Historic Xi-Ma summit advances China's long game for Taiwan

[HONG KONG] The upcoming summit between Chinese President Xi Jinping and Taiwanese President Ma Ying-jeou is historic - literally. It's been seven decades since top leaders from both sides, technically still in a state of war, have met in a formal diplomatic encounter.

The planned meeting in Singapore on Saturday - two years in the making - is the latest remarkable twist in a geopolitical contest that stretches back to the bloody, final days of the Chinese Civil War, when Chiang Kai-shek's Kuomintang, or KMT, fled and took residence in Taiwan in 1949 - or, in China's view, launched a renegade province.

Mr Ma on Thursday billed the gathering as a way to promote peace across the Taiwan Strait and maintain the "status quo."

Turns out, the status quo isn't a bad thing for Mr Xi right now. China hasn't yet realised its dream of political reunification with Taiwan, but its economic gravitational pull has increased steadily during Mr Ma's eight years in office.

Gone are the days of high-decibel, fulminations from Communist Party leaders about the "splittists" in Taiwan or the provocative Chinese military exercises in the Taiwan Strait that prompted the Clinton administration to sail two US aircraft carrier battle groups through the waterway.

Then again, if a military clash were to happen in 2020, the Chinese would have the military assets to mount a serious challenge to the island, according to a report released by Taiwan's Ministry of National Defense in September.

That's maybe a self-interested assessment by military planners, but China's array of ballistic missiles, fighter aircraft and submarines are real - if still inferior to the US military support required by the Taiwan Relations Act of 1979. Mr Ma said he'll discuss reducing hostilities between the two sides.

SHORT-TERM RISK

When it comes to short-term trends in Taiwan's politics, things may not go China's way. Mr Ma is a lame duck. Heading into a general election slated for January, opinion polls show Tsai Ing-wen- the candidate for the pro-independence Democratic Progressive Party - as the frontrunner over KMT rival Eric Chu. The cross-strait thaw may prove short-lived.

"The decision is not for the election," Mr Ma said at a briefing in Taipei. "It's for the happiness of the next generation, hoping this is the first step toward the normalization of the meetings between leaders from both sides."

Viewed through a different lens, the meeting is a significant achievement in China's long-game to bring "its long lost brother" back into the fold, said Xu Shiquan, a senior researcher at Chinese Academy of Social Sciences' Institute of Taiwan Studies.

Market reaction was muted on Wednesday as investors waited to assess the long-term impact. While the benchmark Taiex gauge closed at its highest level since July, the 1.7 per cent gain failed to keep pace with gains in Hong Kong and Shanghai.

GROUND-BREAKING MOMENT

The first high-level, non-governmental talks between both sides took place in 1993. The next ground-breaking moment came in 2005 with then-KMT Chairman Lien Chan's journey to the mainland.

A successful Xi-Ma summit "would feel like scaling the third peak of Everest," according to Mr Xu. "For mainland China, it both consolidates what has evolved in the past eight years, and fits its step-by-step strategy in achieving eventual reunification," he said.

Economic ties between both sides have intensified since the meetings. "As long as water flows, a channel will be formed one day," Mr Xu said. "Now, the water flow of the economic exchanges has become enormous."

China became Taiwan's biggest export market in 2003, when it surpassed the US for the first time, according to trade figures compiled by Societe Generale. Since then, the mainland's share of Taiwan's export market has doubled to 40 per cent.

TRADE TIES

Cross-strait economic ties were given a major boost after Ma became Taiwan's president in 2008 and pursued policies to build relations with Beijing. In 2010, the two sides signed the Economic Cooperation Framework Agreement - their first ever trade treaty - paving the way for other pacts, including one for investment protection in 2012, a services accord in 2013. The two sides have signed more than 20 agreements covering everything from flights to tourism to crime-fighting to nuclear power safety.

True, there's plenty of anti-China sentiment in Taiwan, as shown by the "Sunflower" student protests last year and the KMT's loss of nine of their 15 city and county chief positions in local elections last November. There's a risk that Mr Xi's overtures to Mr Ma might fire up the opposition among those worried about closer ties to China.

However, a successful Xi-Ma summit might also put pressure on the DPP's presidential candidate, Tsai, according to Jean-Pierre Cabestan, director of government and international studies at Hong Kong Baptist University.

CHINESE DREAM

"It's going to narrow Tsai's room for maneuver, if she's selected next year," Prof Cabestan said. "Tsai wants to revive the economy and how can she revise the economy without China's goodwill?"

Mr Xi and Mr Ma "would like to try to lock in the status quo, securing a legacy for Ma and making a DPP presidency less threatening for Xi," said Joseph Fewsmith, a political science professor at Boston University who specialises in China's elite politics.

Yet China, if anything, has proven itself both patient and determined over decades when it comes to Taiwan. Reunification is a key part of Mr Xi's vision of "the Chinese dream" - the grand rejuvenation of the Chinese state, culture and civilization.

Mr Xi, who has shown a proclivity to borrow from Mao Zedong's toolbox, aspires to emulate the party patriarch, according to Zhang Lifan, a Beijing-based historian. The summit shows "Xi's greater ambition of rejuvenating the country," Mr Zhang said.

BLOOMBERG