TAIWAN STRAIT CONFLICT

Bingyuan Hsiung

In 1949, the Chinese Civil War ended with the victory of the Communist People's
Republic of China (PRC). The government of the Republic of China (ROC), controlled by
Chiang Kai-shek and the Kuomintang (KMT), and 1.3 million anti -Communist Chinese
supporters fl ed from mainland China. The ROC government relocated to the island of
Taiwan. The territory under ROC control was reduced to Taiwan, Hainan, the
Pescadores Islands (Penghu), and several island groups along the south-east coast of
China. In April 1950, the PRC captured Hainan. ROC forces there evacuated to Taiwan
in May 1950.

The First Taiwan Strait Crisis (also the Formosa Crisis, the 1954–1955 Taiwan Strait
Crisis, the Off shore Islands Crisis, the Quemoy-Matsu Crisis, and the 1955 Taiwan
Strait Crisis) was a brief armed confl ict between the Communist People's Republic of
China (PRC) and the Nati onalist Republic of China (ROC) in Taiwan. The confl ict
focused on several groups of islands in the Taiwan Strait that were held by the ROC
but were located only a few miles from mainland China. The crisis began when the PRC
shelled the ROC-held island of Kinmen (Quemoy). Later, the PRC seized the Yijiangshan
Islands from the ROC. Under pressure by the PRC, the ROC then abandoned the Tachen
Islands (Dachen Islands), which were evacuated by the navies of the ROC and the US.

OBJECTIVES AND AIM

The author aims at providing a solution to the ongoing Taiwan Strait crisis between China and
Taiwan through Ronald Coase’s theorem. It two parties to a confrontation are hypothetically merged
that is a single ownership is assumed instead of two, then there can be achieved an optimum
solution to the problem which satisfies both parties’ interests.

In this case the two parties namely People Republic of China from here hence referred to as PRC
and Republic of China as ROC. The aim is to derive an optimum solution to their conflicts which
best satisfies interest of both China and Taiwan.
AIM
To resolve the conflict across the Taiwan Strait, one can employ the Coasian theorem of that when
there are conflicting property right, bargaining between the parties involved will lead to an efficient
outcome regardless of which party is ultimately awarded the property rights in combination with the
single-owner apparatus, The idea of a single-owner who owns the opposing interests of a dispute
Since the PRC has become the dominant factor in shaping the Chinese community, it can, based on
the aim of sustaining the Chinese culture and thus guaranteeing a prosperous future for the PRC in
the long-run, unilaterally declare that it will adopt a non-military policy towards Taiwan.

PRC and ROC are relatively new parties/rulers compared to 3000 years old history of CHINA. The
concept of one CHINA in essence of its own cultural identity its language, its people is far more
important than ‘UNIFICATION’ of One China, which historically has proven to be fatal and
impractical.

Finally, that political unification and cultural singularization is not necessarily beneficial in the long
run is not only supported by Chinese history, it is also evident in the historical experiences of other
cultures.

METHODOLOGY
SINGLE OWNER APPARATUS
The idea of a single-owner who owns the opposing interests of a dispute has been suggested in the
literature to make the Coase Theorem operational in resolving dispute .

SINGLE OWNER- Chinese culture

The Chinese culture will thrive more when there is competition between the two nations.
It will help them develop economically as competition brings out the best.
In the industrial organization literature, it is common knowledge that large cooperation often adopt
internal pricing to help improve the efficiency of resource allocation. Similarly, to avoid the increase
Of bureaucratic layers within large firms, horizontal instead of vertical expansion has been routinely
chosen to maintain the innovativeness and competitiveness of the whole enterprise (the single-
owner). That is, the interest of a large organization may be better served by purposefully dividing the
whole organization into smaller, competing units.
Variables into Consideration
1. Republic of China (TAIWAN)
2. People Republic Of China (Mainland China)
3. United States Of America

FINDINGS

INTERESTS OF RESPECTIVE PLAYER:

TAIWAN
 Be Independent
 No military interference

Mainland China
 Unification
 No involvement of US

USA
 Stable relationships with both nations

With US Help Without US Help

1 3

2 4

Taiwan Independence

Taiwan Non-Independence
The current situation is illustrated by status quo 2, where Taiwan is currently seeking independence
with US help.
People in Taiwan want to shift it to 1.
PRC wants the status quo to remain at 4.

The paper argues for a move from the status quo to frame 3, where Taiwan
Will become an independent country with help from not the US but Mainland
China.

Taiwan will attain Independence if not already. 25 countries have set up unofficial offices to conduct
business with Taipei. It has its own currency and army. So the better option for PRC will be to atleast
shun US involvement and help Taiwan sustain Independence. PRC will save on constant political
tensions and army involvement. As ROC was a part of China, it leaves doors open for coup, military
and political instability.
Taiwan will celebrate Independence, the majority of involvement with US has been on military and
ammunition backgrounds, if PRC orders no military action against Taipan, the latter will save itself
from huge military spending and thus curtail US involvement. Moreover, 20% of Taipei’s exports are
to China.
US maintains a status quo by not recognizing Taiwan as an independent nation and at the same time
supplying them with military backing. It can continue maintaining this status quo by having stable
economic relationships with both of them.

CONCLUSION
The idea of a single-owner who owns the opposing interests of a dispute has been suggested in the
Literature to make the Coase Theorem operational in resolving dispute. This paper points out that
the idea implicitly assumes the existence of an overriding authority, e.g., the Courts, to implement
the solution. When such an overriding authority does not exist, a different rationale must be
employed to make the single-owner apparatus work. This insight is explored and then applied to
help resolve the Taiwan Strait Conflict. Specifically, a ‘One China, Two Republics’ policy is proposed
and its implications illustrated.