How China-Taiwan stand-off may end

CHINA and Taiwan, once at the brink of war before a thaw in relations, have avoided discussing their political future and instead focused on forming closer economic ties.

A peaceful solution remains uncertain 60 years after the Communist victory in the Chinese civil war, which saw the defeated Nationalist Party (KMT) forces flee to Taiwan.

China, the world's third-largest economy and a veto-wielding member of the UN Security Council, claims sovereignty over self-ruled Taiwan and has not renounced the use of force to bring the democratic island under its control. But the Taiwanese, despite being ethnically linked to China, are proud of their democratic credentials. China has set no timetable for reunification, though the leadership has said it will not let the status quo last forever.

Here are the basic scenarios:

Federation, wide-ranging autonomy

This neutral proposal, which would bind the two sides under the same wide economic umbrella but guarantee autonomy for both, has been floated in the past by leaders in Taiwan.

China might spurn the idea for lacking the full sovereignty that it seeks, but the two sides may agree on some kind of fudge that lets Beijing claim one country while giving Taiwan enough autonomy to say it governs itself.

China has long hoped to use the Hong Kong and Macau model of "one country, two systems" to entice Taiwan. Both territories are officially part of China, but given a high degree of autonomy, including a largely free press.

But China essentially appoints leaders for Hong Kong and Macau, with a degree of democracy. Taiwan is unwilling to give up choosing its leaders after a long struggle for free elections. Today's Taiwan is keen on better relations with China. Premier Wu Den-yih has offered Taiwan to China as a democracy "laboratory" so the two systems might get closer.

Two countries, Taiwan independence

A formal announcement to establish a Republic of Taiwan and drop the island's official name the Republic of China would almost certainly spark military action from China. Since China-friendly Taiwan President Ma Ying-jeou took office last year, he has sought to reduce military tensions through a series of talks.

"De jure independence for Taiwan in the next 60 years will become an increasingly remote possibility," said Raymond Wu, a political risk consultant in Taipei. "Some kind of sustainable political structure is inevitable."

But widespread economic or social problems at home could goad Beijing into rattling its sabre or even starting a war against Taiwan as a way of diverting attention from domestic issues and rallying the people behind a broadly nationalist cause.

Without rapid US intervention, Taiwan's military would likely quickly be defeated.. Yet with China being the world's largest holder of US government bonds, Washington would think carefully before getting involved.

Full reunification

Not as unlikely as often thought, especially given Taiwan's growing economic reliance on China. Chinese will soon be allowed to invest in Taiwanese stocks and real estate, and the two currencies will also become mutually convertible. Noted Chinese economist Hu Angang once said that China could force Taiwan to its knees simply by applying economic sanctions.

Yet Beijing sees full reunification as long-term only and wants to "break in" relations with Taiwan over the short term, said Li Peng, a professor with the Taiwan Research Institute at China's Xiamen University. But as fewer Taiwanese identify themselves as Chinese and instead take pride in local culture while China shows few signs of democratising, Taiwan is cold to reunification at present.

Reuters