Syaru Shirley Lin on Taiwan’s China dilemma: contested identities and multiple interests in Taiwan’s cross-strait economic policy

Chinese President Xi Jinping (left) and Taiwanese President Tsai Ing-Wen (right).

Syaru Shirley Lin is a member of the founding faculty of the master’s program in global political economy at the Chinese University of Hong Kong. She currently teaches political science at the University of Virginia and offers courses on theories of international political economy and Cross-Strait relations. Lin’s current board service includes Goldman Sachs Asia Bank, Langham Hospitality Investments, and Mercuries Life Insurance. Appointed by the Hong Kong government, she is a member of the Hong Kong Committee for Pacific Economic Cooperation. She also advises Crestview Partners, a private equity fund based in New York, and the Focused Ultrasound Foundation, a Virginia-based foundation that supports the development of new therapeutic medical technology. Lin graduated cum laude from Harvard College and earned her masters and Ph.D. from the department of politics and public administration at the University of Hong Kong. Lin's most recent book, Taiwan’s China Dilemma: Contested Identities and Multiple Interests in Taiwan's Cross-Strait Economic Policy (Stanford University Press, 2016) explores how, as Taiwan has become increasingly dependent on mainland China economically, its policies toward China have fluctuated between liberalization and restriction. This study uses a framework that links national identity and economic interest to explain the ongoing debate over Taiwan’s Cross-Strait economic policy and the oscillations this debate has produced. On December 15, 2016, she spoke to Aaron Yang CMC '17.

How would you briefly summarize Taiwan’s China dilemma? In light of the return to power of the Democratic Progressive Party (DPP) earlier this year, do you think the dilemma is now even more acute?

Taiwan has a dilemma towards China. This dilemma is underscored by the fact that economic interdependence between Taiwan and China is deeper than ever before yet identity on the island has moved more toward a Taiwanese identity. For the past few decades, Taiwan has become more reliant on China, not only in trade but also in foreign direct investment. Most of these economic relations are ones that cannot be reversed in short periods of time. Taiwan is reliant on China in the long term. However, Beijing has always had the expressed goal of unification with Taiwan. From China’s point of view, much of the expectation of increased economic interdependence with Taiwan was to make the Taiwanese feel more Chinese in the way that Beijing defines it and to support unification. This creates the dilemma because many Taiwanese perceive China as Taiwan’s economic future yet are concerned that this economic interdependence will threaten Taiwanese identity and their way of life. Most of the world, especially in Asia, including Thailand, Vietnam, and Laos, is investing and trading more with China than anywhere else because that is where growth lies as the global economy slows down. The U.S. and European economies are starting to have economic problems. However, as Taiwan increasingly relies on the Chinese economy, the fear that China will be coercive in the form of economic sanctions or even military initiatives towards unification has never receded. My book discusses this tension between deepening economic interdependence with China in order to strengthen Taiwan’s economy and that of reducing dependence on China for the sake of Taiwan’s autonomy and the protection of Taiwan’s sovereignty. This is the basis for the dilemma. At times, people have felt that Taiwan has been quite irrational in obstructing trade and investment to China. Much of this has related to divisions over Taiwanese identity in the early days of democratization. In 1989 a majority of Taiwanese identified as Chinese. For the past few years since 2009, a majority of Taiwanese say that they are exclusively Taiwanese, not even partially Chinese. In 2016, only 3% of Taiwanese say they consider themselves only as Chinese. This dramatic change in 30 years underlies some of the oscillating policy Taiwan has towards China. 

The DPP now controls both the executive branch and the legislative branch. Much of the election results are attributable to the KMT’s actions in the last 8 years. Angry at the DPP president Chen Shui-bian’s corruption scandal, Taiwanese had high expectation that Ma Ying-Jeou would turn around the economy. I think Ma either mistakenly, or actually knowingly, decided that it was a mandate to also get closer to Beijing. He did so over 8 years with steadily declining popularity. He continued to liberalize Taiwan’s economic relations with China in his second term because he took the 2012 electoral victory for support for his policy toward China. However, if you look at local elections and mayoral elections in 2014, it was clear that Ma and the KMT were losing support, especially among the young people who were especially opposed to crony capitalism. It wasn’t just about whether KMT affirmed “One China” as defined by Beijing, it was also that the KMT seemed to be colluding with businesses and that the benefits of economic interdependence with China have not been distributed evenly throughout Taiwanese society. This is in addition to the fact that the benefits have also been inconsistent over the years. As of 2015, Taiwan is at a ten year low in terms of trade surplus with China. This is similar to what has been happening around the world. Uneven distribution of economic gains is leading to people being angry and bitter, but more importantly the younger generation, including those from families of mainland Chinese (waishengren) origin, simply does not consider themselves Chinese, even if their parents expressly consider themselves Chinese. The millennials in Taiwanese are simply “non-Chinese.” 

In your book, you mention that the Taiwanese identity consolidated on the basis of shared values, particularly in regards to free markets, secure property rights, and democracy. What caused the discussion to gravitate away from ethnic identity? Are there still divisions between waishengren and benshengren today?

My book is about the relationship between identity and Taiwanese economic policy towards China. Identity is an input in my book and I do not investigate the cause of identity consolidation in any detail. However, I think it is important to step back and look at the reasons for such a changing sense of national identity. Similar to many other emerging countries around the world, such as those in Eastern Europe or the Middle East, it is quite hard to imagine any country changing or consolidating its sense of identity over only three decades. In this sense, Taiwan is very unique. As I mentioned before, in 1989, 52 percent of the people in Taiwan said in a United Daily poll that they were exclusively Chinese. If you were in Taiwan in 1989, you could never have expected that it would be possible to engineer such a change in identity. Much of it is bottom up; there was a force that was pent up and after democratization Taiwan began to actively discuss what their identity was. Because it was forbidden for more than five decades to do so, the discussion was intense and led to extreme expressions. Initially, the new narrative of who the Taiwanese are as a people was focused on an exclusive definition: if you were not one of us, you are not us. Taiwanese meant benshengren, or people who lived in Taiwan before 1949 including the Hakka, the Hokkien, and most importantly the aboriginal tribes (who had lived on the island long before Chinese immigrants came). As Taiwan democratized, as can be expected in a majoritarian system like Taiwan, policies advocated by major parties became more moderate and moved toward the center. Advocating an exclusive identity did not help win votes for parties that wanted to appeal to the mainstream. The younger generation also began to participate in this narrative. Increasingly, people realized that what made people feel more Taiwanese was not necessarily ethnicity. Strictly speaking, Taiwan and Chinese do not have a racial or ethnic divide since 98 percent of benshengren, or Taiwanese, are Han Chinese, who are just like the waishengren who came over in 1949. But in order to hold up the illusion that the Republic of China was representative of all Chinese, the KMT artificially enforced legal identification of one’s place of origin, which separated waishengren and bengshengren. Taiwanese decided to change this segregation policy and eliminate the designation of one’s “place of origin” in 1992. Also, young people began to feel more strongly that their sense of identity is not based on when their parents came to Taiwan but whether they supported democracy, freedom of speech, and rule of law. Young people began caring about international recognition and environmental sustainability. They want to live in a clean place that supports free speech and has economic freedom. For my book, I conducted interviews of CEOs of large companies, opinion leaders of NGOs and student organizations, union leaders, and many others to ask them what they thought of Taiwan’s economic policy and about their own sense of identity. Through these interviews and looking at primary sources such as newspapers, I conclude that when a country is divided in terms of its national identity, there will be more appeal for extreme economic policy. Voting for protectionism could be an expression of one’s identity, in that it is the same as saying “I am Taiwanese and therefore I don’t support trading or investing with China.” The appeal of extreme economic policy fades as national identity consolidates. People could no longer differentiate one policy with another by saying one was more supportive of a Taiwanese identity while the other was more supportive of a Chinese identity when a majority of the people say they are partially or fully Taiwanese. After national identity consolidated, the process of which could be traced to 2006 but is even more pronounced in the period of 2009 until now, the discussion about economic policy became more rational and moderate. People became focused on what the economic impacts of these policy initiatives were rather than looking at the issues through the lens of identity. The consolidation of national identity ironically enabled the Taiwanese to fully support further economic liberalization with China, such as supporting the Economic Cooperation Framework Agreement (ECFA), with the qualification that it must be based on “Taiwan first.” This is quite ironic, because initially “Taiwan first” had negative connotation. However, in the United States Trump won the election running on “America first.” It meant caring more about job creation in Taiwan rather than elsewhere in China. Taiwanese came to believe that they needed to protect the values Taiwanese hold dear and opening the economy to China should be done with more focus on equitable distribution on the island and economic security. The consensus on “Taiwan first” has enabled younger people to say that they want to work in China, but do not support political unification.

How did business interests impact Taiwan’s Cross-Strait policies? Did business groups ever find themselves on the other side of public opinion?

There are two kinds of businesses to consider. In general, the businesses that invest in China, otherwise known as taishang, are very much an important research topic and interest. It is not clear whether they play a decisive force, one reason being if they directly support the DPP or organizations that want to strengthen Taiwan’s autonomy they could be penalized on the mainland. This has happened repeatedly, in one of my case studies I note how the mainland Chinese government would conduct tax audits on companies such as Evergreen that were overly green, which means more supportive of Taiwanese autonomy. It is risky for businesses to get involved in cross-Strait relations and they usually support both parties because over the last four presidential terms, the presidency has moved from blue to green to blue and now to green. All businesses especially those who have invested in China have to cover their bases and not be at odds with the Taiwanese or Chinese government, although I would say that the DPP has traditionally not been a party that caters to businesses. In fact, this is one of the reasons why the DPP won the recent election because the KMT appeared to be doling out benefits to large companies or companies with KMT ties. However, small and medium businesses (SMEs) that are active as taishang in China do not really benefit from what Ma Ying-Jeou has done for the past eight years. These SMEs do not have the protection that large businesses and those close to the KMT get. There is a sentiment that not all businesses are equal. And among the non-businesses community in Taiwan, such as teachers, lawyers, and other professionals, there is even greater frustration about these policies that help certain interest groups. There are times that the businesses are obviously at odds with the majority of the public. The best example is the recent food oil scandal in Taiwan. A very successful taishang returned to Taiwan and bought the leading food oil company. Last year it was found that the oil that they supply to the food companies was tainted. Much of the public branded this as bad Chinese values being imported into Taiwan. There is a strong perception that these taishang businesses are heartless and do whatever it takes to make money, even allowing tainted oil to go into the food people eat every day. The DPP would like to be on the side of the public but now that they are in power, they also need the support of the business community. Businesses play an interesting role, but not a decisive one until now. Increasingly, as my interviews in the book shows, many CEOs are very supportive of the concept of Taiwan first and upholding Taiwan’s autonomy. Many Taiwanese increasingly expect this too, that businesses should put Taiwan first while creating growth for their shareholders.

You mention several reasons for the Sunflower Movement in your book. Do you think the President Ma’s Service Trade Agreement and cross strait policies would have succeeded if he had not rushed the legislative process, or was it doomed to fail from the start?

As my book says, over the last three decades as Taiwanese identity consolidates, support for economic liberalization has ironically increased. When the ECFA was signed in June 2010 in Chongqing, over 70 percent of Taiwanese supported it. I believe the Service Trade Agreement (STA) had a good chance of passing if it was drafted and discussed with more transparency. The process was one big issue that the students were protesting against. They were objecting to the “black box” operation of Ma Ying-Jeou’s government, mainly that the STA was fully negotiated and signed by Ma in 2013, before it went for ratification. There were some people in the KMT who even proposed that it did not need ratification, echoing the same sentiment in regards to the ECFA which was ratified by a KMT legislature. Ma Ying-Jeou was confident that he could rush the STA through but he did not have full control of his own legislators. While many people were supportive of the ECFA, it was under the principle of “Taiwan first.” The STA was much more expansive than the ECFA, which included the early harvest list that reduced the tariffs on certain goods and services, but that was limited to a few sectors. The STA was unusual because most bilateral liberalization efforts start with goods then move on to liberalize services, which involve investments and possibly immigration. If the STA had passed, the perception is that Chinese state-owned enterprises with enormous amount of capital would come and buy all of the Taiwanese banks, all of the hotels, and all these mainland Chinese tourists would come but only frequent mainland Chinese hotels and mainland Chinese restaurants using mainland Chinese guides. I say perception because the STA never got a good public consultation unlike the ECFA which went under ruthless investigation over contribution to GDP growth and job creation. Because the implementation of the ECFA since 2011 did not create the growth everyone expected, Taiwanese were already skeptical about what the STA could do, but most importantly it looked like the STA would destroy all the SMEs in the sectors liberalized such as funeral parlors and beauty parlors. The students and their supporters wanted selective liberalization that would protect them from competition rather than indiscriminate or large-scale liberalization. I think Ma’s attempt to push through the STA thinking that it was just like the ECFA was naive, but more importantly, he should have known that his inability to unite the KMT legislators including Speaker Wang Jin-pyng would prevent the government from ratifying the STA.

How much of your conceptual framework can be applied to the most recent 2016 elections? Do you think Hung Hsiu-chu’s abortive KMT candidacy was caused by a failure to demonstrate a respect for and a willingness to defend the Taiwanese identity?

In regards to the central framework, there are three important conclusions from the research I did about the four economic policy changes that the Taiwan government had vis-à-vis China. First, when national identity is divided extreme economic policies can be very appealing. This was evident in the early policy reversal under Lee Teng-hui and the No Haste Policy, and in 2001 under the Active Opening Policy to liberalize certain strategic sectors. These two episodes were met with huge support or resistance from the public as they grappled with what their national identity was. The second conclusion is that when national identity is consolidated there is tendency towards more rational discussion and more moderate policy options. When Chen Shui-bian tried to change his policy to Active Management to restrict investment in China, he did not get much support. When Ma Ying-Jeou tried to push through his ECFA, the debate among Taiwanese as seen in newspapers and media was quite rational and focused on the economic consequences of these measures. The third part of my conclusion is very important to what is happening now: that the salience and importance of national identity varies. Even after consolidation, identity can become important again, as it did in the 2014 Sunflower Movement. Even though national identity was consolidated, there was a heightened sense of Beijing threatening the Taiwanese identity which embraced values quite different than that advocated by Beijing. Therefore, identity became the most important issue once again. I think that this what we are seeing all around the world in terms of Brexit and the victory of Trump. Select groups of people feel that their identities are threatened by, in broad terms, globalization and wide-scale economic liberalization. My framework is very relevant to what happened in Taiwan’s 2016 elections. Many people thought that the KMT candidates were moving totally away from the consolidated sense of Taiwanese identity. While many voted for the KMT in the last two presidential elections, they realized that the KMT was moving further away from public opinion and this sense of identity. The rise of Hung Hsiu-chu, KMT’s current chairwoman, is an interesting phenomenon because she appeals so much to a specific and small group of people but not even the mainstream KMT members. Hung actually affirms the '92 Consensus and does not insist on each side “with its own interpretation.” She has already openly disagreed with Ma Ying-Jeou, who is concerned with the fate of the KMT. I think the KMT is being threatened and they decided to move more towards the extreme by initially electing Hung as their chairwoman. But this will only accelerate KMT’s becoming more marginalized.

What are the implications, if any, of the consolidation of a salient Taiwanese identity on the international level?

The issue of cross-strait relations is very important for the world as one of the few remaining hotspots because China treats Taiwan as a core interest, and yet the U.S. has not changed its policy since the 1979 Taiwan Relations Act or essentially since the Shanghai Communique was signed in 1972. Some people believe that Xi Jinping thinks that time is running out. Others think that China will reduce its focus on Taiwan eventually. I think at the moment China is not very focused on Taiwan because China’s list of core interests is growing and Taiwan is only one of China’s many interests, although it is one that no Chinese leader is able to abandon. The implication of the consolidation of Taiwanese identity is twofold. From China’s point of view, fewer and fewer Taiwanese favor unification even under the best of circumstances. Basically, only 1.5 percent of the Taiwanese today support unification as soon as possible. Only 3 percent of Taiwanese consider themselves exclusively Chinese. Those are disturbing numbers for Beijing. Trends in terms of self-identification and future national status are even more pronounced among young people: most believe they are Taiwanese and would like more political autonomy. As time goes by, I think the majority of Taiwanese will continue to support autonomy and Beijing must reverse that trend if China would like to see a peaceful and voluntary unification. Beijing is the most important actor in this Taipei-Beijing-Washington triangle. The issue of cross-strait relations will not impact the peace only of the region but of the world. Now, with China increasingly belligerent in the South China Sea and assuming a more assertive military attitude, I think this cross-Strait relationship can trigger other events. Secondly, what is happening to Taiwan is what is happening around the world. I call this a backlash against globalization as well as a part of the problem of the high-income trap. Taiwan is moving into the high-income trap with stagnating income growth, low fertility, an aging demographic which means an increasingly heavy burden on the young people. This is all exacerbated by asset inflation and rising housing prices because of the low interest rate environment that has persisted for many years. This is leading to young people not being able to have good housing, feel secure in their welfare entitlement, or get married and have children. All of this has makes Taiwanese concerned that Taiwan is in an economic crisis that may not recover, just like Japan. One difference with other countries which are revolting against globalization is that Taiwanese young people blame all of this on China. 

In many high income countries, young people feel despair and are taking action, for example Occupy Wall Street and protests all over Europe from Spain to Moldova. Taiwanese young people are not only protesting, but also running for office. This year’s parliamentary election had five members of the New Power Party elected at very little cost even though they are very inexperienced. The trend around the world is that young people do not believe in the elites or the existing political parties. I think Taiwan reflects a global trend that young people have a separate sense of identity and want to create solutions for themselves. But in Taiwan’s case, while there are many economic drivers for protestors’ grievances, young people also feel that there is a value gap between Taiwan and China. That value gap of supporting civic values such as democracy and rule of law will not easily close, even if China from now on consistently gives more benefits to Taiwanese in general and makes that distribution more equitable. And the ability for China to continue to engage Taiwan economically is also questionable in the long term because of the economic slow-down China is experiencing.

What impact, if any, would a Trump Administration have on Taiwan’s cross-strait relations? Do you see the question of security taking up more attention?

For the Trump administration it is too early to tell what will happen. However, what is interesting is that during the campaign, Trump did not talk about Taiwan. What is clear, is that Trump is not an ideologically driven person. One of the important things about Taiwan is that it is a democracy and all of the past presidents have talked about protecting democracies around the world. Trump has not indicated any interest in safeguarding human rights or protecting democracies, however I will say that there are contradictory signs of what may happen. One is that Trump, pandering to the isolationists, says that Korean and Japan should pay more for their defense, but also that the U.S. should beef up its military. These are two contradictory trends, that Trump may insist that Taiwan invest more in its defense but at the same time Trump may decide that in order to contain China, the U.S. should step up relations with Taiwan. So far, one of his advisors has said that the U.S. should increase its arms sales to Taiwan. Other than that, Trump’s policy toward Taiwan remains to be seen.

[Note: Professor Lin's interview took place a few days before the Trump-Tsai call. However, even in light of recent events Professor Lin stands by her original answer: it is still uncertain whether President-elect Trump will only use Taiwan as a bargaining chip for negotiations with China or whether Trump also cares about Taiwan and the welfare of the Taiwanese people.]

Aaron Yang CMC '17Student Journalist
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