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Taiwan's Chen singals tighter policy toward China

Posted on: Saturday, 31 December 2005, 23:55 CST

By Alice Hung

TAIPEI (Reuters) - Taiwan President Chen Shui-bian signaled a tightening stance toward China on Sunday as he warned his people of investment risks in the mainland and growing military ambition by the island's political foe.

Defying expectations that he would take a more conciliatory approach to mend ties, Chen said the government would assume the role of a gatekeeper to guard Taiwan's economic security.

"Cross-Strait economic and trade policies seek to fulfill not the financial interests of any individual or corporate," Chen said in his New Year address. "Instead, Taiwan's sustainable developments is the greatest interest of our pursuit."

"Therefore, 'proactive management and effective liberalisation' represents the new mindset and course of action for our future cross-Strait economic and trade policies," Chen said in the presidential office.

Previously, Chen's administration upheld a policy of "proactive liberalisation and effective management" in favor of economic opening.

Chen's approval rating has dived to a record low after his party's crushing defeat in the December local elections, in part because of a poor administrative record during his five years in office, especially on ties with China.

Beijing and Taipei have been diplomatic and military rivals since their split at the end of the Chinese civil war in 1949. Beijing sees the island as part of Chinese territory and has pledged to bring it back into the fold, by force if necessary.

Despite often testy ties, trade, investment and tourism have blossomed since the late 1980s. Taiwan businessmen who have poured up to $100 billion in China have called for permanent direct links, which analysts say are essential for the island to remain economically competitive.

"Whilst Taiwan would never close itself off to the world, we shall also not 'lock in' our economic lifeline and all our bargaining chips in China," Chen said.

Analysts said Chen's comments were likely to pour cold water on the financial markets, which have been betting on closer economic and trade links across the narrow Taiwan Strait.

"(The speech) indicates mainland policy will be tightening and more conservative," said Li Fang-kuo, an analyst at SinoPac Securities. "It will have a negative impact on the stock market."

CARROT AND STICK

Underscoring China's threat, Chen said the People Liberation Army (PLA) has deployed 784 ballistic missiles targetted at the island and set up a three-stage war plan against Taiwan.

The PLA aims to establish contingency-response combat capabilities by 2007, build up combat capabilities for large-scale military engagement by 2010 and to ensure victory in a decisive battle by 2015, Chen said.

"In the so-called 'carrot and stick' strategy China has employed against Taiwan, the 'soft tactic' is a mere deception, but the "hard tactic" is real," Chen said.

"It has unceasingly pursued its ambition to annex Taiwan."

Chen, who advocates a separate Taiwan identity, repeated a timetable to have a new constitution for Taiwan before his second -- and final -- term ends in 2008 and stressed the island's future would be decided by its 23 million people alone.

In a move sure to anger Beijing, Chen said the island could hold a referendum on the new constitution by 2007 if conditions become mature. Beijing sees Chen's constitutional re-engineering project as a provocative step toward formal statehood.

In his New Year's Eve speech, Chinese President Hu Jintao vowed China would not tolerate Taiwan independence.

Source: REUTERS

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