Social And Political Wound On The Island

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But the DPP's emergence as Taiwan's ruling party has already helped heal the most divisive social and political wound on the island: the rift between Fujian-dialect-speaking locals and the Mandarin-speaking mainlanders who have dominated local politics for a half-century. The topic of schism is no longer in prominent in public discourse.

As for the economy, Taiwan does indeed face serious problems.
But Chen hasn't been idle. In a departure from past KMT policies, Chen is promoting bank mergers to help shore up the weakest institutions. And he says he will lift many restrictions on foreign banks wishing to compete in Taiwan. Although capital is still over-regulated, the question is no longer whether financial reforms will come, but when and to what degree.

Chen is waffling on some economic issues. But his hesitance is often understandable. Taiwan, like many other places, is grappling with a dual economy: one part is old, inward-looking and inefficient; the other is new, know-ledge-intensive and globally competitive. By letting the New Taiwan dollar find its own, lower level and by lifting regulations governing capital lows to China, Chen could encourage Old Economy companies to revive themselves by relocating to the mainland.But China isn't making it easy. Beijing recently said it would take stock of the political views of potential investors from Taiwan, particularly their level of support for Chen's DPP. The threat was later quietly dropped, but a sense of uncertainty had been sown. The reality is that both sides need each other. It is China, not Taiwan, that could face devastating unemployment after joining the World Trade Organization.