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  • Chih-Hsiang Lo

China’s Dollar Diplomacy: Ending Taiwan’s International Presence?

Despite nearly a decade of ‘flourishing’ ties between Taiwan and China under the presidency of Ma Jing-yeou, relations have taken a turn for the worse since the 2016 election. This is due to the pro-independence stance of the new Taiwanese president, Tsai Ing-wen, and her apparent rejection of the 1992 Consensus. This Consensus reached between Kuomintang (KMT) representatives and Beijing was fundamental in the development of the ‘’One-China Principle”, which has underpinned cross-strait relations for the last few decades. It describes how each side would agree on the existence of a single, unified China, comprising of the Mainland, Taiwan, and the other offshore islands. Furthermore, each side would be free to disagree on the meaning of that ‘’One China’’.

Whilst the One-China Principle has been crucial in facilitating cooperation between Taiwan, China, and the rest of the world, it seemingly binds Taiwan to a path of eventual reunification with the mainland. This has proven to be undesirable to pro-Taiwanese-independence politicians, reflected by Tsai’s refusal to officially reaffirm Taiwan’s commitment to the consensus. However, in response to the re-emergence of such ‘’secessionist’’ impulses Beijing has once again applied pressure on Taiwan, seeking to constrain its influence on the international stage.

This has manifested in many different forms since 2016, the clearest of which has been through the escalation of China’s efforts to prise countries away from Taiwan’s diplomatic reach. Since 2016, Taiwan has lost seven diplomatic allies to China, the most recent of which being Kiribati and the Solomon Islands in September 2019. In both cases, Tsai Ing-wen has accused China of ‘’Dollar Diplomacy’’, citing how China has been luring countries with promises of large-scale economic aid in return. In the case of Kiribati, China had promised its government funding for the purchase of several aeroplanes and commercial ferries in exchange for establishing diplomatic relations.

Although dollar diplomacy is not a new phenomenon in Taiwan-China relations, with both sides using such tactics in the past to lure and maintain allies, the ever-growing Chinese economy has made it increasingly difficult for Taiwan to compete for allies through economic muscle alone. Whilst Tsai has attempted to appeal to existing allies through lavash state visits whilst highlighting the potential risks of Chinese investment, China’s large-scale economic incentives have ultimately proved irresistible. For example, Taiwan accused China of taking advantage of São Tomé and Príncipe’s financial woes by promising large scale FDI from Chinese firms when the African nation switched ties in December 2016.

China has also employed tactics such as barring Taiwan from international organisations such as the World Health Organisation (WHO). In 2018, for the first time in eight years, Taiwan was not invited to the World Health assembly due to political pressure exerted by China. When viewed alongside other tactics, such as China forcing American airlines to label Taiwan as a province of China rather than as an independent country, a pessimist could easily make the case that Taiwan’s international presence has met an untimely death.

However, the utilisation of non-traditional solutions by the Tsai administration has sought to promote alternative pathways towards international cooperation, circumnavigating the constraints imposed by China.

The most unique and arguably the most important solution has been the New Southbound Policy (NSP). Introduced by Tsai Ing-wen in 2016, it has sought to strengthen Taiwan’s relations with ten countries in ASEAN by utilising assets including economic, cultural, and educational resources in order to enhance its integration within the region. Former Taiwanese Foreign Minister, David Lee, adds that Taiwan’s use of ‘’soft power’’ is to its advantage with its emphasis on democracy, human rights, and freedom helping to lay the groundwork for further cooperation with countries that share similar values.

An example of this can be seen through policy initiatives designed to ease visa rules for NSP countries. This has sought to build stronger bilateral relations, closer people-to-people interaction, and increase connectivity with countries within the region. This can be seen clearly in the case of the Philippines where, in 2017, a 14-day visa-free program was implemented. Consequently, Taiwan experienced a 44% increase in visitors from the Philippines between 2017 and 2018 and due to the success of the scheme it has been extended until 2020 as a gesture of goodwill by the Taiwanese government.

In conjunction with other policies such as enhancing cooperation in the field of medicine and the development of economic links across the region, the New Southbound policy can be said to have been extremely successful. Whilst contributing to large increases in trade, investment, and tourism involving NSP partnered countries during the period 2016 to 2018, it also shows Taiwan’s continued ability to win trust with overseas partners.

Combined with the continued maintenance of unofficial ties with other major nations in order to facilitate cross-cultural dialogue beyond formal diplomacy (illustrated by Tsai Ing-wen’s continued engagement with unofficial representatives with multiple nations across the world – most notably the USA), I argue that these policies undertaken by Taiwan will ensure that its economy and its vibrant democracy will continue to flourish in the international scene.

Although a day may come when Taiwan stands diplomatically isolated as a result of China’s Dollar diplomacy and mounting political pressure, the continued development of the NSP, the maintenance of unofficial relations, and the reinforcement of Taiwan’s “soft power” should ensure that it remains relevant on the international stage for the near future.

Photo: Usplash/Remi Yuan

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