Taiwan braces for election battle

Taiwan President Ma Ying-jeou at a rally on 12 June 2012
Image caption China-friendly Taiwan President Ma Ying-jeou is running for re-election

China and the economy are the key issues in a neck-and-neck race for Taiwan's presidency between incumbent Ma Ying-jeou and main challenger Tsai Ing-wen.

Saturday's vote comes with the island - still claimed by China - at a crossroads.

President Ma, who has taken relations with China to the best they have been since the end of a civil war in 1949, is urging voters to give him another term to further improve ties, saying a vote for him is a vote for peace.

He wants to negotiate a peace treaty with Beijing if re-elected. Since he took office in 2008, more than three million Chinese tourists have visited, pumping $5bn (£3.3bn) into the economy, according to him.

His China-friendly approach has also brought about regular direct flights and shipping links, as well as a landmark trade deal that cuts tariffs on hundreds of types of Taiwanese exports to mainland China.

Housing woes

But some voters are concerned that Mr Ma, from the Nationalist Party or Kuomintang (KMT), is too focused on China and that his policies will pave the way for unification with the mainland.

His main challenger, opposition party leader Tsai Ing-wen from the Democratic Progressive Party, has warned he is moving too fast and that Taiwanese people should first decide what kind of relationship they want with China before signing agreements.

It is a very close race. A third candidate, James Soong, a former leader of Mr Ma's party, could pull voter support away from him.

The outcome could change Taiwan's relationship with its giant neighbour, long-time rival and biggest trading partner China.

While Mr Ma accepts the principle that Taiwan and mainland China belong to one China, Ms Tsai rejects this.

High-ranking Chinese officials in recent days have made subtle but clear suggestions that relations could be jeopardised unless she accepts this principle, and that dialogue can only continue if she agrees Taiwan is not a separate country.

China wants the island to be reunified eventually and has not renounced the use of force to take it back.

The economy has also become a major issue in the election.

Despite the achievements of Mr Ma's pro-China policies, the benefits have not made a big enough dent on the economy. Economic growth slowed in his first term - which coincided with the global economic downturn - and unemployment rose.

Image caption Opposition party leader Tsai Ing-wen is the biggest challenger to Mr Ma

Only at the beginning of this year did tariffs drop to zero on most of the 539 types of exports qualifying for tariff cuts under the trade deal.

While mainland Chinese companies have invested $175m in Taiwan since Mr Ma's administration began allowing such investments in 2009, that is just a fraction of the $12bn Taiwanese companies poured into China last year.

Mr Ma's opponents argue it is mainly big businesses and the rich that have benefited from his policies - which gave companies greater market access to China but have been blamed for fuelling a further flow of capital and jobs to the mainland.

Meanwhile the wealth gap has widened. And property speculation by the rich - partly due to Mr Ma's China policies - has driven up home prices to unaffordable levels for many.

"I was planning to buy a home, but in the past three years, property prices have increased by 30%, but my wages have only gone up by 3%. Now I can't afford to buy anymore," said Lin Hui-jing, a supporter of Ms Tsai.

Business fears

Dissatisfaction over the economy, coupled with fears about China's growing influence, could swing votes in Ms Tsai's favour. If that happens, she would become Taiwan's first female president.

Taiwanese voters - even husbands and wives - are divided over which candidate is the best one to guide Taiwan.

Image caption Taiwan presidential candidate James Soong used to be a member of Mr Ma's party

"I used to vote green (Ms Tsai's party colour), but later I realized Taiwan's economy can't be detached from China. Without Chinese tourists, business will be bad for us," said Andy Chen, a sales manager at Vigor Kobo, a company that operates souvenir shops in Taiwan.

Sales at the store have gone up tenfold since Mr Ma began allowing Chinese tourists to visit in 2008. Mr Chen and his employees will be anxiously watching the race together on election night.

The company and many others fear the millions of dollars they have poured into building new hotels, buying tour buses and building more stores will be wasted if Mr Ma loses.

But Mr Chen's parents support Ms Tsai. They resent Mr Ma's party for its previous decades of authoritarian rule.

Retiree Kuo Chien-ming believes Taiwan's sovereignty is most important.

"I'm afraid we'll be swallowed up by China. Taiwan is not a part of China," said Mr Kuo. He was at a rally for Ms Tsai alone - his son does business with China and supports Mr Ma.

The United States - Taiwan's most important security ally - is also closely watching the election. A souring of ties between Beijing and Taipei could affect Washington's relations with China too.

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