Post-election cross-Strait relations: what to look for?

* Media speculations have already begun regarding the 2012 presidential election in Taiwan, including the likely contenders and their respective prospects of winning. With the island's democracy deepening and maturing, not many changes in policy, including those on cross-Strait relations, are expected even if there's another change of power at the central level.

* The primary focus will remain on economics, though non-economic considerations will assume greater importance in future cross-Strait negotiations.

* With ECFA taking effect on January 1, 2011, most expect a busy year--at least more capital and personnel exchanges between China and Taiwan--in cross-Strait economic ties. It is also important that the trade pact delivers the expected boost to the economies of both China and Taiwan.

* Among the industries where cross-Strait cooperation is more likely, semiconductor, petrochemical, automobile (including electric), and renewable energy (particularly solar) remain atop the list.

* Negotiations will soon resume between tourism officials from both sides over individual travels (including mainland tourists) to the island, instead of the current requirement of five people in a group. Tourism-related industries--hotels, restaurants, and retail--stand to benefit the most when it is expected to take effect in Q I next year.

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Some observations of this weekend's mayoral elections in Taiwan

(1) The mayoral elections for the five special municipalities—Taipei, Xinbei, Taichung, Tainan, and Kaohsiung Cities—were held on Saturday, November 27, 2010. Prior to the election, the ruling Kuomintang (KMT) had a numerical advantage of 3 to 2 over the opposition Democratic Progressive Party (DPP) and controlled Taipei, Xinbei, and Taichung Cities. The DPP, on the other hand, held the mayoralty in Tainan and Kaohsiung. Ironically the weekend contests maintained the "status quo," making the island’s political landscape truly “Blue north, Green south.”

(2) Taiwan’s 2010 mayoral campaign had no real winners. Though the ruling KMT retained its three seats in northern and central Taiwan, the margin of victory, except for Taipei City, was much narrower than expected, particularly in Taichung City where DPP newcomer Su Jia-chyuan concentrated on the message of "change" and almost upset the always-popular Jason Hu. At the same time, the DPP was able to widen its lead over the KMT in both Tainan and Kaohsiung. As such, the DPP was able to garner 403321 votes more than the KMT.

(3) Facing the same challenges that some of the world's other governing parties have faced in recent elections since the 2008-2009 global financial meltdown, the KMT's hold on its seats in northern and central Taiwan was believed, even before the mayoral elections, to be more vulnerable than the DPP's control in the south. The election results, in the end, substantiated such an assertion.

(4) For Beijing, this weekend’s election results had mixed signals: (1) though the KMT retained control in northern and central Taiwan, the DPP has solidified its hold on power in the south despite Beijing's efforts—through the signed “Economic Cooperation Framework Agreement” (ECFA) and the large Chinese procurement missions—to ease anxiety toward China, (2) with the DPP’s vote total reaching almost 50% and exceeding KMT’s number by more than 400,000 votes, Beijing should make sure that the so-called “cross-Strait peace dividends” would benefit not only the big Taiwan corporations but the ordinary people as well, and (3) besides economic and trade benefits, Beijing should also consider measures, particularly in the areas of Chinese missile deployment and Taiwan’s international space, that would enhance mutual trust in the non-economic domains across the Taiwan Strait.

(5) Since the weekend elections had no real surprises, the local stock market next week should react to the elections results in a positive way, barring more conflicts on the Korean Peninsula. Since there will now be less uncertainty in the market with the elections over, the recent series of good economic news that ranged from revised upward GDP growth, lower unemployment rate at below 5%, and measures to accelerate urban renewal around the island will most likely boost market confidence before  yearend. Construction, cement, and retail sectors are expected to benefit.

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Taiwan's voters go to the polls tomorrow

The mayoral elections for the five special municipalities in Taiwan--Taipei, Xinbei, Taichung, Tainan, and Kaohsiung Cities--will take place this Saturday, November 27. More than just a “dress rehearsal” to the 2012 presidential election, the results from this weekend’s vote will be a direct reflection of why, how, and how much the Taiwanese public has moved along the political spectrum since President Ma Ying-jeou’s landslide victory in the March 2008 presidential election. Therefore, though these mayoral elections remain local in nature, the implications behind the final vote tallies will go far beyond just Taiwan's domestic political landscape.
  
Besides greater local autonomy and more tax revenues, these five “super mayors” will most likely have a bigger say in the formulation of government policy from the economy to cross-Strait relations. Moreover, it remains interesting to see how these mayors will interact with the central government and with each other, especially if they belong to different political parties. Though a Taiwanese version of the “Boris Yeltsin” syndrome is unlikely, more power sharing and expanded participation in policy-making are almost inevitable.

Since this weekend's mayoral elections cover roughly 60% of the population and 50% of the land space in Taiwan, there is growing attention concerning Beijing’s possible reactions and responses if the ruling Kuomintang (KMT) performs disappointingly at the polls. There are speculations that cross-Strait relations may slow down considerably if the KMT suffers a setback. There could also be rising calls within China that, since “yielding benefits” through measures like the ECFA was apparently not enough to win the “hearts and minds of the Taiwanese people,” Beijing should reexamine past measures and identify those that had—and those that had not—worked following the thawing of cross-Strait ties more than two years ago. Though a reversal of current policies by Beijing is out of the question, some tactical changes are likely.

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