The Dynamics of China-Taiwan Politico-Economic Interdependence: Divergence to Rapprochement

Abstract

The study probes into the China Taiwan two fold economic and political relationships as they are the political rivals but economic partners sharing intimate and strong economic ties but politically contentious connection simultaneously. Both the countries have witnessed over the last few decades political ups and downs but despite their rivalries they are valuable trading partners for each other as they have invested tens of billions of dollars in each other’s economies. A glimpse over the historical background will surely help us to know about their political relationship and its impact over their economic interactions. Another aspect under consideration in this article is to analyze the economic, political, and cultural scenarios faced by both on national and international level that caused them to move from divergence to rapprochement. The political dynamics and the economic ties between the two states will determine the future outcomes since the economic interaction will not only have a reciprocal influence on both but also on the global scenario. So to understand the current status of cross-strait relationship, one needs to have a scanning of economic development in the shape of bilateral trade, trade agreements, and meetings between the political figures for their cultural and economic interactions. The study concludes that the asymmetrical relationship in bilateral trade and FDI has both serious political and economic implications. The imbalanced economic interdependence helps to infer and predict that China’s enormous economic influence can be used as the political leverage over Taiwan. So Taiwan is equally in the economic and political risk. Taiwan needs to avoid economic concentration with China and find some alternatives for its economic exchanges to avoid any threat from China in future as this much interdependence can result into an integrated single economy eventually detrimental to Taiwan’s strategic interests.