"If my orders get canceled, what will I do?" asks an anxious Mr. Hsiao, a contractor who builds cleanrooms for high-tech factories, uncertain at whom to vent his anger.

Hsiao was idle for nearly six months following last year's global financial crisis, but business picked up after orders from China began pouring in to his Taiwanese customers in April. Then, just four months after his fortunes started to rebound, the exiled Tibetan leader the Dalai Lama visited Taiwan to pray for those who suffered during Typhoon Morakot, angering China. Hsiao's customers in the Hsinchu Science Park were flustered and furious, fearful that not long after Taiwan started pulling out of its economic slump, the Dalai Lama's visit would unleash a new wave of canceled orders.

During the Dalai Lama's tour of Taiwan, many people, from politicians to entrepreneurs, conspicuously avoided the Tibetan leader.

At one of the events – a dialogue between the Dalai Lama and Cardinal Paul K.S. Shan at Kaohsiung's Hanshin Arena – all 800 seats were full, but scarcely any politicians attended, and business leaders, with the exception of Taiwan High Speed Rail Corp. chairwoman Nita Ing, were also noticeably absent.

At the Zuoying high-speed rail train station in Kaohsiung, groups of both supporters and protesters had taken up positions well before the Dalai Lama arrived to take a 2:30 p.m. train to Taipei.

On a trip during which his itinerary was constantly changed, the Dalai Lama kept a low profile while everybody else acted somewhat awkwardly. When he left Sept. 4, many quietly breathed a sigh of relief. The main actor in this drama was not the tolerant and humorous Dalai Lama, nor the group of invisible politicians, nor the irate protesters who blocked the Tibetan leader's path, but Taiwanese society's complex emotions regarding China. 

A Bout over Core Values

The impact of the Dalai Lama's visit has not yet become fully clear, but it was undoubtedly an important watershed in Taiwan-China relations. The visit represents the beginning of Round 2 of the cross-strait battle.

Round 1 of the Taiwan-China bout was an opening engagement of good will, a series of milestones in improving relations: opening direct flights between the two countries, allowing more Chinese tourists to visit Taiwan, meetings between the heads of the two semi-official organizations for cross-strait negotiations (Taiwan's Straits Exchange Foundation and China's Association for Relations Across the Taiwan Straits), liberalizing regulations on Chinese investment in Taiwan, the appearance of Taiwan's health minister at the World Health Assembly for the first time, and the arrival of Chinese buying missions in Taiwan.

But while many obstacles have seemingly been overcome fairly effortlessly, many more thorny challenges still await.

Round 2 in this cross-strait struggle promises to be a battle over core values.

Andrew J. Nathan, chairman of the Department of Political Science at Columbia University, predicted six months ago during the honeymoon period of cross-strait relations that it would be easy for Taiwan and China to cooperate on less controversial issues such as trade and tourism, but as exchanges inevitably began to touch on more sensitive issues, such as Taiwan's sovereignty, democracy and military affairs, relations would become bumpy and progress slow.

The reason, Nathan said, is that internal pressures will build if China gives up too much in its exchanges with Taiwan, while if Taiwan repeatedly fears upsetting China and loses its autonomy, it will trigger a domestic backlash. There is scant cause for as much optimism on cross-strait relations as everybody imagines, Nathan concluded.

Over the past year, Taiwanese society has experienced strongly conflicting emotions about China – aware that Taiwan can't do without it, but afraid of living with it. At first, Taiwan spiffed itself up to welcome Chinese tourists, capital and buying missions, and there were actually deep fears that this injection of people and money would fall short of expectations. But soon the pendulum swung the other way, with concern that China would gain excessive influence when 4,000-5,000 Chinese tourists began arriving every day and an infusion of Chinese capital pushed the stock and real estate markets higher. But the fear now after the Dalai Lama's visit is that no Chinese investment or money will come at all.

Outside the offices of Tsai Ing-wen, chairperson of the opposition Democratic Progressive Party, sits a stack of ECFA (economic cooperation framework agreement) referendum petitions. More than two months ago, Tsai actively campaigned around Taiwan in support of the petition, which calls for any ECFA that Taiwan may sign with China to be approved by popular referendum. Now, however, the greatest concern of government and business circles is whether a memorandum of understanding on cross-strait financial supervision or an ECFA will be signed at all.

Tsai believes that over the past year, Taiwan's people have been caught in an abnormal state of anxiety. She believes that despite the economic benefits that cross-strait exchanges have brought, people are especially nervous because they are worried over the price Taiwan will have to pay.

"Relying now on China as an economic prescription means that any medicine will have toxins. If the toxins are not identified and the medicine continues to be ingested, what happens when the immune system loses its effectiveness?" Tsai asks.

Biggest Insecurities: Jobs and Sovereignty

CommonWealth Magazine has also become aware of this unease in Taiwanese society through a survey on cross-strait relations conducted prior to the Dalai Lama's visit. The survey found that job security and political sovereignty dominated the list of Taiwanese fears vis-a-vis China, and that fear intensifies the older a person is, and the higher their status in society. Of the more than 2,000 people who responded to the poll, over 73 percent were worried that their jobs would be stolen by Chinese nationals, and 69 percent feared that Taiwan's sovereignty would be compromised. The respondents also feared that Taiwan's economy would become dependent on China. (See Tables.)

Average citizens are not the only ones worried. Taiwanese entrepreneurs are also feeling the pressure of a potentially large influx of Chinese capital into Taiwan.

One owner of a medium-size food factory in Yilan County's Letzer Industrial Park, who actually closed his factory in China's Fujian Province two years ago to return and invest at home, knows that exchanges between Taiwan and China will help open up commercial opportunities, but when he meets with other business-oriented friends, they all worry that in the end, China will grab all the spoils for itself.

"If we keep going this way, Taiwan will disappear," the entrepreneur says.

One senior financial executive, who previously worked for a Taiwanese financial institution and now trains personnel for a Chinese-invested bank, predicts that when Chinese financial institutions pour into the market, Taiwan's financial and insurance sectors "will either wait to die or wait to be merged."

This fear over excessive dependence is not without some validity. Without even considering military or diplomatic threats, China has already become the most critical factor to the survival of Taiwan's tourism, investment and trade sectors.

'Uncertain Good Will' Stirs Taiwanese Anxiety

In the tourism sector, China has already established itself as Taiwan's second largest source of tourists and could surpass Japan at any time. In foreign trade, China became Taiwan's biggest trade partner for the first time four years ago. Currently, Taiwan's trade dependence on China (including Hong Kong) has reached a level of 41 percent. According to Bureau of Foreign Trade statistics, overall trade with China has grown 16-fold within the past 10 years, far outpacing the 24 percent and 73 percent growth in trade with the United States and Japan, respectively, and Taiwan's exports to China have skyrocketed 35-fold while exports to the U.S. have only risen 2.5 percent. This growing dependence is alarming to many when considering that 70 percent of Taiwan's GDP is export-driven.

Also, Taiwan's trade surplus with China has grown over the same period by 126 percent, and if it had not been for a US$42.5 billion trade surplus with China last year, Taiwan would have actually had a trade deficit of US$27 billion.

"When it comes to Taiwan's survival and development, the mainland's importance to Taiwan is self-evident," acknowledges Shin-Yuan Lai, minister of Taiwan's Mainland Affairs Council, the agency responsible for coordinating China policy.

China is also the main overseas investment destination of Taiwanese businesses, and draws US$40-50 billion more in investment from Taiwan than it injects into Taiwan. Tung Chen-yuan, an associate professor in National Chengchi University's Graduate Institute of Development Studies, estimates that if one includes Taiwanese investments in the Caribbean (which are eventually transferred back to China), three-quarters of all of Taiwan's overseas investment are concentrated in China.

Taiwan and China sit on opposite sides of an unbalanced scale. This state of relations, where Taiwan is overly dependent on China in many areas while Beijing has huge power and leverage in deciding "whether or not to give" Taiwan something, is described by Tung as "uncertain good will." Tung, a former vice chairman of the MAC under the previous Democratic Progressive Party administration, says that because Beijing's good will is questionable, Taiwan more readily suffers anxiety and unease.

A Too Rapid Transition

Looking back over the past 14 months, Lai says the achievements of the government's liberalization measures have far surpassed what was achieved over the past 60 years. Yet in pushing the pace of liberalization, the government neglected to address the deeply felt fears of the public. It's as though the government has been driving down the cross-strait expressway at breakneck speed, only to look back and notice that the people have been hanging on for dear life with both hands, their bodies suspended in air.

"The transition from opposing the communists to developing close relations with them has happened too quickly. There was no bridge in between. This has made it difficult for people to get acclimated and has raised fears," says 62-year-old Chen Fang-ming, director of National Chengchi University's Graduate Institute of Taiwanese Literature.

The first thing he does every morning when he arrives at his office is to read the People's Daily and the South China Morning Post to get the latest on China. Although Chen feels that Taiwan's Sinophobia complex represents inevitable labor pains before peace with China is achieved, he admits that even he feels unease, because the government is in too much of a hurry to show its friendship to China and has let many important issues "slip away," including not daring to fly the national flag or use official titles when dealing with Beijing.

Another potential danger, Chen says, is that "China has raised the level of interaction by showing good will, but will Taiwan ultimately have to repay the principal and interest at an exorbitant rate?"

The controversy sparked by the Dalai Lama's visit was not necessarily a bad thing for Taiwan. It created an opportunity to take a breather and examine cross-strait policy before continuing down the road of rapprochement. As Taiwan-China relations enter their second round, the two countries in fact need a greater level of adaptability because both face internal pressure cookers.

China Faces Pressure to Stop Concessions

If unease in Taiwan is growing because of a fear of China, there is also growing dissatisfaction in China over conceding too much to Taiwan. When a Taiwanese student went to study at a Hong Kong university earlier this year, mainland Chinese students launched a protest to oppose the Taiwanese student's enrollment in the "foreign student" quota. They demanded that the student be listed as a "domestic student" and compete directly with them.

Kaohsiung deputy mayor Lee Yung-te also believes that the Dalai Lama's visit is a new starting point in the two sides getting acclimated to each other.

Lee says that during the first round of engagement, the responses of Taiwan's officials were what China wanted to hear, and China answered by doling out economic benefits to Taiwan. But "the government cannot continue indefinitely to do what the other side wants," he cautions.

Allowing the Dalai Lama to visit Taiwan was the first action taken by the Ma administration that made Beijing unhappy, and it is a rare opportunity to force both parties to figure out "how to respond and handle the situation if either side doesn't do what the other wants," Lee says.

Aside from getting accustomed to its inevitable relationship with China, however, Taiwanese society must also confront its own Sinophobia. Yi-feng Tao, an associate professor in National Taiwan University's Department of Political Science, has previously written that with such a powerful neighbor, Taiwan needs to examine carefully exactly what it treasures and what it fears losing before it can maneuver rationally.

"In this relationship, we should preserve our identity and influence the other side," Tao says. 

Similar to Taiwan, much of the world is coping with its own Sinophobia and is learning to get accustomed to China's omnipresence. Erik Izraelewicz, a well-known French columnist and a member of the economic council of advisers to the French finance minister, compared China's entry on the world stage to an elephant crashing into a porcelain shop. Before the elephant is tamed, the porcelain shop must rearrange its interior layout to prevent the impetuous animal from breaking precious pieces.

Similarly, whether it be selecting tourist destinations, universities, jobs, neighbors or bosses, China has squarely entered our lives. Taiwan must face its own deeply rooted fears and anxieties, and quickly find a model for co-existence with the elephant, a model that must be the most advantageous for Taiwan and prevent China from smashing the country's precious democratic values and freedom of thought.

Translated from the Chinese by Luke Sabatier