In many ways, Taiwan is stalled. The economy is sluggish and politically the country is acting at cross purposes: voting to strengthen ties with China but resisting any attempt to dilute local identity. Tsai Ing-wen's presidential victory in 2016 may have ignited hopes for a new mode of dealing with Beijing, but it also raised fears of renewed tensions. Yet Taiwan continues to develop as Asia's most open, tolerant and liberal society. If there's a national mood, it might be sunny pessimism.

The Mewling Tiger

Where did it all go wrong? The story is still being written but a few clear themes are emerging.

First of all there has been gross overinvestment in China. Since the late 1990s Taiwanese firms, with their advantages in language and culture, have invested some US$120 to US$200 billion in China, but only a fraction of that at home. Currently there are over 70,000 Taiwanese companies with operations in mainland China.

There's also been a lack of R & D and business upgrading. Too many Taiwanese companies moved to China for the cheap manufacturing rather than as part of a sophisticated industrial restructuring. Now with wages rising in China, and firms there capable of handling production (and design) themselves, many Taiwanese companies are finding themselves outdated and unneeded. That said, more and more Taiwanese are joining mainland China's creative industries such as animation, or high-tech fields like integrated circuit design, where Taiwan still enjoys a technological edge over the mainland.

In 2013 it was estimated that 600,000 of Taiwan’s 23 million people spent more than half of the year abroad. Three of every four were in China.

Identity Questions

In a 2016 poll on national identity that was conducted just days after Tsai Ing-wen's ascension to the presidency, a record high of over 80% said they considered themselves exclusively Taiwanese, while only 8.1% identified themselves as Chinese and 7.6% as both. This is a massive change from 20-odd years ago, when under 17% considered themselves Taiwanese. In addition, over 51% of respondents indicated a preference for eventual independence, compared to 15% who favoured unification and 25% who wanted to maintain the status quo.

An increasing number of locals see Taiwan as both their nation and homeland. Ironically, this is despite eight years of cross-Strait engagement with China under former president Ma Ying-jeou, which seems to affirm the self-identity of Taiwanese citizens.

Just a couple of months into the presidency, it seems that Tsai is departing from the pro-Beijing policy of Ma, moving towards closer ties with Japan, possibly with an eye on the latter's military might, but also with Southeast Asia, with the aim of developing more destinations for Taiwan's exports. But it remains to be seen if she will indeed keep Beijing at arm's length, as she had indicated during the elections.

It is largely believed that China is adopting a wait-and-see attitude while maintaining dialogue with Taiwan over culture and education.

The Other Big Issues

In addition to national identity and the economy, you can be certain to hear lots of other issues discussed on the news and on the streets.

For example, Taiwan badly needs educational, judicial, police, healthcare, taxation and pension reforms (current public-sector worker pensions would make precrisis Greeks envious). Every move, however, has been countered or watered down by special interest groups.

Rising inequality is another concern. Warren Buffet may note that his secretary pays a higher percentage of taxes than he does, but according to reports by Commonwealth Magazine, wealthy Taiwanese often pay less in real dollars than most workers by parking their wealth in property and stock purchases (which are effectively tax free). This is starving the government of needed revenue to fund everything from infrastructure to education.

Connected with the above, housing in northern Taiwan, especially Taipei, is becoming unaffordable, with costs at 15 to 20 times the average yearly income.

Nuclear energy is another hot topic these days, especially after the Fukushima disaster in Japan. Many young Taiwanese are also highly concerned with media monopolisation, especially with large companies with pro-China agendas appearing more than willing to stifle free expression.

One of the most contentious issues of the day is land confiscation. The Taiwanese government expropriates enormous amounts of land from farmers each year to provide space for development projects. Many people are fighting back and things often turn violent.

Government & Politics

A multiparty democracy, Taiwan's government is now headed by the independence-supporting DPP (Democratic Progressive Party), which controls both the executive and legislative branches. The main opposition party is the KMT (Chinese Nationalist Party), which held the reins for eight years prior to 2016.

The humbling defeat of the KMT in the elections shows that voters were disillusioned with Ma's economic and political policies. Surveys in the years prior indicate declining support for expanding economic activities with China between 2004 and 2015, coupled with a growing opposition to expanding cross-Strait economic ties. Many believed that Ma's engagement with China had strengthened Taiwan's dependence on the latter, without creating substantial economic growth.

The Future of Taiwan

Taiwan may be a small, politically marginalised island, but it's also an IT powerhouse with a highly educated and entrepreneurial population. Though it is coveted by the People's Republic of China (PRC) for nationalistic and strategic purposes, the US and Japan (and most of ASEAN) also hope to keep it as a democratic ally and bulwark against Chinese expansion.

Politically Taiwan may be divided about the future, but few have any desire to be ruled by Beijing. Tsai Ing-wen's landslide victory in the 2016 presidential elections may mean a new era in the negotiations with Beijing as the latter is forced to deal with the DPP, but Tsai also has a lot on her plate domestically – Taiwan’s economic woes, low income, a widening gap between rich and poor, pensions for the elderly and educational reforms, to name a few.

What's the future of Taiwan? An uncertainty wrapped in a layer of unpredictability.