How Taiwan's president-elect is prepping for power

Two months after her landslide election victory, Taiwan’s president-elect Tsai Ing-wen is busy policing her party’s legislators, meeting industry heads, and screening candidates for her cabinet. Her moves point to a large-scale economic overhaul along with a pursuit of an uneasy peace with China.

Ms. Tsai faces a deep economic shift. Taiwanese fear the end of four decades of stable growth in export manufacturing and want the government to foster new sources of employment. Tsai, a legal scholar, hopes to avoid relying too much on China, Asia’s largest economy. China has been willing to extend trade and investment privileges to Taiwan, seeing economic integration as a path to future unification, a nonstarter for many Taiwanese.

This leaves Taiwan’s president elect trying to keep China content with its current economic agreements while looking for alternative ways to boost business profits at home.

“At least she wants to make sure the current cross-Strait economic situation doesn’t get any worse,” says Lin Chong-pin, a retired strategic studies professor. “As an addition, she’s trying to come up with other economic policies to give it a boost.”

Expectations are high for economic change, says Lai I-chung, vice president of Taiwan Think Tank. Many Taiwanese felt outgoing President Ma Ying-jeou, who is stepping down in May after two terms, got too close to China and signed economic pacts that produced limited trickle-down benefits.

“The issue right now is how to respond to people’s call to reach the critical reforms they want her to fulfill,” says Mr. Lai.  

Tsai’s Democratic Progressive Party (DPP) won a clean sweep of Taiwan’s legislature in February for the first time, ending seven decades of control by the Nationalist Party. To keep peace with China, Tsai intervened last month to stop a DPP lawmaker from pulling down Sun Yat-sen portraits from government buildings.

The Nationalists consider Sun Yat-sen the “father of the nation” dating back to the 1911 revolution in China. Beijing’s Communist rulers also respect his role in overthrowing the Qing Dynasty.

Tsai, as chairwoman of the DPP, also insisted that a legislative bill on oversight of agreements with Beijing avoid language that casts the two sides as two countries – another poke at Beijing. China sees the two sides as part of one country.

Officials in Beijing require that Taiwan recognize both sides as part of “one China” before holding any talks. President Ma accepted that condition but defined “China” as the “Republic of China,” which is Taiwan’s legal name. Tsai disputes Beijing’s call to negotiate on that condition, though she has proposed no substitutes that China accepts.

Wait and see

Tsai may be intentionally waiting to see what China does rather than making any proposals or new statements, some analysts suggest. Beijing worries that any strong action against Taiwan’s economy or foreign relations could backfire by giving succor to Taiwanese leaders who favor stronger self-rule.

But Tsai already faces a challenge in foreign affairs: In March, China established diplomatic ties with The Gambia, which split from Taiwan in 2013. This effectively snaps what Ma’s government described as a “diplomatic truce,” which meant the two sides had stopped using pledges of development aid to poach allies. The Gambia aside, China has not shown recent signs of arm-twisting Taiwan’s other 22 allies to change sides.

While Tsai’s caution is understandable, some experts say that her relatively few comments on China since the Jan. 16 election suggests a struggle to develop a strategy. She has alluded to stronger informal ties with other governments, such as Japan and the United States. China forbids its more than 170 allies from seeking formal ties with Taiwan; both Japan and the US hew to this formula.

“I can’t say she has no way of doing things, but either she hasn’t thought things through or she doesn’t want to touch them,” says Kweibo Huang, associate professor of diplomacy at National Chengchi University in Taipei.

Most of Tsai’s activity before her May 20 inauguration has centered on retooling Taiwan’s half-trillion-dollar economy. She has met with a list of business organizations, many hit over the last year by a slump in exports due to weak global demand and a perceived slowdown in innovation here.  

Her stops included visits in March to shipbuilding companies and aircraft designer Aerospace Industrial Development, two industries that she hopes to foster. Taiwan now relies mainly on high-tech machinery and petrochemicals.

Reducing red tape

Voters are looking for government promotion of new industries to deliver higher paying jobs. Salaries average less than $1,000 per month for new graduates. The president-elect also indicated in March she would consider liberalizing controls on startups to promote innovation.

“Right now it’s hard, especially in industries such as banking and finance because there are so many red tapes,” says Jamie Lin, chairperson of the Taiwan Internet and E-commerce Association, which hosted Tsai at an event.

Tsai is urging some companies to trade and invest outside China, says Bonnie Glaser, a senior adviser with the Center for Strategic and International Studies in Washington. That diversification would protect firms from any dip in cross-straits political relations and from China’s own economic deceleration.

One firm that is diversifying is Hon Hai Precision Industry, a major contract manufacturer in China for Apple and other consumer technology brands. This week it struck a $3.5 billion deal to acquire struggling Japanese electronics maker Sharp Corp.  

Tsai’s government may apply eventually for membership in the US-led, 12-nation Trans Pacific Partnership trading bloc that excludes China. However, she will face opposition from domestic industries, including pork producers.