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By Julian Baum in Taipei and Susan V. Lawrence in Beijing

The last time China's Wang Daohan met Taiwan's Koo Chen-fu, media excitement ran high but mutual suspicion ran deep. So it was not surprising that those historic talks in Singapore yielded extremely modest pacts, on documenting marriages and paying for registered mail. Five years on, the same two envoys are preparing to meet again--on Chinese soil and without an agenda. This time the stakes are higher since they have agreed that political issues can be raised, and not just civil affairs.

Beijing and Taipei--as well as Washington, the absent third party in the cross-strait dialogue--also better understand the importance of settling their differences peacefully. With economic crisis gripping most of East Asia and requiring regional cooperation, no one wants a return to the military confrontation of 1995-96. Then, Beijing protested against Taiwan's allegedly pro-independence policies with military exercises and missile "tests" in the Taiwan Strait, forcing Washington to respond with the largest mobilization of U.S. naval forces in Asia since the Vietnam war. To avoid more confrontations, U.S. President Bill Clinton has urged both sides to talk "sooner rather than later."

The two envoys will meet in Shanghai in mid-October. Wang, head of China's Association for Relations Across the Taiwan Strait, is a former mayor of Shanghai and a close adviser to President Jiang Zemin. Koo, chairman of Taiwan's Straits Exchange Foundation, is a member of the ruling Kuomintang's inner circle. Significantly, Koo is also scheduled to meet Jiang, Premier Zhu Rongji and other senior leaders in Beijing--the highest-level public contact between the two sides in half a century.

Both sides are playing down the notion that Koo's ice-breaking visit will move the relationship dramatically forward. Given the glacial pace of cross-strait diplomacy, many observers doubt that the meeting will produce much progress. Still, Koo's trip to China marks a firm step away from the tensions of 1995-96 towards a more stable relationship. Optimistic observers hope for even more: the start of a process that could culminate in a face-to-face meeting between President Jiang and Taiwan's President Lee Teng-hui.

Taiwanese officials exude none of that optimism. Premier Vincent Siew told Taiwan's legislature in late September not to have high expectations of the outcome. It's a "first step" for both sides to normalize their exchanges, he stressed. "It's a meeting, not negotiations; it's a visit, not talks." Koo has been authorized only to have "exploratory conversations" with his hosts, an official at Taiwan's National Security Council told the REVIEW.

Similarly, mainland scholar Su Ge, a vice-president of Beijing's Foreign Affairs College, says the limited goal of these talks is to "maintain the status quo, facilitate understanding, and make confidence-building efforts." Adds Su, a specialist on Taiwan: "The point is to stay engaged."

Taipei's caution over engagement springs from Beijing's uncompromising stance, say officials in Taipei. "There's been absolutely no shift in their strategy," asserts Lin Chong-pin, deputy chairman of the cabinet-level Mainland Affairs Council, which coordinates policy towards Beijing. Among other things, Beijing insists on the "one-China principle" as a condition of political talks. Taiwan's leaders accept the term, but not what they perceive as Beijing's definition of "one China" as the People's Republic.

Beijing also refuses to recognize Taiwan's de facto sovereign status and won't renounce the use of force if the island declares independence. Unless Beijing first accepts the principle of political equality, Taiwanese officials say, political talks would not be a dialogue among equals; it would signal the capitulation of the ruling Kuomintang and a retreat for Taiwan's democracy.

Taipei's official position is that China should be unified as a democracy and a free-market economy. Taipei no longer contests Beijing's rule over continental China, and wants Beijing to reciprocate by not contesting Taipei's rule over Taiwan. "We are masters of our own house under conditions of freedom and democracy," says a senior government official. "We are not going to give this up to suit the fancy of people in Beijing."

Beijing's official position is that political dialogue should focus first on "officially terminating hostilities across the strait under the principle of one China." Beijing regards Taiwan as a renegade province which should be peacefully reunited with the mainland under the "one country, two systems" formula--the formula under which Hong Kong returned to mainland rule.

Chinese Foreign Ministry spokesman Tang Guoqiang on September 29 restated Beijing's position that after unification, Taiwan would be allowed to keep its own military and Taiwanese leaders could be appointed to central-government positions. "The degree of autonomy enjoyed in Taiwan will be even greater than that enjoyed in Hong Kong," he pledged.

Beijing's caution stems mainly from its deep suspicion of President Lee. Although Lee has never openly called for Taiwan's independence from China, mainland officials and scholars believe that his actions add up to a bid for independence. While Lee remains in charge, mainland experts do not believe that cross-strait talks can make significant progress.

Despite their mutual distrust, however, both sides have in the past year made concessions to get talks going again. Beijing has bowed to Taipei's demand that it should issue the invitation to resume the dialogue, which it had suspended. Beijing also softened its earlier insistence on having political talks. In Su's words, it agreed to settle for a dialogue that at least "leaves room for political issues."

Taiwan softened its stance, too, saying that it would not exclude the possibility of a political dialogue, but that the two sides needed to work out practical issues first, such as agreements on settling fishing disputes and hijacking cases which were negotiated in the past but never signed.

Analysts on each side cite differing factors that persuaded President Jiang to reach out to Taiwan. What set the stage, Su says, was Jiang's state visit to the U.S. last year. "Stable Sino-American relations provide a healthy and stable framework so that cross-strait relations can proceed," says the mainland scholar. "You cannot proceed when the U.S. and China regard each other as a major menace to national security."

But observers in Taiwan believe that the decisive factor was the rise of the pro-independence Democratic Progressive Party, Taiwan's leading opposition group. In municipal elections last December, the DPP won 12 of the 23 top local-government posts and slashed KMT-held posts from 15 to only eight. The DPP's surprise victory raised the prospect of a DPP-controlled central government sooner than expected.

Presumably adding to Beijing's worries are opinion polls in Taiwan which show a steady rise in support for outright independence. "They see time is running out," says Liang Su-yung, president of the Association for Peaceful Unification, a private group of retired KMT officials. A former speaker of the legislature, Liang was recently received by Jiang in a new bid to cultivate private organizations in Taiwan which are sympathetic to Beijing's policies.

Liang urges political dialogue as a way of preventing Beijing from again resorting to military force if it sees the prospects for unification slipping away. "Two years ago they had no timetable for unification, but now we're not sure," he warns, implying that Beijing's leaders could set a deadline for a political solution which could be followed by more serious military threats than in the past.

Experts in Beijing insist, however, that the mainland is in no rush to settle the Taiwan issue. They say President Jiang signalled as much last year, at the Communist Party's 15th Congress, when he declined to name an army representative to the party's top decision-making body, the politburo standing committee. If serious military threats against Taiwan were being contemplated, they say, Jiang would not have excluded the military from the body.

The mainland's outreach policy was most recently boosted by comments made by President Clinton when he visited China at mid-year. For the first time, an American president stripped away the ambiguity from the U.S. position by saying publicly that Washington did not support Taiwan's independence, "two Chinas," or Taiwan's membership in international organizations requiring state sovereignty. Tang Shubei, vice-chairman of China's Association for Relations Across the Taiwan Strait, said that Clinton's "three no's" statement made it possible for Beijing to "normalize" cross-strait relations. Beijing is looking for a similar statement from Japanese leaders during Jiang's planned visit to Tokyo later this year.

But Taiwan, too, is feeling pressure to revise its policies, especially its 50-year-old ban on direct links with the mainland. Last year Taiwanese business leaders publicly criticized the restrictions. This year even the American Chamber of Commerce, Taiwan's most influential foreign business lobby, urged Taipei to open direct links to serve its goal of making the island a regional operations centre for multinational corporations.

Lee's "go slow, no haste" policy for Taiwanese companies investing on the mainland has also come under fire. Formosa Plastics Chairman Y.C. Wang, who is being told to pull out of a $3 billion power-plant project in Fujian, has said this policy should be scrapped.

China-watchers in Taipei say Beijing set the timing for the resumption of cross-strait meetings with Taiwan's next national election in mind. With less than two months to go before the December poll for an expanded 225-seat legislature, some analysts believe the KMT could lose its majority in parliament. By giving the KMT credit for improving cross-strait relations, Beijing may hope to enhance the ruling party's support among voters and at least delay the arrival of an opposition-led government.

Taiwanese analysts surmise that Beijing would prefer bargaining with the KMT, which is still officially committed to unification, rather than the pro-independence DPP. They believe Tang implied as much when he told Taiwanese journalists that it was not his government's intention to open talks with the DPP.

However, a senior Chinese analyst counters that China prefers to deal with people who are "straight up." He contends that President Lee pretends not to support independence, while pursuing pro-independence policies. The analyst suggests that China might make more progress negotiating with the DPP, which at least does not make any pretence about its pro-independence policy. He draws a parallel to Beijing's successful cooperation with the virulently anti-communist, yet pragmatic, U.S. President Richard Nixon.

Su also does not rule out the possibility that Beijing might find itself negotiating with the DPP. "If the DPP is going to be elected, we need to keep contact now," he says. It's important that they "understand our positions."

Beijing's deep antipathy toward Lee has in the past five years been the biggest stumbling block in the cross-strait relationship. Chinese propaganda has described Taiwan's first popularly elected president as "the sinner of all millennia" and consigned him to "the dustbin of history." Those who distrust Lee argue that China should wait out the remaining months of his term before reopening talks. Lee has said he will step down when his term expires in 2000. So Su says some people in Beijing are asking "What's the hurry?"

But the improvement in U.S.-China relations offered an opportunity for cross-strait engagement that others did not want to pass up. "At the end of last year, we were not sure how to deal with Lee Teng-hui," Su comments. "However, we just could not let the status quo go into a downward spiral again." Su argues that contact before Lee leaves office is important. "If you don't have any contact, how can you influence Taiwan?" he asks.

Would Lee and Jiang go so far as to exchange visits, as recently mooted in the news media in Taiwan and Hong Kong? In his inaugural speech two years ago, Lee proposed to make a "journey of peace" to the Chinese mainland, although Beijing is adamant that he cannot visit in the capacity of a national leader. A Hong Kong newspaper recently floated the idea that Lee could be welcomed as the "supreme leader" from Taiwan, one of several new proposals coming from unnamed sources.

But Taiwan's China-watchers suspect such proposals are part of Beijing's campaign to convince the world that it is being more conciliatory. At best, they say, the proposals show a divergence of views, such as the "one country, three systems" idea which presumably offers Taiwan a more distinctive niche in a future unification scheme. (Taiwan has steadfastly rejected the "one country, two systems" formula.)

Taiwan's Lin says such proposals are meaningless unless they come from key decision makers and address the core issues. "We'd prefer something more substantive, such as an offer to end the strangulation of Taiwan's international diplomacy and end the military preparations which threaten us," he says.

Premier Siew told Taiwan's legislature on September 29 that the most "natural" setting for a meeting between Jiang and Lee would be at the summit of leaders of the Asia-Pacific Economic Cooperation forum in Kuala Lumpur in November. (Beijing has blocked Lee's attendance at previous Apec meetings.) But most Taiwanese officials worry that such a grand gesture could put Taiwan on the defensive. Says a presidential staff member: "We are aware of the potential risks. That's why we insist on parity in our relationship."

For Taiwan, the bigger question is whether Beijing is ready to resume talks on civil affairs broken off in 1995. "We're still in the dark about this," says Jean-Pierre Cabestan, director of the French Research Centre on Contemporary China in Hong Kong.

As for political talks, he believes that neither side appears seriously ready to open such a dialogue. "These meetings are just a beginning; it's not even a negotiation about negotiations." Cabestan adds: "It's even possible that after these meetings both sides will feel that they have met their obligations to the U.S. and go back to sleep."