IN FOCUS: China is set to wield bigger ‘carrots and sticks’ over Taiwan. Here's how it may impact ASEAN states
Ahead of Mr William Lai’s inauguration as Taiwan president on Monday (May 20), China has kept up military pressure while easing some travel and import curbs. Its message to the self-governing island is clear, say experts.

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SINGAPORE: Five days before Mr William Lai Ching-te’s inauguration as Taiwan’s president, its defence ministry detected 45 Chinese military aircraft around Taiwan, the highest single-day number this year. Twenty-six of the planes on Wednesday crossed the median line of the Taiwan Strait, which once served as an unofficial barrier between the two sides.
In a friendlier gesture, when lawmakers from Taiwan’s China-friendly opposition party Kuomintang (KMT) visited the mainland last month, China said it would restart the travel of Fujian residents to Taiwan’s Matsu islands and later allow group tours to other parts of the territory.
China also said it would approve the import of pomelo and other agricultural and fishery products from Taiwan.
Such a “carrot and stick” approach is likely to continue and intensify as China’s preferred way of dealing with Taiwan under Mr Lai, who takes over from Ms Tsai Ing-wen on May 20, say observers, as Taipei becomes more important to Beijing’s calculations amid a tussle for influence with the West and economic challenges at home.
Mr Lai won a historic third successive presidential term for the independence-leaning Democratic Progressive Party (DPP) in January’s elections, beating the KMT’s Mr Hou Yu-ih and Mr Ko Wen-je of the Taiwan People’s Party (TPP).
Beijing’s message to Mr Lai is clear, observers say: Taiwan will reap benefits if it plays ball in forging deeper cross-strait integration but face reprisal should it try pushing further away from China, which sees the self-governing island as part of its territory to be reunified with the mainland.
Amid growing pressure from China, analysts say Taiwan will look increasingly towards other states for economic and diplomatic mileage as Mr Lai attempts to maintain the cross-strait status quo of not declaring independence.
But there are limits on what Taipei can do, with the lack of a legislative majority potentially stonewalling efforts. There are also clear constraints on how far Mr Lai can expand or deepen Ms Tsai’s New Southbound Policy of closer economic and people-to-people links with South and Southeast Asian countries, as well as Australia and New Zealand.
“China is basically the primary economic lifeline for all the countries in the region,” Dr Hoo Tiang Boon, associate professor at the School of Social Sciences at Singapore’s Nanyang Technological University (NTU), told CNA.
“(Southeast Asian nations) will be very cautious to be seen as forging closer linkages with Taiwan … they have to be very mindful of and indeed sensitive to Chinese considerations.”
“CARROT AND STICK” APPROACH
Cross-strait relations have ebbed and flowed depending on the person and party that governs Taiwan.
Ties were strained from 2000 to 2008 when the DPP’s Chen Shui-bian was president. They improved considerably under his KMT successor Mr Ma Ying-jeou – including a landmark meeting in 2015 with Chinese President Xi Jinping – before deteriorating again when the DPP’s Tsai Ing-wen took office in 2016.
Troubles surfaced during her inaugural speech, which Beijing criticised as an “incomplete test answer” for not explicitly recognising the 1992 consensus.

The 1992 consensus is the understanding that both sides of the Taiwan Strait are part of one China, with each side having its own opinion as to what this means. China sees acknowledgement of the consensus – which the DPP has never done – as a baseline for dialogue, and official communications have been cut since 2016.
China subsequently enacted travel and trade restrictions, poached Taipei’s already limited number of diplomatic allies and stepped up military activity around the island.
The “two-hands” or “carrot and stick” approach has been Beijing’s long-term practice, Dr Qi Dongtao from the National University of Singapore’s (NUS) East Asian Institute told CNA.
“The soft hand, or the carrot, is to pull Taiwanese closer to China, and the hard hand, or the stick, is to deter the pro-independence forces from pushing Taiwan away from China,” added the senior research fellow, who specialises in cross-strait studies.
“Just like Washington’s Taiwan strategy toward Beijing consists of both deterrence and assurance, Beijing’s Taiwan strategy also has these two components.”
But China is using bigger sticks by increasing military and grey zone pressure while making the economic “carrots” more appealing, Mr Brian Hart, a fellow at the think tank Center of Strategic and International Studies’ China Power Project, told CNA.
“The timing before Lai’s inauguration could allow China to cast itself as benevolent and to cast Taiwan as spurning China’s overtures,” he added.
“If China escalates pressure on the new Lai administration following the inauguration, Beijing can claim it offered concessions that were ignored.”
Beijing did not only announce the relaxation of travel restrictions when the group of KMT lawmakers visited China from Apr 26 to 28.
Earlier in April when former Taiwan president Ma of the KMT led a student delegation to China, he was hosted by President Xi at Beijing’s Great Hall of the People, where foreign leaders normally hold talks with top Chinese officials.

These gestures carried a message for Mr Lai, say analysts.
China’s interactions with the KMT and the subsequent benefits offered to Taiwan are aimed at setting a model for Mr Lai’s future China policy, Dr Qi said.
Beijing is trying to underscore that “everything can be up for discussion” so long as Taiwan accepts China’s terms, said Associate Professor Chong Ja Ian from NUS’ Department of Political Science.
“Note that discussion implies neither agreement nor commitment to an agreement,” he added.
Neither is China making “one-sided sacrifices” in easing curbs on Taiwan, Mr Hart pointed out, as it stands to benefit from more tourism and economic activity.
China’s economy is facing numerous challenges, including property woes, local government debt and a shrinking population. Sino-West tensions are also weighing heavy - earlier this week, the US announced it would raise tariffs on an array of Chinese imports, including electric vehicles and semiconductors.
MORE OPPOSITION CHECKS ON DPP
Mr Lai indicated on the night of his electoral triumph he would continue Ms Tsai’s cross-strait, foreign and defence policies, such as maintaining peaceful relations with Beijing, maintaining the Taiwan Strait status quo and bolstering Taiwan’s defences. The message of continuity is reflected in the lineup of his administration, experts note.
He has appointed National Security Council (NSC) secretary-general Wellington Koo as his defence minister, while outgoing foreign minister Joseph Wu will take over from Mr Koo at the council. The NSC advises the president on national security issues.
Former Taichung mayor Lin Chia-lung will serve as minister of foreign affairs, while Mr Tsai Ming-yen will remain as director-general of the National Security Bureau.
Mr Chiu Chui-cheng will be head of the Mainland Affairs Council (MAC). He was vice-chairman of the semi-official Straits Exchange Foundation and former deputy head of the MAC.

“If you look at the foreign policy, national security circles … these are all familiar and old faces who all played an active role in the Tsai Ing-wen administration,” said Associate Professor Huang Chin-Hao of the Lee Kuan Yew School of Public Policy at NUS.
“You can count on this continuity of key advisors on foreign and security policy matters to continue to provide input that will ensure predictability, stability and continuity in William Lai’s policies – at least in the near to medium term,” added Dr Huang, who’s also the author of “Power and Restraint in China’s Rise”.
The KMT, which will wield more influence in the legislature during Mr Lai’s term, has also urged the incoming president to use his inaugural address to ease tensions with China.
Senior KMT lawmaker Shu Yu-zhen said on May 12 Mr Lai should use his speech to “show goodwill and (try to) facilitate dialogue" with China, and ease the "hostile spiral" of ties.
The opposition KMT made gains in January’s legislative elections, adding 14 seats to make up 52 in the 113-strong Legislative Yuan. The DPP lost ground with 51 seats, down from 61 previously.
The TPP, a relative newcomer to the political fray, bagged eight seats to secure the swing vote. The two remaining seats in the 113-strong Legislative Yuan went to independents aligned with the KMT.
The KMT’s Mr Han Kuo-yu and Mr Johnny Chiang were also elected as legislative speaker and deputy speaker respectively in February.
Analysts say that a KMT-led parliament could make it more challenging for Mr Lai to push through his policies, but any that are less favourable to cross-strait ties could be checked by the opposition.
It could also hamper policies deemed unfriendly towards mainland China, said Mr Wang Kung-yi, head of Taiwan International Strategic Study Society, a Taipei think tank, as reported by the South China Morning Post (SCMP).
“Although the KMT is not the absolute majority of the legislature, it has the help of two independent legislators who are friendly to the KMT. The KMT can also cooperate with the TPP – which is relatively friendly to Beijing – on certain Lai measures that would fuel a cross-strait impasse,” Mr Wang said.
The state of play isn’t lost on Mr Lai, who extended an olive branch to the opposition and also to China during his election victory speech.
He pledged to carefully study the policies and positions of his two rival candidates, tap talent from different political parties for personnel appointments and prioritise issues that have consensus across political parties.
Taiwanese scholars have said China’s recent measures are related to the situation in Taiwan’s Legislative Yuan. With no party holding an absolute majority, this allows Beijing some leeway to take a softer approach, said National Taiwan Normal University professor Huang Hsin-hao as reported by Focus Taiwan.
Expressing similar views, Mr Chao Chun-shan, an honorary professor with the Graduate Institute of China Studies at Tamkang University, added that China aims to elicit a response from Mr Lai during his inauguration speech.
“Beijing hopes that Lai will provide a more positive and proactive response regarding cross-strait relations in his speech on May 20 ... and not mention phrases that could easily escalate hostilities between the two sides,” Mr Chao said as reported by Focus Taiwan on May 2.
STAYING SOUTHBOUND
Mr Lai has also stated he favours more exchanges and dialogue with Beijing, even as he pledges to maintain the cross-strait status quo. Late last month, he expressed hope that “the ruling parties on both sides of the Taiwan Strait will responsibly start healthy dialogues”, reported Taiwanese media.
"China needs to be confident and willing to deal with the democratically elected and legitimate government entrusted by the people of Taiwan … only then can exchanges across both sides of the Taiwan Strait proceed on the right path,” local media reported him saying a day later.
But analysts say Beijing, which has labelled Mr Lai a “troublemaker” and “separatist”, is unlikely to trust Mr Lai because of his reputation. Mr Lai described himself as a “pragmatic worker for Taiwanese independence” in 2017 when he was premier.

“I think there’s nothing that any democratically elected Taiwanese leader or government can say that would assure China, and William Lai himself comes from a political background and political party that represents pro-independence,” said NUS’ Dr Huang.
Mr Lai is expected to press on with efforts to further reduce Taiwan’s economic dependence on China and deepen the island’s regional integration, observers note, especially as Beijing remains deeply distrustful of him. To this end, he is expected to uphold the New Southbound Policy (NSP), the Tsai administration’s flagship external strategy.
Since its launch in 2016, a higher proportion of Taiwan’s investments have flowed to the 10 members of the Association of Southeast Asian Nations (ASEAN), six South Asia nations including India and Bangladesh, as well as Australia and New Zealand.
In 2021, NSP countries accounted for 31 per cent of Taiwan’s total outward direct investment, up from 10 per cent in 2016, according to a 2022 NUS East Asian Institute research paper. China’s share declined from 44 per cent to 32 per cent during the same period.
While Taiwan’s own efforts have played a part, other factors such as the US-China trade war, a global supply chain shakeup wrought by COVID-19 lockdowns and Beijing’s economic challenges have also contributed to this trend.
Analysts agree that under Mr Lai, Southeast Asia will still have pride of place in Taiwan’s diversification strategy.
A 2022 report by the Taiwan-Asia Exchange Foundation found Southeast Asian nations account for the lion’s share of Taiwan’s exports under the NSP, while also attracting more Taiwanese capital.
“Southeast Asia has become the most important destination (for Taiwan) … in terms of becoming a new Asian factory and the focus of supply chain relocation,” Ms Kristy Hsu, director of the Taiwan ASEAN Studies Center at Chung-Hua Institution of Economic Research, a Taiwan-based think tank, told CNA.
Southeast Asia also stands to gain from greater inflows of Taiwanese investments and goods, analysts note, especially considering Taiwan is a production powerhouse in semiconductors, which are a critical component in modern electronics.
Taiwan produces more than 60 per cent of the world’s semiconductors and over 90 per cent of the most advanced ones, according to an SCMP report in October last year.
LOOKING EAST AND WEST?
Mr Lai has “every incentive” to continue the NSP, given how he oversaw its implementation while serving as premier under the Tsai administration, Dr Hoo told CNA.
At the same time, Dr Hoo believes he may further align the NSP to America’s regional initiatives as Washington and Beijing tussle for influence in Asia. The Taiwan government has linked the NSP to the US Indo-Pacific strategy since 2018.
This could potentially strengthen links between Taiwan and its main security partner amid growing Chinese assertiveness as Taipei would be seen as helping to advance American interests in the region.
“Depending on who’s in power in 2025 in Washington – either Biden or Trump – whatever their new economic policy, I suspect William Lai will try and align and connect the objectives of the NSP to America’s economic policy,” said Dr Hoo.
Mr Lai is likely to double down on efforts to enhance ties with not just the US but the broader West as well, particularly the European Union, he added.
Taiwan authorities said earlier this week that they will monitor several upcoming elections in Europe for any cross-strait policy shifts, following President Xi’s first trip to the continent in five years.
If Mr Lai is “creative”, he may also try to connect the NSP or at least strategically align it with the regional political economy, particularly other democratic neighbours such as Japan and South Korea, Dr Hoo said.
NUS’ Dr Huang noted that while Tokyo and Seoul are traditionally not part of Taiwan’s southbound policy, the island has always enjoyed “quite cordial and friendly ties and exchanges historically” with the two countries, which are US allies.
For Japan, Dr Huang said the personal connections between Taiwanese leaders and Japanese leaders “run quite deep”. Mr Lai attended the funeral of Shinzo Abe, Japan’s former prime minister who was assassinated in 2022, for instance.

Mr Lai has already signalled his intent to forge closer ties with Japan. Last week, he said that he hoped to strengthen cooperation, create economic prosperity for both sides and “jointly maintain peace and stability in the Indo-Pacific region”.
He also cited a warning from the late Abe that “Taiwan’s crisis is Japan’s crisis”, reported SCMP. Abe made the remarks in 2021, saying an armed invasion of Taiwan would be a grave danger to Japan as he noted the proximity of several Japanese islands to Taiwan.
Beijing has reacted strongly. “The DPP authorities are essentially telling the world that their underlying logic is to ingratiate themselves with Japan, sell Taiwan out and seek ‘Taiwan independence’ through soliciting foreign support, said Chinese Foreign Ministry spokesperson Lin Jian during a daily press briefing on May 9.
“Let me stress that the one-China principle is a universal consensus. No separatist attempt for ‘Taiwan independence’ will get anywhere, whatever its form or pretext.”
EVEN IN SOUTHEAST ASIA, CHINA LOOMS LARGE
China’s economic clout, especially in Southeast Asia, will ultimately limit Taiwan’s regional engagement drive, analysts say.
China is the largest trading partner for practically all Southeast Asian countries. The latest edition of an annual ISEAS-Yusof Ishak Institute survey found that China continues to be seen as the most influential economic power in Southeast Asia.
Trade between ASEAN and China came in at US$911.7 billion in 2023, according to the Mission of the People's Republic of China to ASEAN. In comparison, trade between ASEAN and Taiwan was US$117.2 billion in that same period, according to data from Taiwan’s Ministry of Economic Affairs.
“(Southeast Asian countries) cannot afford to forgo the Chinese market, and this will always be a factor as long as you are in the region,” Dr Hoo said.
China was also perceived as the most influential political and strategic power in the region, followed by the US, according to the institute’s 2024 State of Southeast Asia poll.
Notably, Beijing pipped Washington as Southeast Asia’s preferred superpower if countries in the region were forced to choose between them. Respondents from the region had leaned towards the US in the last four surveys.
“Beijing has made it quite clear that the issue of Taiwan is their number one core interest … all the Southeast Asian countries will be very mindful of that,” Dr Hoo pointed out.
Even with more people-to-people, cultural and tourism links between Taiwan and Southeast Asian countries, it is “not necessarily going to have an impact in terms of enhancing Taiwan’s international space, or if you will, international influence”, he added.

Taiwan’s diplomatic circle has dwindled to 12 from 22 under the past eight years of DPP rule as nations switched sides to China. Most of the island’s remaining allies are located in Latin America and the Caribbean as well as the Pacific, with none in Asia.
Meanwhile, all Southeast Asian nations have their respective one-China policies that either explicitly recognise the People’s Republic of China as China’s government or leave it vague, an indication of how challenging it is for Taiwan to expect overt support from the region.
Taiwan also remains reliant on the Chinese economy. Despite simmering tensions, China is Taiwan's top trading partner, with cross-strait trade totalling US$224 billion last year. The island runs a trade surplus with its much larger neighbour, which accounted for about 35 per cent of Taiwan’s exports in 2023.
Mr Lai will thus maintain a careful balancing act as he leads Taiwan into a new and uncertain chapter, experts say.
“William Lai is going to strike a tone of pragmatism, he’s not going to declare any sort of de jure independence, he’s not going to alter the status quo arrangement that’s already been put in place for many decades,” NUS’ Dr Huang said.
“What he wants to convey, most importantly, is this message of continuity and reassurance to all stakeholders involved – not just China, but also countries in Southeast Asia will be watching.
“I think Taiwan understands it has limited space to operate, but it’s going to make the most out of that limited space.”