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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