How is Taiwan dependent on China

Background current

On June 29, 2010, Taiwan and the People's Republic of China signed an economic cooperation agreement. After decades of confrontation, the signs were pointing towards rapprochement. But recently the conflict between the two countries has intensified again.

Chen Yunlin (r.), Representing the PRC, and P.K. Chiang (left), the representative of Taiwan, signed the ECFA agreement on June 29, 2010. (& copy picture-alliance / dpa)

On June 29, 2010, the People's Republic of China and Taiwan (self-known as the "Republic of China") signed a framework agreement on economic cooperation: the Economic Cooperation Framework Agreement (ECFA). It was the first rapprochement in the Taiwan conflict since the end of World War II. Despite the economic advantages, many Taiwanese protested against the government's course a few years later - for fear of Beijing's too much influence. Today, 10 years after the agreement came into force, it is unclear whether the People's Republic will extend it - the relationship is tense.

Economic advantages versus political dependency

The ECFA liberalized the movement of people and goods and contained paragraphs on the protection of investments. In addition, tariffs were lowered and in some cases canceled: 539 Taiwanese products were allowed to be exported to the mainland duty-free after a transition period - at that time this corresponded to around 16 percent of exports to the People's Republic of China. Flows of goods worth almost 14 billion US dollars were affected in this direction. Taiwan's chemical and automotive industries, as well as mechanical engineering, benefited in particular from the new regulations.

The map shows the island of Taiwan in relation to the PRC. (& copy picture-alliance / dpa)
Conversely, regulation 267 affected goods exported from the People's Republic of China to Taiwan. With a value of almost three billion US dollars, these accounted for around 11 percent of exports.

Despite the economic benefits for Taiwan, the agreement has been criticized. In particular, politicians from what was then the largest opposition party, the Democratic Progressive Party (DPP), feared that the country, which had around 24 million inhabitants, could also be politically controlled by mainland China in the future due to its increasing economic dependence.

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China-Taiwan conflict

The relationship between the People's Republic of China and Taiwan is complicated: The People's Republic still sees Taiwan as a breakaway province, not an independent state. After the Second World War, Japan surrendered the island to China in 1945. In 1949, the communists under Mao Zedong won the Chinese civil war and proclaimed the People's Republic. The leader of the nationalists, Chiang Kaishek, then withdrew to the island of Taiwan, 130 kilometers off the Chinese mainland. There he established a market economy-oriented dictatorship with his Kuomintang (National People's Party, KMT).

Both the People's Republic of China and Taiwan saw themselves as the only legitimate representatives of China in the decades that followed. Taiwan was initially a member of the United Nations, but in 1971 Taiwan's membership was replaced by that of the People's Republic. Taiwan has developed into a functioning democracy since the late 1980s.

Few states today recognize Taiwan as a sovereign state. The German government rejects diplomatic recognition of Taiwan in order not to damage German-Chinese relations. Taiwan has not yet formally declared itself independent.

Closest rapprochement since the end of the war

The ECFA Treaty was the closest rapprochement between the People's Republic of China and Taiwan since the end of the war: under the Taiwanese President Ma Ying-jeou, who was in office from 2008 to 2016, relations with the People's Republic had increasingly relaxed. He and large parts of the Kuomintang party saw no alternative to the ECFA agreement: They feared the economic isolation of their country, especially after China and the East Asian alliance ASEAN created a joint free trade area (ACFTA) in January 2010.

In 2013, both sides signed a service agreement in addition to the ECFA contract. However, this did not come into force because the Taiwanese parliament did not ratify it. Many Taiwanese people rejected the agreement because they feared Beijing's growing influence. The Kuomintang government lost massive support in surveys, but did not want to move away from the content of the agreement.

Sunflower protests

In March 2014, students occupy the parliament in Taiphe to protest against a planned service agreement with the People's Republic of China. (& copy picture-alliance / AP)

In March 2014, massive student demonstrations - the so-called sunflower protests - finally caused the Kuomintang party to give way and the service agreement to fall. The reservations about China's policy led to a change of government in the 2016 elections: the KMT lost both the presidency and, for the first time, a majority in parliament. Since then, the DPP politician Tsai Ing-wen has been the President of Taiwan. She is an advocate of the greatest possible independence from Beijing. In protest, the People's Republic cut all official contacts with Taipei.

In 2018 tens of thousands of demonstrators in Taiwan called for a referendum on independence. But Tsai Ing-wen has so far refrained from declaring Taiwan formally independent, partly because of the expected sanctions from Beijing. In January 2020, the DPP was again the strongest force and Tsai Ing-wen was confirmed in office despite great losses. The ongoing mass protests in Hong Kong, with which many Taiwanese people expressed their solidarity, were an important factor in the re-election. Beijing warned the Taiwanese government against accepting demonstrators from Hong Kong after Taipei announced the move.

ECFA contract could expire in 2020

The diplomatic ice age was accompanied by the trade conflict between the USA and the People's Republic of China, which also had an impact on Taiwan's economy: exports to the USA increased significantly in 2019, while exports to the People's Republic and the ASEAN allies fell significantly. Investments by Taiwanese companies on the mainland have also recently declined. As part of its "New Southbound Policy" (NSP), the government under Tsai Ing-wen has been supporting investments in Southeast Asia in particular since 2016 - in order to be less economically dependent on the People's Republic of China.
The graphic shows the shares in world GDP in percent. The data is from 2016. License: cc by-nc-nd / 3.0 / de / (bpb)

It is still Taiwan's most important trading partner by far - a good 40 percent of exports go to the People's Republic and Hong Kong. The consequences would be correspondingly serious if the ECFA contract were not extended. Tsai Ing-wen strongly advocated an extension. However, observers fear that Beijing could let the agreement expire this year.

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