On 13 January, Taiwan’s 19m voters will go to the polls to elect the successor to President Tsai Ing-wen. The election will also decide the composition of the 113-seat legislature, currently dominated by Tsai’s ruling Democratic Progressive Party (DPP). Whatever the outcome, the election will have major geopolitical implications, though it is unlikely to result in major changes to the cross-Strait status quo.

A closely watched election

Since the 2016 election, which shifted power from the Kuomintang (KMT) to the DPP, the Taiwan Strait has become the main geopolitical flashpoint in East Asia and the centre of US-China tensions. More frequent Chinese military activity in the Strait is now the norm, and US support for the island and Taipei’s attempts to reduce its dependence on mainland China has intensified.

This geopolitical backdrop has fuelled growing concerns about the risk of conflict over Taiwan and brought increased international attention to the upcoming election. These concerns are disproportionate. The primary effect of election’s outcome will be to determine whether Beijing reduces trade restrictions and the frequency of military exercises, or whether it ramps up pressure on Taipei. Moreover, Beijing’s reaction to the outcome will be influenced by further developments beyond the ballot.

A three-way race

A key feature of the 2024 presidential election has been the emergence of a strong candidate outside traditional party politics: Ko Wen-je, the founder of the Taiwan People’s Party (TPP). A presidential hopeful in 2020, Ko’s image as a non-establishment politician and his campaign for a “third way” have resonated with voters dissatisfied with the KMT and DPP, especially young voters.

Until November 2023, Ko consistently ranked second in opinion polls in the largely three-way race with frontrunner Lai Ching-te from the DPP and KMT’s Hou Yu-ih at a distant third. (A fourth candidate, business mogul Terry Gou, withdrew from the race at the last minute after announcing his candidacy in August.) Ko’s history with both parties and ambiguous line on domestic and foreign policy has put him in a powerful position to influence the election. This was particularly evident in the attempt by Ko and the KMT to field a joint ticket in October, which would have dramatically reduced Lai’s chances of winning. With the collapse of this nascent alliance and subsequent drop in support for Ko, the presidential election has largely returned to a familiar contest between the KMT and DPP.

Lai and his running mate, Hsiao Bi-khim, lead polls by a 3%-11% margin, making them the current favourites, but a Hou victory remains credible. With more than 10% of voters still undecided, questions about the reliability of polls, falling approval ratings for Tsai’s government, all against a broader backdrop of a struggling economy, there is room for plenty of developments between now and the election to shift the outcome.

Familiar divide

Cross-Strait relations are not the only issue shaping voters’ decisions – far from it – but outsized attention on them has reinforced familiar divides in how the parties approach support for independence from mainland China on the one hand, and support for closer ties with mainland China on the other.

If elected, it is widely believed that Lai would continue Tsai’s cross-Strait policy. Lai has been more outspoken about Taiwan’s sovereignty in the past but has recently toned down his rhetoric. This offers reassurance both to the US and to Taiwanese voters who reject changes to the status quo, but it has not changed Beijing’s opposition to Lai. Still, it is unlikely he would provoke a major crisis upon taking office. By comparison, both Hou and Ko favour more stable relations and closer communication with mainland China, though neither endorses the idea of unification, and both prefer close relations with the US. While an opposition win could help to stabilise cross-Strait relations, Taipei will still be under pressure from the US.

Beijing has so far refrained from outright threats or expanding military activities as a means of influencing the upcoming Taiwanese elections, likely to avoid possible backlash, which has occurred in previous elections where the DPP candidate was the favourite. Instead, Beijing has resorted to a familiar two-pronged tactic: reminding Taiwanese voters of the economic benefits of closer cross-Strait ties and the potential consequences of further deterioration in relations. In November 2023, Fujian authorities announced 15 measures making it more convenient for Taiwanese citizens to work, invest and live in mainland China; two weeks after that, Chinese authorities announced that Taiwan had violated the Economic Cooperation Framework Agreement (ECFA), a bilateral trade agreement. Depending on the outcome of the elections, further sticks or carrots will likely follow.

Even if Lai wins, it is unlikely that the outcome of the election itself would prompt military or economic responses from Beijing beyond the levels seen following then-US House Speaker Nancy Pelosi’s visit in 2022. Beijing will likely watch for subsequent developments, such as Lai’s policy statements on key cross-Strait sensitivities and the scope of US-Taiwan cooperation, to structure its responses. Regardless of what Lai says or does, fundamental uncertainty around Lai’s future positioning will work to maintain Beijing’s pressure on Taipei beyond the election.

Beyond geopolitics

Domestic issues, especially the economy, are equally high on voters’ priority lists. Taiwan's economic slowdown, frozen wages, inflation, and high youth unemployment have repeatedly fuelled public criticism of Tsai’s administration and the DPP.

Ko and Hou have leveraged this discontent by calling for wage increases and tax and labour reform, particularly policies aimed at easing the burden on young people and the elderly. Both candidates have also voiced support to deepening cross-Strait trade and investment flows as a way to boost Taiwan’s economy, even as they advocate for deepening Taiwan’s integration with the wider regional economy through regional free trade agreements.

By contrast, all three candidates have pledged to continue promoting foreign investment, technological development, and innovation to support Taiwan’s industrial development. Regardless of the election outcome, Taipei will continue its favourable foreign investment policies and incentive measures, such as tax credits and subsidies to incentivise foreign investment and reshoring Taiwanese investment in domestic advanced technologies and manufacturing.

Another point of contention concerns nuclear energy development and energy security, a politicised issue in Taiwan. All candidates agree on the importance of renewable energy to address the island’s energy security, especially the development of offshore wind. However, the opposition candidates disagree on the DPP’s timeline for carbon reduction, criticising it as too aggressive. Both candidates have also criticised Tsai’s and the DPP’s policy to phase out nuclear power (which currently accounts for 9.6% of Taiwan’s electricity generation) by 2025. While an opposition victory is unlikely to significantly change Taiwan’s renewable energy agenda, it can reduce the urgency for renewable energy and therefore potentially affect the timeline and incentives for certain renewable projects.

Whatever the outcome of the election, businesses will need to be prepared for a range of scenarios that could arise from Taiwan’s nuanced domestic environment and East Asia’s complex geopolitical dynamics.

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