found them to be 'powerless' (Keng and Lin 2007) or characterized them_ as 'apolitical' (Schubert 2010) or 'symbolic clustering' (Wu 2004). From the perspective ofBeijing, however, the Taishang organizations are valuable because they can help convey Beijing's political will and inessage to the Taiwanese communities on the nlainland and to Taiwan at its preferred occasions. Identity politics complicated Economic integration with China generated new governance concerns. Contestation of the rights of mainland spouses represents a typical conflict. International marriages in Taiwan increased greatly in the early 1990s, with the non-Taiwanese spouses, mostly female, originating primarily from Vietnam, China and Indonesia (Hsia 2000; Wang 2001). There are two separ­ ate sets of laws and policies regulating the acquisition of citizenship for spouses based on their nation of origin. Because China is deemed a special 'mainland area' under the ROC constitu­ tion, the 'mainland people' are placed under a legal :framework distinct :from that which governs foreigners in general. This specialized legal framework stirred up a heated debate about whether the new mainland inunigrants were discrinllnated against co1npared to non-mainland immi­ grants, and the debate spilled toover other areas, such as welfare provision, identity politics and gender equality (Chao 2005; Chen and Yu 2005;Yang and Lee 2009; Friedman 2010).A simi­ lar debate can be seen in the prolonged dispute over whether students from China should be covered by the national health insurance programme in the same way as other foreign students (Sun 2013; Chen 2014). Recent years have also witnessed issues of identity politics and dual citizenship among Tai\vanese expatriates in China, a focal point for the competition over the loyalty ofTaiwanese citizens (Tseng and Wu 2011; P. Lin 2012). China~ rise: global concern, local responses The rise of China causes concern globally, but its impact is differentiated across regions and contingent on local variables. The great powers, particularly the US, keep a close watch on the narrowing gap in national power (Friedberg 2011), fearing fierce competition for supre1nacy or even an impending hegemonic war (Subrainanian 2011). China's rise also impacts regional ter­ ritorial disputes, international con1petition for natural resources, and the organization of multi­ lateral cooperation initiatives (Garver 2001; Wan 2006; Bush 2010; Womack 2006). Womack's research on the Sino-Vietnamese conflict in the 1980s-1990s sheds light on the situation in the Taiwan Strait. The large powerful state (China) and the small weaker state (Vietnam) formed structurally asymn1etric relations, but both parties understood that neither would prevail if conflict continued. Thus, the stalemate was resolved by 'negotiated normalization' and further evolved into a phase of'mature asymmetry'. Both sides managed to put aside contentious issues without ultimate resolutions. The so-called '1992 Consensus' rhetoric agreed upon by Beijing and the KMT government is, on its face, strikingly similar to the method of conflict resolution between China and Vietnam. 1 Womack argues that asymmetric norn1alcy can be durable and stable. This analysis does not apply to the relations between China and Taiwan, however, because the doesformer not hold the latter to be a sovereign state, and because of China's vital interest 428 The China factor: