Can Beijing save the Taiwanese president?

By Nicholas Consonery

During the next six months or so, as leaders in Beijing and Taipei see their window of opportunity shrinking, they will make a concerted push toward remedying one of the world’s major geopolitical dilemmas. Both sides will work feverishly to expand economic ties-in the hopes of strengthening Tawainese President Ma Ying-jeou’s domestic standing and staving off a rebound for the opposition Democratic Progressive Party (DPP). Ma’s political strength hemorrhaged in August when Typhoon Morakot created a humanitarian and public relations disaster, leaving 700 dead or missing. Now, the president’s approval ratings remain below 30% and the DPP looks set to regain some strength.

When he was elected last year, President Ma had already become a relative darling in Beijing by promising to focus on the economics of the cross-strait relationship, without addressing the politics. Beijing was happy to accommodate this approach because it coalesced with the leadership’s broader plan to secure sovereignty over the island through gradual economic integration. With hardliners in Beijing threatening to undermine Chinese President Hu Jintao’s Taiwan policy after a tumultuous eight-year presidency of DPP member Chen Shui-bian, progress was needed quickly.

Concessions began in the months after Ma’s election, as charter flights and other tourism channels between the two sides were expanded. Later, in April 2009, the first-ever direct corporate investment from China into Taiwan was announced, with mainland telecom giant China Mobile planning to purchase a 12% stake Taiwan’s Far EasTone. The next day, Taiwan’s domestic market jumped nearly 7%. In following days, then Minister of Economic Affairs Yiin Chii-ming announced that Chinese investments would soon be allowed into 99 Taiwanese business sectors.

But political troubles for President Ma are making Beijing concerned that all this progress could be for naught. The president’s popularity ratings had already fallen precipitously during the global financial crisis. Now, with the mishandling of the Morakot disaster, Beijing fears that Ma’s reelection prospects in 2012 may be imperiled. Certainly things seem to be trending downward for Ma and his Kuomintang (KMT) political party, and based on recent experience, Beijing dreads a resurgence of the more confrontational DPP.

As a result, China will be handing out economic concessions to Taiwan in the next six months, hoping that they will bolster Ma’s prospects. For his part, Ma will happily accept, fearing a stronger opposition and believing that he can regain some political strength by improving commercial ties with the mainland and boosting Taiwan’s growth prospects. The big deliverable could be an economic cooperation framework agreement, which would set the stage for a significant expansion in economic ties, investment, and trade flows. Negotiators for both sides are purportedly working for an agreement by early next year, and rumors are swirling that President Hu himself is calling for a deal. More cross-strait corporate activity looks likely, perhaps including chances for Chinese firms to invest in Taiwan’s leading tech industries, though this will face popular resistance on the island. A planned memorandum on financial cooperation, which will allow mutual investments in the banking sector, also looks set to be signed by early December.

On the political stage in Taiwan, Ma recognizes that the DPP’s growing strength will make concessions to the mainland more contentious heading into 2010, motivating him to accomplish as much as possible before then. Although recent polling indicates general disgust with both parties, the opposition is positioning itself to rebound from recent lows by increasing its representation in local government and in the island’s legislature. Two weeks ago, a DPP candidate won a by-election for a seat in the legislature to represent the second district of western Yulin County. While KMT-affiliated candidates split the vote, affording the DPP candidate an easy win, the victory left the opposition just one vote short of holding one-fourth of the total seats in the legislature. The DPP could also gain more representation during local mayor and magistrate elections on 5 December, which would be a blow to Ma and his KMT party.

The DPP stands a decent chance of securing one-fourth representation in the legislature in the next few months, as another by-election must be held in Nantou County before 10 December for the seat abandoned by Wu Den-yih, who was installed as premier in September. This would give the DPP more leverage in combating the KMT’s majority coalition in the legislature. The DPP would also be able to propose recalls of the president, a political move that would be easily blocked by the dominant KMT. But such infighting would steal the domestic news cycle, distracting Ma from his strategic and economic goals, and causing more than a little heartburn in Beijing.

Nicholas Consonery is an Asia Analyst at Eurasia Group.

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