could be win-win for China,
By George Zhibin
The realities between Taiwan and
mainland China are "economically hot, politically
cold". Their ever-increasing economic ties demand
far better political relations. One highly
feasible resolution is a "federation". Would it
work? The answer: economically, the time is right;
politically, it is only few steps away.
system would mean more autonomy for Taiwan than
Hong Kong and Macau enjoy; for Beijing it would mean the
revolutionary concept of a unified China with multiple
power centers. Under a federal system, the island
would keep its own government, military, judicial
and other systems. Its political leadership would
not bow to Beijing. In short, it would be a
political partnership between equals. Both
political entities would be subject only to a
"federation" law. And anything is open for
discussion under the "one China" principle.
Taiwan's love affair with the
Economically, Taiwan and
mainland China are well connected. The mainland is
Taiwan's biggest trading partner as well as its No 1
export market. In 2004, total cross-strait trade
reached US$61.6 billion, a jump of 33.1% over
2003; of which Taiwan's exports accounted for $45
billion, by Taiwan's own accounting.
Besides ever-increasing trade, investment
is another major activity. In 2004 alone, Taiwan
Inc invested $6.94 billion in the mainland.
Officially, Taiwan's total investment stood at
about $40 billion by 2004. But some people
estimate it as high as over $100 billion. This
discrepancy in numbers comes from numerous
government restrictions on Taiwan investment in
the mainland; as a result, many members of Taiwan
Inc may go to the mainland from a third location.
One popular way is via tax-shelter islands.
Behind the ever-increasing trade, there is
an ever-increasing tide of investment from Taiwan
Inc. The mainland is its biggest destination
already and it now has over 60,000 Taiwan
enterprises. It also has more than 1 million
Taiwan residents as well. Shanghai alone has more
than 300,000 Taiwan residents. Living and working
opportunities in the mainland will only increase
for the Taiwan residents, as there are more
opportunities for them over there.
cross-strait trade has made a huge difference in
the island's economic health. Lately, nearly all
the island's growth has been attributed to
mainland trade. In particular, cross-strait trade
has created 1 million jobs in Taiwan. There are
vast additional benefits as well.
In reality, there is huge
room for improvement, as there are numerous
restrictions in Taiwan opposing bilateral trade and
investment. For example, its largest energy company,
China Power, is allowed only to buy up to one-third of
the coal it needs from the mainland. As a
result, China Power must spend more money to buy
the additional coal from places far away. If such
bans were lifted, cross-strait trade could
easily double. In reality, better political ties
are demanded for both sides to enjoy all the benefits
from their huge economic cooperation.
big step towards a solution
Like Hong Kong
and Macau, Taiwan is moving fast in integrating
its economy with that of the mainland. This
process has been accelerating year after year.
Taiwan has gained enormously and its economic
benefits will directly promote better political
The current cross-strait
difficulties are caused by the unfinished business
of the long-term civil war between the Communist
Party and the Kuomintang (KMT), the nationalist
party that lost the Chinese civil war and fled to
Taiwan. For now, the KMT has become more
involved, officially visiting the mainland.
Despite all the political uneasiness, the
general direction can hardly be reversed. Indeed,
in the past six decades, there have been dramatic
improvements, from past exchanges in bombshells to
vast human and economic exchanges, as is the case
Simply put, more rational measures
will only offer the island's political leadership
more advantages. Despite all the frictions between
Beijing and Taipei, the roads for peaceful
resolutions are wide open. The recent trip to the
mainland by the Kuomintang chairman Lien Chan is a
very healthy start. It also opens a wider door for
more direct exchanges between Beijing and Taipei.
For both parties,
being Chinese is their greatest strength and nothing
is more significant. For now, there are also
positive signs from Taipei. In particular, Taipei is
considering widening access for mainland Chinese tourists. Also,
more political groups from Taiwan are on their way
to visit the mainland. As such, widening
peaceful contacts and dialogues are emerging. All
this points to bright prospects for both sides.
In the long run, the most
crucial factor determining the ultimate outcome of
the unity issue is sustained progress in the
mainland, both economically and politically. A
progressive and prosperous mainland China will change all
the dynamics in the cross-strait relations.
Happily, by now, mainland China is entering a new era
of deepening institutional and political
reforms, besides possibly new rounds of
economic advancement. This will fundamentally enhance
a peaceful resolution of the unity issue. At the
same time, the choices to bring about unity are
also vast. They include the choice of a new
federation for China, for example. As a matter of
fact, it is the best choice on the table.
concern is that the island's government is afraid
to become a "local government" under a central
government from Beijing. Instead, it wishes to
maintain itself as an independent political
center, having all the autonomy possible. It
wishes to keep its independent government body,
military, currency and judicial systems, among
other things. In short, it does not intend to be
subject to a higher central power.
Beijing, the concern is more about political
unity. It has become very pragmatic in its
thinking and dealings. In its mind, anything can
be and should be discussed provided that there is
one China. This position of Beijing means that it
has walked out on the traditional mentality that a
unified China must be governed under one
centralized government. This change in mentality
and policy lays down the very political foundation
for a federation.
Already, Hong Kong's
and Macau's returns to China are exemplary.
The situation is different from the United
States federal system, for example. In the US,
the governor of New York State is elected by
the state's residents and his actions are
independent of the central government in Washington,
DC. However, federal law overrides state and
local statutes. Financially, the central
government levies a federal tax on New York residents.
But in both Hong Kong and Macau, Beijing does not
have tax claims over those residents living in
those highly self-governed cities, though
politically, Beijing remains as the central
However, the good will of
Beijing goes far beyond the degree of autonomy for
Hong Kong and Macau - as far as the special case
of Taiwan is concerned. Indeed, Beijing's position
is that Taiwan can gain much more autonomy in the
future. For a long time, Beijing has been
proposing that the island maintain its government
and key institutions. Its political leadership
would not be subject to Beijing. Both political
entities would be subject only to a "federation"
law. Anything could be discussed under the "one
China" principle. So, China has already moved
toward a federation, though Beijing has not used
the word "federation."
"federal" approach is revolutionary for China, as it
has never happened before. It means that a
unified China can have more than one political
center. Indeed, Taipei will become another
political center under a federation. Gaining
multiple political centers would certainly be new to
all Chinese. But this is demanded by the
current realities and it is the best possible
resolution that accommodates the needs of the
various political entities.
federal alterative do Taiwan any good? It
certainly would. Above all, it gets rid of all
unwanted political tensions and offers all the
opportunities for Taiwan. In short, the island's
political establishment would gain all the
advantages, while keeping all its existing
positive institutions and ways in a federation.
Otherwise, continued cross-strait tensions will
cause unnecessary damages, even catastrophic
damages, if they escalate.
toward mainland China with 1.3 billion Chinese
would be most irrational as well as unacceptable
to all Chinese around globe. But a change in
mentality as well as approach would open the doors
to a better world.
Above all, they are all
Chinese, separated only by an unfinished business
of a painful civil war. Now, the Chinese people
have all the opportunities to move forward
creatively and productively. It means a peaceful
unification for the Chinese people living on both
sides of the Taiwan Strait. It roots out all the
elements for political tensions and the unwanted
consequences. Both sides will benefit directly
from peaceful unity. This great prospect of a
federal alternative has emerged at this time.
The rational resolution of the
cross-strait tension will enhance global peace and
progress, not just for China. For many decades, and
even centuries, the Taiwan issue has been a key
de-stabilizing factor for East Asia and beyond. A
peaceful and progressive outcome would bring
benefits to the entire world. So, therefore, the
outside world has every reason to be supportive
and constructive in promoting the federation
(Copyright 2005 George Zhibin
George Zhibin Gu,
author and business consultant based in China, is
the author of a forthcoming book, China's
Global Reach: Markets, Multinationals and
Globalization (Haworth Press, Fall 2005). (Some
thoughts on a Chinese federation are also
contained in his previous book, China Beyond
Deng: Reform in the PRC, McFarland, 1991) He
can be reached at firstname.lastname@example.org.