Since taking office on May 20, 2008, Taiwan’s new President Ma Ying-jeou  has been moving fast to fulfill his promise of closer financial ties with China. After 59 years of strained relations with the Mainland, exacerbated by his predecessor, Chen Shui-bien, the tiny island is making headway.  This past weekend Taiwan lifted restrictions on purchasing Chinese currency in Taiwan.  Now, people in Taiwan can legally buy Chinese RMB with their NT instead of resorting to the black market.  This development comes weeks before the first regularly scheduled charter flights will fly between Taiwan and the Mainland.  Although Ma cannot take credit for the chartered flights because they were announced in 2007, he can claim credit for this latest move toward a better relationship with mainland China.

Both of these recent developments are more practical than political.  With so many Taiwanese doing business on the Mainland, travelling to the Mainland through Hong Kong or Japan without legitimately exchanged currency is extremely inconvenient.

But what do these first steps mean?  Ma, the former head of the KMT (Taiwan’s National Party) ran on better ties with China after Chen Shui-bien crashed and burned with his anti-China policies.  During his campaign, Ma promised closer economic ties and hinted at a possible peace treaty with the Mainland if China removed the missiles pointed at Taiwan.

What a possible peace deal would entail is questionable.  China has always viewed Taiwan as a province in rebellion, whereas Taiwan has conducted itself as the “true China” since the 1949 Communist Revolution.  It’s not that peace is not possible.  In fact, the ever increasing economic ties between Taiwan and China make it highly probably.  The stumbling block is the politics.

Unfortunately, a peace treaty would place the United States in an awkward position.  Since Ronald Reagan signed the 1982 US-PRC-ROC communique, the United States has maintained its influence in the area by acting as the umpire for relations between mainland China and Taiwan and promising to protect Taiwan from possible physical force by China.  With closer commercial and financial ties between Taiwan and China, most likely a peace treaty would not result in an independent Taiwan.  As a result, the United States would lose its existing influence in the area and will need to establish relationships with other key countries in the region to re-establish its influence in the region.

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