U.S.-China power struggle on the ballot in Taiwan’s election

Taiwanese voters cast ballots Saturday in an election that will determine the future direction of the world’s only Chinese-speaking democracy as it faces pressure to pick sides in a global power struggle between the U.S. and China.

President Tsai Ing-wen of the ruling Democratic Progressive Party is seeking a second term in the face of competition from Han Kuo-yu of the main opposition Kuomintang, which has governed for much of the time since World War II, and James Soong of the People First Party. Polls open at 8:00 a.m. and close at 4:00 p.m., with a result expected around 8 p.m.

Analysts widely expect a win for Tsai after she backed Hong Kong’s pro-democracy protests and oversaw a robust economy despite the U.S.-China trade war. There’s a “low probability” of an election upset, BNY Mellon Investment Management senior sovereign analyst Aninda Mitra wrote in a note Friday, saying he expects Tsai’s DPP to hold onto the presidency and the legislature.

Taiwanese laws bar publication of opinion polls until 4 p.m. on election day.

While issues such as wages, housing and air quality are important to voters, the self-ruled island’s complex relationship with China is the main political fissure in Taiwanese society. A victory for Tsai, whose party advocates formal independence from China, would likely mean four more years of no talks between the two sides on one of the region’s main potential flash points.

China, which claims Taiwan as part of its territory, cut off all contact with Tsai’s government after she declined to endorse the “one-China” policy after her inauguration in 2016. Since she took power, Beijing has sought to further isolate Taipei diplomatically by convincing smaller nations in the Pacific, Africa and Central America to switch sides.

“We do not rule out the possibility of discussions, dialogs and meetings between Taiwan and China, but they need to be conducted without preconditions,” Taiwan’s foreign minister Joseph Wu said at a briefing in Taipei Thursday. “If China wants to speak with Taiwan, they should speak with Taiwan as it is. Taiwan is a democracy.”

Despite the freeze on cross-strait ties and the U.S.-China trade war, foreign investors have continued to pour into Taiwan’s markets. Stocks saw their biggest annual gain in a decade last year, leaving the benchmark Taiex index just four percentage points off an all-time high.

The main index closed up 0.5% on Friday, with stocks seen benefiting in either scenario all rising in the last session before the election. The Taiwan dollar ended little changed Friday, rising for an eighth week in its longest winning streak since 2013.

The presidential election isn’t the only choice facing voters: The battle for control of Taiwan’s top lawmaking body could end up being more consequential in Saturday’s elections. If the electorate returns Tsai to the presidential office but gives the KMT a majority in the legislature, it will likely lead to four years of political acrimony and deadlock. The reverse could also be true.

A Japanese colony for the first half of the 20th century, Taiwan came under the control of China’s Nationalist government after World War II. It became a refuge for Chiang Kai-shek and his troops as they fled the Communists at the end of China’s civil war.

Under Tsai, Taiwan has aligned itself more closely with the U.S., interrupting eight years of closer ties with China under her predecessor Ma Ying-jeou. At stake in this election is whether Taiwan continues to move closer to the U.S. or reverts to an economic policy focused on opening more to China’s markets, as advocated by Han.

While there’s no sense of an open conflict between China and Taiwan, a Tsai victory would likely see Beijing increase efforts to conduct cyberattacks, invest in Taiwan’s media and restrict tourist visas, according to Jonathan Sullivan, director of the University of Nottingham’s China programs.

“In response, Tsai will continue to diversify Taiwan’s economy by looking to Southeast Asia and continue to cultivate close ties with informal allies, especially the U.S. and Japan,” he said.

Taiwan’s room to maneuver between the world’s two main economic powers may be diminishing. U.S. efforts to ensure it maintains the technological upper hand by restricting Chinese access to cutting-edge computer chips and components could weigh on the likes of Taiwan Semiconductor Manufacturing Co., the island’s largest company. Its two biggest customers are Apple Inc. and Huawei Technologies Co.

China, meanwhile, is increasing pressure on Taiwan to enter talks about eventual unification. In a speech directed at the Taiwanese public last year, Chinese President Xi Jinping said Taiwan’s separation from China could not be allowed to continue from generation to generation.

The most recent example of alleged Chinese meddling came on Thursday. Australia’s The Age newspaper reported that a senior KMT member attempted to coerce self-confessed Chinese spy Wang Liqiang, with both threats and financial incentives, to recant claims he had helped organize Chinese efforts to spread disinformation in Taiwan against Tsai.

The KMT official involved, Alex Tsai—no relation to the president—denied The Age report in a briefing in Taipei on Thursday. He countered that Wang was instead a DPP asset, paid by the ruling party to invent claims of Chinese influence operations against the Taiwanese government. The DPP countered by demanding the KMT explain whether it’s working with the Chinese government.