Event

On 11 January 2020, incumbent President Tsai Ing-wen was comfortably re-elected after a landslide victory at the presidential elections with 57% of the vote, ahead of the Kuomintang’s candidate (38%). Her Democratic Progressive Party (DPP) also kept its parliamentary majority – with less seats though – after legislative elections. The turnout (75%) was higher than in the 2016 elections.

Impact

Her chances of running a second mandate seemed very uncertain after she largely lost local elections in 2018, among other things due to socioeconomic discontent. However, protracted mass protests and defiance against pro-Beijing authorities in Hong Kong have probably been decisive in boosting Tsai’s re-election. By an uncontested support to the pro-independence president and her party, the population – more attached to democracy than ever – has indeed expressed its rejection of China’s proposal to apply the ‘one country, two systems’ principle in Hong Kong. Tsai’s second term and a DPP majority should allow for policy continuity and maintain the pro-investment focus, including the relocation of Taiwanese companies away from mainland China (notably to circumvent US tariffs), whereas some tax reforms could be in the pipeline to address the population’s evils of high housing prices and the wealth gap. 

The biggest risk to the MLT outlook will remain the relation with Beijing, which in fact was what was really at stake during the latest elections. Since 2016, bilateral relations have deteriorated as Tsai’s pro-independence stance faced China’s growing diplomatic, economic and military pressures. Therefore, the political outlook for the next four years is negative with Xi Jinping expected to increase pressure on Taiwan in order to reach the eventual Chinese reunification. However, with Tsai as president and a population less and less sharing the Chinese identity, an increasingly impatient Xi Jinping might gradually come to the conclusion that the reunification goal will be impossible to achieve peacefully. Hence, Xi Jinping’s insistence will grow in the coming years and so will the conflict risk, as the US will keep a central role in future cross-strait developments and is likely to remain Taiwan’s closest partner as the China-US rivalry intensifies. Meanwhile, given continuity in policy, Credendo’s political risk rating remains unchanged at 1/7.

Analyst: Raphaël Cecchi – r.cecchi@credendo.com