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SINGAPORE — As flights cross the Taiwan Strait at the start of the Year of the Dog, hopes have been high for a possible rapprochement in ties between Beijing and Taipei. But observers are split on whether to expect “a new spring” or renewed tensions across the strait in the next two years before Chen Shui-bian steps down as Taiwan’s president.

Chen delivered a surprisingly hardline speech on New Year’s Day and then followed that up, in a Chinese New Year address, with a proposal to scrap the 1998 reunification guidelines with the mainland. This was significant, as Chen had just installed his fifth government and prime minister in six years.

More surprising was the public rebuke of Chen by Washington. The U.S. State Department reiterated Washington’s cross-strait policy based on the “one-China principle.” It termed Chen’s Lunar New Year remarks as “inflammatory” and warned him not to upset the delicate relationship among China, the United States and Taiwan. For the first time, Washington condemned Taiwan’s bid to participate in the United Nations and related agencies (such as the World Health Organization) as an attempt to “unilaterally change the status quo.”

Many had expected Chen to have been humbled after his Democratic Progressive Party (DPP) was thrashed in December’s local elections. The morale of the ruling party is reported to have sunk to an all-time low just as the opposition Kuomintang, or KMT, rises in prominence amid restructuring.

Up to 2,200 new members are said to be joining KMT’s ranks every month since Ma Ying-jeou took over as party chairman. The boost in KMT confidence comes as the other “pan-blue” opposition leader, James Soong, desperately tries to prevent legislators from his People’s First Party (PFP) from crossing over to the KMT.

Amid the latest Cabinet reshuffle, DPP members elected Yu Shyi-kun to chair the party, but a 20-percent DPP vote turnout confirmed its sagging morale. Chen’s electoral support has reportedly crumbled to 10 percent, the lowest ever for a Taiwanese president.

Many political observers have highlighted the “natural” tendency of Chen to harden his political line as he enters his own “twilight zone.” Constitutionally, Taiwan’s president may only serve a maximum of two terms, and Chen’s time is up in spring 2008. As Chen mulls his political legacy, he will surely be tempted to reform the constitution, a move that would infuriate Beijing.

Constitutional reforms envisaged by Chen could spark a confrontation that the U.S. and the Taiwanese opposition are keen to avoid at all costs. Washington, intent on maintaining a cross-strait peace, has worked to prevent Chen from crossing the red line with Beijing. Recently U.S. Deputy Secretary of State Robert Zoellick engaged in a “strategic dialogue” with China for the third time.

Some political observers have advanced the theory that the recent departure of Douglas Paal, director of the American Institute in Taiwan, could have provided Chen an opening to show his displeasure with Washington for trying to control his political maneuvers. Others believe Chen wants to test Washington’s limits before the arrival of the new director in Taipei.

Beijing has been advancing its own goals in cross-strait ties, too. A “new” philosophy of Chinese President Hu Jintao is slowly emerging vis-a-vis Taipei. In a visit to Xiamen, Fujian province, Hu praised Taiwanese businessmen for their contributions to cross-strait relations and assured them of China’s support of their activities on the mainland. Hu also dangled a carrot, offering them the possibility of bidding for lucrative Beijing 2008 Olympics-related projects.

More and more of these businessmen appear to be crossing over from the DPP to the opposition pan-blue alliance, which Beijing discreetly favors in the 2008 elections. Chen’s decision to prosecute a top Taiwanese IT wafer-production industrialist, as well as his recent Web commentary criticizing rich and “disloyal” tai san, herald a struggle between Beijing and the Chen administration for businessmen’s sentiments.

Beijing seems set to engage Chen in a relentless campaign to win the hearts and minds of Taiwanese in general. After effectively wooing the opposition pan-blue alliance by inviting former KMT chairman Lien Chan and PFP’s Soong to the mainland last spring, Beijing is poised to deliver “three gifts” (besides extended chartered flights) this year to Taipei: two pandas, a “unilateral opening” of the mainland to Taiwanese fruits and vegetables, and permission for mainland tourists to visit Taiwan en masse.

Beijing clearly is playing its economic card to divide business-savvy Taiwanese from Chen and the ruling DPP, while stressing that Beijing can work within the confines of the 1992 Consensus on “one China, different interpretations.”

To the extent that the KMT’s Ma appears poised to accept the consensus and re-establish the “three links” (transport, mail and commerce) if elected in 2008, Beijing appears to be reaping the benefits of its new cross-strait policy.

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