In 1972, President Nixon traveled to China to have a meeting with the Premier. This meeting began the process of normalizing relationships for the first time since the civil war 23 years prior. The two leaders issued the joint Shanghai Communique which has granted a series of statements on the two government’s stances on a series of issues. It was the first time that China had officially outlined its position on Taiwan, which was that Taiwan had been given back to the mainland China by Japan and that it was a rogue province that needed to be eventually reigned in.
Nixon said the US position did not challenge China on Taiwanese independence. The US agrees to remove some military forces from Taiwan and for the first time begins to pull back on its stance of KMT being the official government of China. They also both agreed that trade between the two nations would greatly benefit both parties. This new relationship would push a period of high economic growth for both countries. Under the One China Policy any government that establishes diplomatic ties with Taiwan can’t have diplomatic relations with PRC.
On December 31, 1978, the United States closed its embassy, and President Jimmy Carter nullified a treaty with Taiwan that had ensured the US involvement if PRC invaded Taiwan. After intense pressure from the Taiwanese lobby, Congress passed the Taiwan Relations Act, setting up a de facto embassy, allowing the US to sell arms to Taiwan, and offer to use military force to defend Taiwan’s autonomy. As PRC and the US grew closer, China began trying to focus on policies that would encourage growth and modernize the economy.
In 1979, China instituted a one-child policy. This policy was aimed at adjusting the countries dependency ratio, or percentage of working age population to boost growth. It also started a policy called One Country Two Systems. Under this region such as Hong Kong, and Macau could have their own economic, legal, financial and political systems. In 1980 PRC also created several special economic zones which allow several areas to operate with more capitalist systems, and provide tax incentives to attract foreign investment. It was also believed that these rich regions would also spread growth into adjacent areas.
After the huge successes of the initial programs, these systems were expanded to all province capitals and almost all of the coastal cities. It also began privatizing agriculture. It also allowed for a more decentralized regional control of business. The countries modernization led to dissatisfaction about it only benefiting a select few, and that was compounded by the state having a one-party political system.
In 1989, students began protesting near Tiananmen Square demanding various political reforms. The Communist party, after much infighting eventually decided to use force and declared martial law. After protesters had blocked the military’s second attempt to remove the square, the army opened fire on the demonstrators, killing 300 people. This ended the period of liberalization and reigned in many of the political freedoms, and state controlled of the press. In 1991, China released its plans for the reunification of China with Taiwan, and in 1992 China and Taiwan sign the 1992 consensus. This agreement stated that they both agree that Taiwan and China are part of the same country, and they acknowledged the existence of the other government. This began the major division between the KMT and the Democratic Progressive Party (DPP) which favored independence over reunification.
In 1997, the United Kingdom’s 99-year lease ran out ending their 156-year control of the region. In the Sino-British Joint Declaration, it was declared that Hong Kong would continue as a special administrative zone under the one country two systems. It would also be able to maintain its laws, economic system and legislature. Then in 2005 China signed the Anti-Cessation law, promoting cross-straight relations and that if Taiwan were to declare independence and all other means of peaceful reunification are lost, China had the right to pursue military action to take back the region.
You can read part four on the South China Sea.
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