Taiwan – Beijing Threat Looms Large

As pre-election polls indicated would be the case, incumbent President Tsai Ing-wen won a second four-year term at the presidential contest held in January, taking 57.1% of the vote, compared to just 38.6% for Kaohsiung Mayor Han Kuo-yu, the candidate of the KMT. Tsai’s nominally pro-independence DPP also retained its majority in the 113-seat Legislative Yuan, despite suffering a net loss of seven seats (reducing its total to 61) and only barely finishing ahead of the KMT in the popular vote. Numerous missteps during her first term appeared to doom Tsai’s re-election hopes, but she benefited from mainland China’s increasingly aggressive infringement of Hong Kong’s autonomy, which left many Taiwanese voters reluctant to hand the presidency to the Beijing-friendly KMT, as well as her sure-handed response to the threat from COVID-19 as the virus triggered a health crisis on the mainland in late 2019.

President Tsai’s popularity remained sky-high at the end of May, which is largely down to her successful management of the coronavirus pandemic. The healthcare system has coped remarkably well, and Taiwan has shown not only tremendous resilience, but also the ability to produce sufficient quantities of face masks to become both self-sufficient and supply its allies, thereby demonstrating its manufacturing prowess.

Tsai has also gained credit for her government’s pragmatic but firm approach to cross-strait relations, pledging to engage in dialogue with Beijing rather than adopt a more belligerent stance that can only worsen the situation. Nevertheless, short of the mainland’s resort to force against Taiwan, the threat of cyber warfare, non-military seaborne confrontations, and various forms of diplomatic and economic pressure will likely continue.

The economic policy agenda for Tsai’s second term includes a focus on domestic manufacturing, particularly hi-tech, security, and renewable energy, along with a coordinated reorganization of supply chains, plus some judicial and legislative reforms. On the latter point, a constitutional committee is to be set up to consider an amendment to facilitate cross-party consensus. The promotion of national unity is intended to ensure that Taiwan is primed to capitalize on new opportunities in the post-pandemic period, but there is a risk that China the effort as a step toward independence.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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