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Zhang Mingqing, a spokesperson for China's Taiwan Affairs Office, said Feb. 11 that Beijing has not and will not interfere in Taiwan's elections and is unconcerned about the election results. "We don't care who will be elected. What we care about is after they're elected, what is his attitude in developing cross-strait relations and national reunification," Zhang said.   While Beijing made clear its disdain for Taiwan President Chen Shui-bian's push for "gradual independence," it also signaled that it would not aggressively respond to the island's controversial security referendum to coincide with March 20 presidential elections. On the contrary, a deal appears to be emerging across the Taiwan Strait to increase economic ties even as Taiwan vents its urge for independence.    Chinese policymakers apparently have reviewed all their options regarding Taiwan's elections and decided against provocative moves. This is not overly surprising: China does not have the military capability to win a confrontation in the Taiwan Strait, and the costs of a show of strength are prohibitive. However, STRATFOR thought Chinese President Hu Jintao, under internal pressure from hardliners, would demonstrate Chinese strength and resolve in some way &mdash; possibly through <a href="/china_cornered_over_taiwan_rhetoric">overt pressure</a> on Taiwanese business interests on the mainland.    Something quite different, however, is occurring as both Taipei and Beijing woo Taiwanese business and work to further integrate the countries' economies &mdash; a move that undermines the island's bid for independence. Chen needs the support of the island's business leaders &mdash; who historically have supported the opposition Pan-Blue Alliance &mdash; and the 500,000 Taiwanese living on the mainland as he heads into tightly contested elections. Beijing is intensifying that pressure by allowing Pan-Blue to campaign for Taiwanese business votes on the mainland.   STRATFOR does not have clear evidence that Beijing has strong-armed Taiwan businessmen on the mainland, but it is no stretch of the imagination to assume that the Chinese let it be known that if Chen pushed too far, the business environment would become uncomfortable. Pressure from Taiwan's business community likely then prompted Chen to start offering concessions.  Chen presented his <a href="/taiwan_chens_business_concessions_risk_re_election">"four new measures"</a> offering greater health and education subsidies for mainland-based Taiwanese, and he also discussed increased shipping and transportation links when he spoke to Taiwanese businessmen on Jan. 30. The following day, Taiwanese Prime Minister Yu Shyi-Kun told a group of mainland-based Taiwanese businessmen that the island's government is working to offer greater access to the Taiwanese stock exchange for companies with significant mainland investments and operations.   China, for its part, is all too happy to increase Taiwan's economic ties with the mainland because it mitigates the island's willingness to declare independence sometime in the future. Zhang derided Chen's "peace and stability framework" &mdash; a plan proposed Feb. 3 to establish a demilitarized zone in the Strait, swap special envoys and establish liaison offices &mdash; as "deceptive talk." But on the same day, the deputy director of the Exit and Entry Bureau under the Ministry of Public Security, Han Yusheng, announced a five-point plan to simplify procedures for cross-strait travel. The plan includes extending the visa period for mainland residents to visit Taiwan and reducing restrictions on long-term residence permits and multi-entry travel documents for Taiwan residents.    Beijing is swapping the unprofitable, <a href="/taiwan_chen_baits_china_no_avail">aggressive tactics</a> it has used in previous elections &mdash; including violent threats and missile tests &mdash; for a charm offensive aimed at Taiwan's business community. This could prove a winning strategy. Although Hu's Taiwan policy is undoubtedly under severe scrutiny by Chinese political and military leaders wary of giving an inch on the sovereignty issue, in the short to medium term, increased economic ties will improve Beijing's chance to solve a problem politically that it does not have a hope of solving militarily anytime soon.

Taipei and Beijing are moving toward improving economic ties to reduce tensions caused by Taiwanese President Chen Shui-bian's push for a controversial security referendum. This is an unexpected reversal of strategy for Beijing, which previously attempted to change Taiwan's behavior primarily with threats.

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