Taiwan's economic importance to China and the Asian region is due to its growing economy and status as a primary regional exporter and importer. Indeed, the Republic of China's Directorate-General of Budget, Accounting and Statistics indicated the country's 2006 economic growth rate was a strong 4.39 percent. [FN60] Moreover, Taiwan could count mainland China, Hong Kong, Japan, and Singapore as four of its top five export targets in 2004. [FN61] That same year, Taiwanese exports to Indonesia, the Republic of Korea, Malaysia, the Philippines, Thailand, and Vietnam exceeded well over one billion dollars for each country. [FN62] Taiwan itself is a key destination for neighboring countries' products. In 2004, for example, Japan, mainland China, and Indonesia were among the top exporters to Taiwan. [FN63] That same year, imports to Taiwan from Indonesia, Malaysia, the Philippines, Singapore, and Thailand surpassed two billion dollars for each country. [FN64] Taiwan is therefore an economic powerhouse, and a fundamental component of the Asian economic system.

In its quest to assume leadership of Asian economic integration, China may need Taiwan to a greater degree than that to which Taiwan is amenable. At best, Taiwan is a reluctant, if not unwilling, Chinese partner. It seeks to maintain stable separation from China, which could limit the ultimate degree of regional integration. [FN65] Compounding China's difficulties with its cross-strait rival, Taiwan's President, Chen Shui-bian, has signaled the possibility of de jure independence for the island. He has, for instance, rejected the "One China" principle, which he believes undermines Taiwan's own sovereignty. [FN66] More recently, in what China perceived as an act of defiance, President Chen ended the National Unification Council and the Guidelines for National Unification, both of which had been effectively defunct yet important symbols of the island's political connection to the Mainland. [FN67] At a minimum, Taiwan's tendencies toward independence are a minor distraction to China's larger objectives for Asia, diverting diplomatic energy to issues of cross-strait relations rather than to its efforts to drive Asian economic regionalism forward. However, China's inability to rein in Taiwan's separatist identity could also pose a complete obstacle to Chinese leadership in crafting an Asian-Pacific economic bloc by frustrating China-led plans for integration and altering other countries' perceptions of the Mainland's leadership capabilities.

Already, other countries and institutions tread a fine line between appeasing China and acknowledging Taiwan's de facto, and nearly de jure, independent sovereignty, which indicates the limits of Chinese power as well as the importance of Taiwan in international relations. Even though China does not recognize the island as a separate country, Taiwan still maintains formal diplomatic relations with twenty-four nations. [FN68] Numerous countries have established unofficial diplomatic organizations in order to engage in commercial relations with Taiwan, which is represented in 122 countries. [FN69] Furthermore, at least one major regional economic association, APEC, has bypassed the issue of Taiwanese independence through some diplomatic maneuvering and semantics. It included Taiwan separately from China in its membership by using the term "member economy" instead of "member country" or "member state." [FN70] That so many nations are willing to circumvent the Mainland's "One China" policy is a sign of Taiwan's economic significance both regionally and globally.

China apparently recognizes Taiwan's distinct presence and has taken steps to counteract this rival's separate ascendancy in the region's economic affairs, again utilizing agreements rather than resorting to a show of military force. Indeed, China has assumed a less aggressive stance toward its cross-strait neighbor in recent years. It has seemingly resigned itself to allowing Taiwan to be functionally, though not formally, independent. [FN71] A more outwardly harmonious relationship with the Republic of China may be part of the Mainland's larger plan to bolster its leadership prospects. As some analysts have observed, "[i]f the Olympic Games in Beijing in 2008 were held against a background of rapprochement across the strait, that would greatly assist China's efforts to project itself as a responsible world power." [FN72] Such projections, as a component of what is effectively a public relations campaign on a global scale, could, in turn, build China's reputation as a natural choice to lead an Asian-Pacific economic bloc.

Instead of focusing on Taiwan itself, China has directed more diplomatic attention to regional economic agreements, especially with ASEAN, as a means of offsetting Taiwan's strong position in Asia. Specifically, the ASEAN-China Framework Agreement (discussed infra), with its attendant increased market opportunities, could cause an exodus of Taiwan-based businesses to the Mainland. [FN73] Burgeoning, China-initiated regional trade agreements may lead to the wholesale exclusion of Taiwan, creating a China-centric economic system in the area. [FN74] Moreover, such economic exclusion of the island through China's amicable relations with ASEAN could, in effect, suppress Taiwan's leanings toward independence. [FN75] Thus, China's pursuit of agreements with ASEAN appears to be a fruitful strategy both economically and politically. It could prove that a form of Asian economic integration is possible without Taiwan, but given Taiwan's economic and financial importance to the region, such a bloc seems unlikely to be successful in balancing similar Western institutions. Undoubtedly, an Asian economic bloc would be comparatively weak and incomplete without Japan, Taiwan, or South Korea.

C. Korea