Butter or Guns: Taiwan’s Economic Policy Toward China

Abstract

ABSTRACT Tensions between China and Taiwan have been heightened significantly lately. This paper is aimed at investigating the cross-Strait relations from Taiwan’s perspective concerning, in particular, Taiwan’s economic policy toward China. Indeed, China has long been Taiwan’s largest trading partner; yet, political relationship between the two has fluctuated over time. On the one hand, China has been an attractive market for Taiwanese businesses, but one the other hand, there have also been economic and security concerns about Taiwan’s dependence on China. This paper shows the connections between political and economic factors which jointly affect Taiwan’s economic policy toward China. It argues that there may be a general equilibrium—a median voter—but it has often been distorted by the institutional constraints in Taiwan’s political process.