The relationship with China has become increasingly ambiguous, with the desire for independence at odds with the drive for greater economic integration, experts on cross-strait relations said at a recent meeting in Tokyo.
The scale of investment in China has amassed to a staggering US$70 billion since 1987.
The flow of people across the Strait has also been steady, with one million locals settling in, or returning to China, roughly 400,000 of them in and around Shanghai, experts at the conference organized by Tokyo's Keio University late last month said.
The migration is largely due to the relocation of production bases in China by local semiconductor and personal computer manufacturing contractors, said Leng Tse-Kang, a political economist from Taipei's National Chengchi University.
"The main reason for the new initiative is to cut costs, enhance international competitiveness and maintain global production networks," Leng said.
Such companies are largely immune from the risk of a takeover by Chinese interests if cross-strait relations deteriorate seriously due to the involvement by their brand-holding partners -- usually Japanese or US firms.
Industry, which puts profit before politics, must internationalize operations if they want to retain their technological advantage and remain competitive, Leng said, but the government of the island has imposed some limits on investment in the name of national security.
"Many domestic factors constrain policy flexibility and efficiency. Taiwan's democratic politics and its desire to preserve the democratic system have [become] entangled with business initiatives to explore the booming Chinese market," he said.
Industry pressure has prompted a call from Premier Yu Shyi-kun to resume dialogue on the restoration of transport, trade and postal communications dirct links.
The move follows Taipei's decision to allow Taiwan-based carriers to operate charter flights to China during Lunar New Year holidays, that made brief stops in Hong Kong and Macau -- the first since direct links were severed in 1949 at the end of a civil war.
The landmark flights only got off the ground after heated debate and the government rejected an appeal from lawmakers to allow direct flights, invoking security fears.
Samuel Wu (
"With the direct link it would take one and a half hours to go from Shanghai to Taipei: It would be possible for executives to do the trip in one day. Most likely they would then choose Taipei as their headquarters," he said.
Wu said the country should be bold in efforts to increase ties with China because it risks isolation from an international community eagerly courting China.
"Economically the two sides are becoming closer and closer, but militarily and politically the two sides are becoming more and more apart," he said.
"Taiwan should locate itself in a strategic way in international trade and politics. If foreign investors perceive it as a strategic gateway [to China], then Taiwan will gain respect and money," he said, noting the island could influence China in culture and politics.
While the process of economic integration may seem unstoppable, a military stand-off still casts its pall.
Current cross-strait relations may seem less strained, but President Chen Shui-bian's (
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