Taiwanese Leader Tsai Says Beijing Reverting to Coercive Tactics

(Bloomberg) -- Relations with China are becoming more fraught as Beijing increasingly reverts to threatening and intimidating its neighbor, Taiwan President Tsai Ing-wen said while vowing not to return to “the old path of confrontation.”

Tsai’s frank comments during a New Year’s Eve address in Taipei come at a sensitive time, weeks after U.S. President-elect Donald Trump angered Beijing by accepting a protocol-breaking phone call from the Taiwanese president.

The 10-minute conversation on Dec. 2 was the closest a Taiwanese leader has come to getting formal recognition from Washington since the U.S. established ties with the Communist government in Beijing almost four decades ago.

“Step by step, Beijing is going back to the old path of dividing, coercing, and even threatening and intimidating Taiwan,” said Tsai, 60, according to a translation of her remarks. “We hope this does not reflect a policy choice by Beijing, but must say that such conduct has hurt the feelings of the Taiwanese people and destabilized cross-strait relations.”

“The Republic of China is an independent, sovereign country,” Tsai said, referring to Taiwan’s formal name and calling for “new models for cross-strait interactions.”

For more on Taiwan’s uneasy relations with China, click here.

Relations between Taiwan and China have soured since Tsai became the island’s president in May following a landslide electoral win. She has declined to endorse the One-China policy, a longstanding acknowledgment that the two are part of the same China, even if they disagree on what that means. China considers Taiwan a breakaway province, while the Taiwanese constitution claims its territory includes mainland China.

Much of Tsai’s briefing was devoted to her plans for the economy, including an effort to spur domestic demand with a mid- to long-term public-works blueprint. “Next March, the cabinet will unveil a comprehensive, forward-looking infrastructure development plan,” she said.

Tsai’s cabinet, led by Premier Lin Chuan, earlier proposed a budget that included only moderate increases to overall spending and about $6 billion for public works. As the economy stagnated, central bank Governor Perng Fai-nan stressed the need for government investment in areas such as infrastructure while Lin was more focused on the deficit. The budget is still being debated in Taiwan’s legislature.

‘Most Important Mission’

Tsai said Saturday that additional spending could be added to the current budget for infrastructure development, or a special budget could be approved. The government will work to encourage private investors to follow suit, the president said.

“The most important mission in 2017 is to stimulate Taiwan’s economy by all means,” she said.

Taiwan’s economy was set to grow by 1.35 percent in 2016 and 1.87 percent in 2017, the government forecast in November. The central bank kept its benchmark interest rate unchanged in December and predicted mild economic growth in 2017. A new Apple iPhone model may bolster Taiwanese electronics makers, while rising oil prices will boost the export of petrochemical products, according to economists.

Wild cards include Trump’s comments after his call with Tsai that the U.S. acceptance of the One-China policy should be contingent on better trade-deal terms, which has fueled uncertainty over world-power relations. In the meantime, Taiwan lost a West African ally to China, as Beijing continues to warn countries around the world not to challenge the One-China principle. China on Dec. 29 also urged the U.S. not to allow Tsai to pass through airports in the U.S. en route to Central America in January.

Economic Vision

Amid global uncertainties -- both geopolitical and economic -- Tsai is returning to the economic vision she laid out in her campaign. It addresses longer-term issues that plague Taiwan’s economy, including the task of pushing its contract manufacturing industries higher up the value chain. She is also championing innovation in key industries such as the Internet of Things, biotechnology and national defense. An office to promote Taiwan as Asia’s Silicon Valley opened in December.

Tsai said Saturday that her government remains committed to ending the use of nuclear power as an energy sources as well as reducing carbon emissions. Other types of infrastructure projects under review include integrating public transport, cloud infrastructure, drought and flood resistance, hardware and software for an aging population, and basic science research.

To contact the reporters on this story: Debra Mao in Taipei at dmao5@bloomberg.net, Adela Lin in Taipei at alin95@bloomberg.net. To contact the editors responsible for this story: Stanley James at sjames8@bloomberg.net, Daniel Ten Kate at dtenkate@bloomberg.net, Ros Krasny, Stephen West

©2016 Bloomberg L.P.