China Lures Taiwanese With Free Schooling, But There's a Catch

(Bloomberg) -- For Taiwan’s government, China’s decision to offer new identity cards to islanders now living on the mainland is the latest salvo in a menacing pressure campaign. For Taiwan native Allen Cheng, it’s a shot at enrolling his son in a public school.

The 36-year-old equities analyst said the card, which entitles the roughly 400,000 Taiwanese living on the mainland greater access to public services, will make living in the southern Chinese metropolis of Shenzhen easier for him, his wife and two small children. Otherwise, he would face prohibitively expensive private school fees.

“This will serve us Taiwanese in China better,” Cheng told Bloomberg News. “It will make people like me more integrated.”

The ID card is just one piece of a broad strategy by Beijing to convince Taiwanese to abandon the policies of President Tsai Ing-wen, whose Democratic Progressive Party officially supports independence. China, which views the democratically run island as part of its territory, wants Tsai to accept that both sides are part of “one China” or replace her government with one that will.

China Lures Taiwanese With Free Schooling, But There's a Catch

While Chinese President Xi Jinping has stepped up military exercises near Taiwan, he’s relying on economic might to show the benefits of ties -- and the cost of damaging them. On one hand, he’s expanding incentives for Taiwanese to do business on the mainland in sectors from energy to finance. On the other, he’s luring away the island’s few diplomatic allies and challenging any international recognition of the government in Taipei, even by companies who sell T-shirts or airline tickets.

That strategy’s success with Taiwan’s 23 million residents will face a test in November, when Tsai’s party defends hundreds of seats in local elections. The vote gives the island’s more China-friendly opposition, the Kuomintang, the first chance to claw back influence after being swept from power over the past few years.

“China is taking a harder line and trying to create political embarrassment for Tsai,” said Steve Tsang, director of the China Institute at the School of Oriental and African Studies in London. “China is trying to make the administration look unreasonable, and potentially get voters to punish her.”

A survey by Taiwan’s Mainland Affairs Office in August found that 65 percent believed that China had an “unfriendly attitude” toward the Taipei government, compared with 57 percent before Tsai took office. A separate poll by National Chengchi University in June showed that 21.7 percent backed the DPP, compared with 25.3 percent for the KMT -- the party’s first lead in five years.

China Lures Taiwanese With Free Schooling, But There's a Catch

The election will be watched closely in Washington, since the U.S. provides military support to Taiwan and has taken a renewed interest in the island as its trade dispute with China widens. The White House vowed to “oppose China’s destabilization of the cross-strait relationship” last month, after the Central American country of El Salvador became the latest country to cut diplomatic ties with Taipei in favor of Beijing.

El Salvador’s Aug. 21 announcement cast a somber mood over Taiwan’s sprawling, Japanese-built presidential palace. Tsai -- just back from a trip to bolster Taiwan’s dwindling relationships in Latin America -- lashed out at China for challenging “the traditional power-led international order, coupled with increasingly complex trade conflicts.”

Taiwanese Foreign Minister Joseph Wu told Bloomberg News that China was using the island as a proving ground for turning its economic strength into “sharp power.” “Taiwan is on the front line, and I think the rest of the international community is increasingly aware of the situation and that we must deal with it together,” Wu said.

China Lures Taiwanese With Free Schooling, But There's a Catch

Beijing views the squabble as a domestic dispute and blames Tsai for rejecting the “one China” framework that underpinned a series of cross-strait economic deals under her KMT predecessor, Ma Ying-jeou. In an address to mark the start of his second term in March, Xi warned that efforts to widen divisions with Taiwan would be “punished by history.”

China has stepped up military patrols around the island while blocking its participation in international groups such as the World Health Organization. At the same time, it removed or relaxed a wide range of restrictions on Taiwanese investments, allowing firms based on the island to join infrastructure projects and apply for special tax benefits.

Beijing also introduced the new ID cards to give Taiwanese living on the mainland for more than six months access to things like public schooling and basic medical care and ease the process of getting a driver’s license or taking domestic flights. The Mainland Affairs Council in Taipei dismissed the cards as a “political ploy.”

China Lures Taiwanese With Free Schooling, But There's a Catch

Still, China’s ability to influence Taiwanese politics is limited. Tsai’s struggles to resolve stubborn economic issues such as stagnant wages and limited job opportunities likely play a larger role in her support. And residents with the strongest ties to China have never been part of the DPP base.

China must also take care not appear so aggressive that it risks a backlash, such as when the People’s Liberation Army fired missiles into the Taiwan Strait ahead of its first direct presidential election in 1996. The move was seen as helping then-President Lee Teng-hui, who supported “special state-to-state” relations with China, secure a clear majority of the vote.

“The missing link for the mainland is still finding that political sweet spot that can persuade the Taiwanese that reunification would benefit them,” said Rana Mitter, director of the University of Oxford China Center. “Taiwanese voters don’t respond very well to saber-rattling.”

China Lures Taiwanese With Free Schooling, But There's a Catch

Most Taiwanese, who have spent almost seven decades watching relations with China ebb and flow, would rather leave the island’s status ambiguous. Almost 70 percent surveyed by the Mainland Affairs Office said they wanted to maintain ties as they were with no preference for independence or reunification.

So, while some may be annoyed by Chinese efforts to squeeze Tsai, such as mainland calls to boycott Gourmet Master Co. bakeries after she visited one its 85C outlets in Los Angeles last month, many just shrug. “I come here every day to buy my bread, I’m not going to change that,” said Cybie Lin, 43. “It’s all just a lot of noise.”

In Shenzhen, the equity analyst Cheng has a similar opinion. He said he voted for the KMT in the 2016 presidential election and doesn’t know which way he’ll lean in November.

“I don’t want independence, I want the situation to stay as it is forever,” Cheng said. “In practice we’re independent. We have our army. Let’s keep going this way.”

©2018 Bloomberg L.P.