The KMT, which ruled Taiwan as a one-party state from 1949 to 1996 and has controlled the government for 12 of the past 20 years, is by far the wealthiest political party in Taiwan. Its assets exceed $600 million — 40 times as much as those of the country's ruling Democratic Progressive Party (DPP) — most of which the KMT gained in the wake of the 1945 transfer. Though the recently enacted law did not explicitly target any one party, it was widely recognized as an effort by the DPP to begin chipping away at the KMT's formidable wealth, institutional heft and business ties. By rendering illegitimate the income from sources other than member dues, registered political donations and government subsidies, the new law aims to level the playing field between the KMT and Taiwan's numerous other political parties.
A Minor Setback
As part of the new law, the Taiwanese government established a special committee to investigate the sources of party funds and enforce bank freezes and other punitive measures. The committee decided to freeze the KMT account after discovering that the party had withdrawn approximately $17 million from it Aug. 11, the day after the ill-gotten assets law took effect. Using the withdrawn funds, the KMT issued 10 checks worth $1.7 million each to internal party offices to cover administrative costs; one of them was cashed and disbursed before the committee could freeze the account.
On its own, the freeze is a minor setback for the KMT. The party's reputation has suffered over the past several years because of factional struggles, continuous leadership failures and the political collapse of former party chairman Ma Ying-jeou during his final years as Taiwan's president. Nevertheless, the KMT has maintained its influence in the country. The party — like other holdovers from autocratic governments — has extensive ties to industry, including dozens of companies that, until recently, it owned and operated directly. Even in the throes of an identity crisis spurred in part by generational and socio-political changes in Taiwanese society, the KMT remains an imposing force at every level of the country's politics.
A Sign of Things to Come
Still, the KMT account freeze signals an important change: a more concerted effort by Taiwan's government to root out the sources of KMT's power. If the administration of Taiwanese President Tsai Ing-wen succeeds in doing so, it could transform the structure of politics on the island, enabling the DPP to gain ground on the KMT. For as long as Taiwan has been a democracy, this has been a priority for the DPP and other parties in its "Pan Green" coalition. But since its extraordinary performance in this year's elections — Tsai captured 56 percent of the popular vote and 68 parliamentary seats — the DPP has the support it needs to achieve that goal.
Success in curbing the KMT's institutional and corporate sway could also ease the way for the DPP to implement the economic and social policies that helped bring it to power for the first time in 2000. But the KMT will do its best to undermine those efforts. The party has accused the government of trying to obstruct its legal obligation to cover employee payroll and pensions and could use the issue to mobilize public sentiment against the Tsai administration's proposed pension reforms. (The measures would affect civil servants, an important constituency that tends to support the KMT.)
Perhaps the biggest question is how a shift in Taiwan's domestic political structure would influence cross-strait relations. After all, the transition could strengthen the power of the DPP, a party historically wary of China. In June, China suspended official communications with the island after Tsai refused to endorse the "one-China" principle. Even so, Tsai has acknowledged that unofficial communication channels between the two governments remain open, reiterating her intention to preserve the status quo with China — that is, an autonomously governed, if not formally independent, Taiwan. Given Taiwan's close economic ties to and extensive trade with China, the DPP is unlikely to espouse Taiwan's independence anytime soon. At the same time, it is equally unlikely to take as overtly a pro-China stance as Ma did. In the long run, growing skepticism toward China across Taiwanese society, combined with a weaker KMT and stronger DPP, could heighten tensions between the two countries.