Taiwan The End of a Dynasty

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Lee's economic background should serve him well. Despite a spectacular average annual growth rate of more than 9% over the past two decades, Taiwan's economy now stands at a potentially hazardous crossroads. With an average manufacturing wage of $535 a month, the country can no longer claim to offer cheap labor by Asian standards, yet it has been slow to invest in higher- technology fields. Exports of textiles, a key industry, last year grew by an impressive 23%. But other sectors have been hurt by a 40% rise since late 1985 in the value of the New Taiwan dollar against the U.S. greenback, which has increased the price of the island's products in many overseas markets.

Politically, the new President is expected to follow through with the three major initiatives prepared in the final years of the Chiang regime. The first of these steps, the lifting of martial law, was accomplished last year. The second, permitting opposition political parties, was effectively taken with the formation in 1986 of the liberal Democratic Progressive Party, which is expected to be granted full legal rights later this year. More problematic is the goal of reorganizing the country's three legislative bodies. Lee's need to play consensus politics may prevent him from moving rapidly on that and other unfinished business. The new leader will almost certainly continue the policy, begun only last November, of allowing Taiwan residents to travel to the mainland to visit family members. So far, more than 11,000 former mainlanders have traveled legally to China, and thousands more have made the trip covertly.

One test of Lee's China policy will be his handling of trade and travel ties to Hong Kong as the British colony prepares to revert to mainland rule in 1997. According to an agreement signed by Britain and China in 1984, Hong Kong will be allowed to retain its capitalist system for 50 years, as well as a large measure of local control. Many Taiwanese will be watching Hong Kong's < experience for guidance on how to handle their future relations with the mainland. While a Taiwanese reunification even as tenuous as Hong Kong's is by no means inevitable, a gradual improvement of relations across the Taiwan Strait seems likely.