Rethinking the Political Consequences of Economic Integration in Mainland China-Taiwan Relations

Abstract

When Taiwan President Lee Teng-hui traveled to Cornell University in 1995, economic relations across the Taiwan Strait were already burgeoning. Capitalizing on mainland China’s cheaper labor and economic reforms, Taiwan’s labor-intensive industries had flocked to the mainland following the 1987 lifting of martial law in Taiwan and the subsequent decision to legalize indirect economic ties with China. Trade between the mainland and Taiwan grew from under US$1 billion in 1986 to over US$22 billion in 1995.¹ While initial Taiwan investments in China were primarily undertaken by small, labor-intensive industries, by the mid-1990s an increasing number of Taiwan’s larger firms began to invest in the mainland, attracted by deepening reform and a rapidly growing economy.² Chinese officials welcomed and encouraged these trends, believing that economic integration would help facilitate cross-Strait political integration.