That political relations at the time were strained 15

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that political relations at the time were strained. 15 Taiwan was again re- minded of the economic costs of political rupture with Beijing when, later
Geoeconomics in Chinese Foreign Policy 97 in Lee’s years as president, comments on a “special kind of state-to-state relationship” with China caused TAIEX to drop 13.25  percent in one week. 16 It is impossible to know whether the drop was anything more than purely market-driven. Regardless, Taiwan learned an important lesson with Lee’s suggestion of Taiwanese independence: political ruptures have economic consequences. But the story of China’s growing use of geoeconomics in its direct deal- ings with Taiwan really begins in 2000, when the president of Taiwan at the time, Chen Shui- bian, lifted a fi fty- year ban on direct trade and investment with mainland China. Taipei was not blind to the geopolitical risks that eco- nomic opening could entail—government reports openly cited worries that Beijing would “use economic interaction to force po litical concessions.” 17 But Taiwan’s domestic challenges— rec ord unemployment, a worn- out economy, and the specter of municipal and presidential elections— left Presi- dent Chen little choice. 18 And so it was that Taiwan embarked on a historic shift away from its well-established “no haste, be patient” stance to one of “aggressive opening, effective management,” scrapping a long-standing $50 million ceiling on individual investments in China and allowing offshore units of Taiwanese banks to remit money to and from China. 19 Under President Ma Ying-jeou, who succeeded President Chen in 2008, the two sides followed these initial steps with a series of specialized agreements that furthered economic ties. Formal restoration of the “three direct links”—direct postal services, trade, and transportation across the strait—in 2008 eliminated the need for transit cities and dramatically reduced travel time in both trade and tourism. 20 In June 2010, the Economic Cooperation Framework Agree- ment (ECFA) was signed with the aim of establishing a “systematic mecha- nism for enhancing cross-strait economic cooperation.” In a departure from the hard-bargaining negotiating posture China is known to take in many trade deals, the ECFA strongly favors agricultural interests in Taiwan’s “green South”—a traditional stronghold of anti-mainland sentiment. 21 Be- ginning with preferential duty cuts and protection for bilateral invest- ments, the ECFA aspires to the full elimination of nearly all cross-strait trade restrictions, opening each side’s markets to the other in “unprece- dented ways.” 22 To date, Taiwan has made available more than 400 sectors to Chinese investment, including manufacturing, services, public construc- tion, and finance. 23 These economic policies were aimed at more than economic outcomes.

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