78 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 historical divisions. After the 1949 Chinese Civil War, the communist government established the People’s Republic of China (PRC) on the mainland, while the KMT nationalists fled to Taiwan. Both initially claimed to be the official government of both areas, but today, mainland China views the island of Taiwan as a territory and aims for reunification, by force if necessary, under its One China policy. Given the global importance of Taiwan, Beijing wants that keystone under its control. This relationship is arguably the most sensitive geopolitical issue in East Asia, with far-reaching implications for regional stability and global security. China limits Taiwan’s diplomatic recognition and imposes trade restrictions, pressuring countries to avoid formally recognizing Taiwan and blocking free trade agreements. Most notable of the latter is Australia’s hesitance regarding those agreements in response to Beijing’s influence (Herskovitch, 2023). While many countries trade with Taiwan, they refuse to recognize Taiwan, fearing threats from Beijing. Some results of this recognition duality are symbolic diplomatic doublespeak. To participate in international organizations like the Olympics, Taiwan must use names like “Chinese Taipei.” Meanwhile, Taiwan’s sovereignty has separated Taiwanese identity from that of the mainland Chinese population. Taiwan operates its own government, economy, military, and democratic systems, which together foster a distinct identity. Elements of the pair’s identities are perceived as opposites: Simplified Mainland Mandarin/Traditional Taiwanese Mandarin, unification/individualism, and communism/democracy. The identity dissonance is particularly strong among Taiwanese citizens raised during the re-Sinicization period after World War II. More broadly, these contrasting identities reflect the struggle between authoritarianism and democracy. Since the democratization of Taiwan in 1987, Taiwanese identity has grown. But so have Chinese threats. Taiwan’s continuing efforts to define itself as sovereign and democratic serve as powerful statements of defiance. The island’s assertion of separate identity starkly challenges the One China policy, intensifying regional tensions. As Taiwan moves toward independence and embraces distinctness, China responds with threats and coercion. These efforts range from military posturing and cyberattacks to economic pressures and diplomatic isolation. China actively blocks Taiwan’s participation in the UN, the World Health Organization, the International Civil Aviation Organization, and Interpol (Tiunn, 2023). This isolation intensified after President Tsai Ing-wen’s election in 2016, when she rejected the notion of a single Chinese nation. Following her statements, Beijing severed official communication, further marginalizing Taiwan’s presence on the world stage (Hernández, 2016). Currently, Taiwan maintains only 13 formal diplomatic allies worldwide, a number that has dwindled as China agFigure 1 Trends in Taiwanese/Chinese identity of Taiwanese, 1992–2024 Source: Election Study Center, National Chengchi University (2025). Figure 1 Trends in Taiwanese/Chinese identity of Taiwanese, 1992–2024 Source: Election Study Center, National Chengchi University (2025). Cultural identity share of population (%)
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