Analysis-China plays waiting game in run-up to Taiwan inauguration

By Laurie Chen and Yew Lun Tian

BEIJING (Reuters) - China's muted response to the weekend victory by Taiwan President-elect Lai Ching-te signals what some analysts see as the start of an uneasy four months before he takes office, with Beijing treading carefully before then.

Lai, from the ruling Democratic Progressive Party (DPP), will not replace outgoing Tsai Ing-wen until May 20 - but Beijing has little appetite to break a delicate balance that has settled over its ties with Washington in recent months, some diplomats and analysts say.

The situation is further complicated by a looming U.S. presidential election in November, risking plenty of bipartisan pressure from candidates as foreign policy debates intensify.

China claims neighbouring Taiwan as its own and has never ruled out the use of force to bring the island under its control. Some DPP figures are bracing for a tough four-year term ahead for Lai, who was branded by Chinese officials as a "dangerous separatist" well before the vote.

The tiny Pacific island nation of Nauru offered a taste of that in ditching its recognition of Taiwan for China, which reflects a long-running diplomatic effort by Beijing to deprive Taipei of its last few diplomatic allies. Taipei described the move as an act of post-election malice.

But while Beijing may maintain pressure on Taipei to enforce what it calls "red lines" over independence for the island it insists is "sacred" Chinese territory, it is unlikely to tighten the squeeze just yet.

"The line is very clearly drawn," said Victor Gao, a professor at China's Soochow University.

"China will not fire the first shot. But China will never allow pro-Taiwan independence activists to fire the second shot, after firing a first shot which is anti-peace."

Tsai and Lai both reject China's sovereignty claims and have repeatedly offered talks, which Beijing has rejected. They say only Taiwan people can decide their future.

Few Chinese analysts and scholars are speaking openly given the delicate nature of the situation, but some outside the country detect a marked caution.

"China's response is relatively muted now because it wants to leave it to the U.S. to rein in Lai first," said Qi Dongtao, a senior research fellow at the East Asian Institute in Singapore. "If the U.S. fails to rein Lai in, then China can step in."

Taipei-based political scientist Wen-Ti Sung, a non-resident fellow at Washington's Atlantic Council think tank, said Beijing's courting of Nauru was "low-hanging fruit".

Chinese officials are now likely conducting internal studies into what went wrong - why Beijing's preferred Kuomintang (KMT) opposition party didn't take the presidency, Sung said.

Not that it was a complete failure. Lai won less than 40 per cent of the vote and together with smaller opposition parties, the KMT can form a majority in the legislature.

RANGE OF OPTIONS

After his victory on Saturday, Lai said he wanted to improve ties with China and was open to talks, but Beijing has no shortage of options should his rhetoric change or broader Washington-Beijing ties cool again.

Western diplomats say China's Central Military Commission, commanded by President Xi Jinping, has likely been presented with a variety of escalatory options beyond its on-going deployments across and around Taiwan.

China's military has not directly commented on the election, but on Monday its Eastern Theatre Command released footage of naval combat drills in the East China Sea, without giving a detailed location.

"Battle alert, battle alert!" the command said in accompanying text. "The enemy suddenly arrives and the commander quickly issues combat instructions."

Such action is on a vastly smaller scale to the extensive missile drills and naval manoeuvres that surrounded Taiwan after the visit to Taipei by then-U.S. House Speaker Nancy Pelosi in August 2022.

Economically, Beijing has coercive options too given on-going business flows and trade ties, while security analysts and diplomats say China has the ability to attempt cyberattacks against Taiwan infrastructure.

In late December, China scrapped tariff cuts on some 12 chemical products it imported from Taiwan - moves described by Taipei officials as an attempt to interfere in the election. But further pressure on the two sides' 2010 free trade deal, the Economic Cooperation Framework Agreement (ECFA), cannot be ruled out, analysts said.

"The economic sanctions option they tried three weeks or so before and didn't work. So now Beijing needs to retool and optimise how it's going to use economic sanctions in a way that can send its message against Lai without unduly alienating Taiwanese society," Sung said.

Politically, too, Beijing can exploit connections with various opposition figures and groups, analysts said, noting that China's Taiwan Affairs Office said on Saturday that the vote tally showed that the DPP "cannot represent mainstream public opinion".

So far, China's state media has kept a low profile, with no editorials on the election result published by the English-language Global Times or a CCTV-affiliated social media blog that frequently comments on Taiwan issues.

Retired newspaper commentator Hu Xijin wrote in a WeChat blog post on Saturday that "if (Lai) does not restrain himself after taking office and intensifies his efforts to promote a radical line ... he may trigger a war and become a sinner for the ages." It was later deleted.

(Additional reporting by Ben Blanchard in Taipei and Greg Torode in Hong Kong; Writing by Greg Torode; Editing by Nick Macfie)