CHINA, the United States and the entire East Asian region will have to brace themselves for an increasingly unstable Taiwan Strait after President Chen Shui-bian won a second term by a margin of just 0.22 per cent last night.

His triumph, which also spells victory for his pro-independence Democratic Progressive Party (DPP), could upset the political balance on several fronts. What it means for Taiwan IN THE four years since the ""Taiwan first'' DPP became the ruling party, Taiwanese nationalism has taken root.

Its winning strategy in this election was the highly inflammatory but very effective slogan: ""We Taiwanese and they Chinese.''

Taiwanese voters were often asked whether they were electing a Taiwanese president or a chief executive of the Chinese Special Administrative Region of Taiwan.

The political colour of Taiwan divided between the green of DPP and its separatist allies and the blue of pro-unification opposition parties is likely to change drastically as a result of yesterday's election outcome.

The Pan-Blue alliance's second defeat in as many presidential elections means the Kuomintang (KMT) and its partner, the People First Party (PFP), will have to ""go local'' to survive.

Thus many people expect a general ""greening'' of Pan-Blue.

Until now, the KMT and the PFP have served as a brake preventing the DPP from pushing the independence agenda too fast and too far. With gradual ""greening'', this brake may no longer be effective. This is clear from KMT leader Lien Chan's statement during the campaign that ""independence is also an option not to be ruled out''.

From now on, any pressure to rein in separatism will have to be exerted from outside.

Without an internal brake, de-sinicisation will go hand in hand with the surge of Taiwanese nationalism. What is next for
cross-strait relations WITH Mr Chen as president for four more years, China now faces a very real threat that the island will hold a referendum to devise a new Constitution by 2006 and implement it by 2008, thus turning independence from de facto to de jure.

This is the road map towards independence announced by him. It explains why he is so adamant that the referendum mechanism be installed during this election.

Beijing had been saying for the past two decades that it placed its hopes for a peaceful reunification on the Taiwanese government and the Taiwanese people.

When Mr Chen won the 2000 presidential election and the DPP became the ruling party, Beijing knew it could no longer rely on the new government.

But it still drew consolation from the fact that a solid 60 per cent of the people were still opposed to the DPP.

With the DPP winning the election again, it means that the majority, albeit a wafer-thin one, is on its side. So there goes the
hope placed on the people, too.

Now Beijing will have to find a new way of engaging Taiwan in order to curb the separatist movement.

All along, the unwillingness to wage a war against the Taiwanese, seen as fellow Chinese of the same blood, has been the single most important factor restraining Beijing from using force, not military inadequacies or fear of intervention by the United States.

By now, most people, including American military planners, be Continued on page 4 From page 3 Chen's narrow win: threat to Taiwan, region lieve that the People's Liberation Army has the capability to occupy the island even in the face of American intervention, if the political will is there.

Backed by this military strength, Beijing is contemplating more proactive efforts to ward off the spectre of separatism.

These include setting a timetable for national unification to prevent the problem from dragging on indefinitely.

A law on national unification is also being contemplated in order to solidify the will of the whole nation and to tell the Taiwanese not to underrate Chinese seriousness about unification.

Political exchanges between both sides are unlikely in view of Beijing's lack of trust in Mr Chen after listening to his words and watching his deeds for four years.

The four ""No's'' and one ""Won't'' pledges that he made four years ago will mean very little to Beijing in light of his
announcing a concrete road map towards independence.

Economic exchanges at non-official levels will continue as usual since now it becomes the only glue that joins both sides and remains a powerful means to engage Taiwan on non-political issues. Implications for US-China-Taiwan relations THE cardinal principle for crisis management over the Taiwan Strait, from the US point of view, is to prevent itself from being drawn into a war with China over Taiwan. A state of neither unification nor independence serves American interests best.

With President Chen winning a second term, there is bound to be greater support for Taiwan's newfound identity within the US.

Future American presidents will be under increasing pressure, for entirely opposite reasons, from domestic constituencies and from Beijing.

How Washington manages this dilemma will have profound ramifications for East Asian countries, which are caught in a
similar, if not identical, dilemma, although on a much reduced scale.

Much will depend on how President Chen patches up his relations with Washington, impaired by his insistence on going ahead with the referendum against US disapproval.

If he heeds American warnings, cross-strait tension can still be manageable. If not, he will find, to his grief, that there is a
limit to Chinese restraint.

To some extent, it is ironical that given its small size and relative insignificance in world geopolitics, Taiwan may well cause
two nuclear powers to collide over its future. Impact on the Taiwanese economy GROWING instability in the cross-strait region will continue to plague the already ailing Taiwanese economy, with less foreign direct investment flowing in. No panacea to pull it out of its current doldrums is in sight.

Two leading tycoons in Taiwan, noted for their previous support for President Chen, Messrs Wang Yung-ching and Chang Jong-fa of Formosa Plastics and the Evergreen Group, respectively, had come out in public to signal their disapproval of his policy on economic exchanges with China, especially on opening up direct links in trade, transport and telecommunications.

Until President Chen is willing to scrap the legacy of ex-president Lee Teng-hui's ""slow and no haste'' policy vis-a-vis
the mainland, Taiwan risks being marginalised in the current globalisation process. CHEN WINS Did "magic bullet' help him? DPP (CHEN SHUI-BIAN/ANNETTE LU) 6,471,970 KMT/PFP (LIEN CHAN/JAMES SOONG) 6,442,452 Margin: 29,518 Invalid: 337,297 Turnout: 80.28%