In the 70s and 80s China got out of the game (of foreign aid to diplomatically isolate Taiwan).

Definition of foreign aid for our purposes: Economic help for political and possible economic gain

Published amounts are misleading because many countries promise aid but don't deliver. Europeans frequently criticize the US for not giving much aid as a percentage of GDP, but the US provides market access that the EU doesn't and Japan doesn't, but China does.

Only 24 countries have diplomatic relations with Taiwan, none important. Total population of smallest ten is under one million people.

China's Taiwan policy: territory, regime. China still claims Taiwan, and claims that the Taiwanese regime is not legitimate.

In the spring of 1950, Mao was preparing to invade Taiwan. Troops got sick from a liver fluke in Fujian province, then the Korean war broke out, and then Truman changed his mind and sent the Seventh fleet to protect Taiwan. Later attacks in 1954 and 1958 but China backed down in the face of US protection of Taiwan (including nuclear artillery in 1958). Stalemate.

1969 border war with USSR; Nixon negotiated with Mao regarding Taiwan; contents of these negotiations remains unknown.

Deng Xiaoping hoped to solve the Taiwan problem as a side effect of growing China's economy, as Taiwan would seek to rejoin voluntarily.

In 1956, in an attempt to end its diplomatic isolation, China offered aid to Cambodia, then Nepal, Indonesia, Sri Lanka, middle east. Didn't do anything in Latin American, except very briefly Cuba. Grants, loans, project aid, 10, 20, up to 100+ million dollars. Big recipients: North Korea, North Vietnam, Albania, and a north African railroad.

Issue of China joining UN. Most countries, other than the communist bloc, kept ties with Taiwan. 1969 was a turning point. Albania proposed a resolution that PRC, not ROC, should have China's UN seat. Joel's note: here's Time magazine from 1971: "THAT annual rite of fall—the struggle over who should represent China in the United Nations—used to be fairly predictable. In past sessions, the drama has swirled around the so-called Albanian resolution, which offers the U.N.'s 127 members a simple choice: Taipei or Peking." Almost all countries China gave aid to voted for Beijing. Cambodia was one exception; Indonesia broke of relations with China after 1965 due to suspicion from Indonesian military.

Another few dozen countries recognized the PRC after this, about half of which received aid from China.

Aid from China dropped; Taiwan became the world's #1 country for foreign exchange and had the ability to compete with China in aid-giving.

Since 2000 and Taiwan's election of Chen Shuibian, more efforts to strip away Taiwanese friends. Foreign aid from a secret fund became a politicized issue in Taiwan. Chen's wife was indicted in 2006 for forging withdrawals from the secret fund for personal use. The prosecutor, a Chen supporter, said he refrained from indicting the president only because the crimes did not constitute treason. Chen may leave Taiwan before his term ends to avoid prosecution.

Macedonia went from China to Taiwan and back to China. Macedonian press Taiwan had promised between 1 and 1.6 billion (US dollars) of aid, which is much greater than Taiwan's total (public) aid budget. China offered aid and threatened to veto ongoing UN peacekeeping in Macedonia unless Macedonia switched to China.

China promised US$130 million to Nauru, which has 13,000 people. This angered Chen into saying that there were two entities, one on either side of the strait, which statement angered China. (Joel's note: Wikipedia says $60 million and mentions that Nauru went back to Taiwan in 2005.)

Chen had made a big deal of diplomacy and aid with other democracies, and so was embarrasses when Senegal, one of the most diplomatic countries in Africa, went to China. The premier of Taiwan was on a plane to Chad when Chad announced a switch to China.

Of Taiwan's remaining 24 friends, some are critical. Nicaragua is one. Panama is another. Chen Shuibian has been pushing the notion that Taiwanese are not Chinese, which is undermining Taiwan's position with overseas Chinese, including in Panama.

China's trade is skyrocketing in Latin America whereas Taiwan's is mostly flat.

Conclusion: China's won the diplomatic battle with Taiwan.

What's the effect if Taiwan's number goes down to 20, or 10? Unclear; Spain once had 2; Russia once had 2. What could China do next? It's clear that China absolutely doesn't want anybody else to control Taiwan, but finds the status quo acceptable for now.

Q: Would China reach a point of diminishing returns and stop even trying to reduce the number? Would it affect the Taiwanese regime's legitimacy? A: I don't think so.

Audience comments: It would matter in that Taiwan would find it much harder to file the UN applications that it uses to make noise. You can't find Taiwan in World Bank data. China doesn't want to overpay because then more countries would start switching back and forth.

A: Taiwan has informal, cultural diplomacy with many countries. China is insensitive to this as long as it isn't formal or implying statehood.

Q: If it comes to a crunch, should Singapore abandon Taiwan? Taiwan supported Singapore with FDI in the early days. (very long-winded details about consequences of Taiwanese independence and Korean opinions ultimately interrupted) Can China up the ante in this competition? A: Yes; but what's the hurry? On your Singapore question, it's the Singapore policy to oppose Taiwanese independence. But it doesn't matter. In my opinion, if Chen declared independence, Bush would call Hu Jintao and ask for 48 hours, and then overthrow the Taiwanese government. ("Is that on the record?" "It's my opinion")

Q missed it. A Much of China's aid is now money instead of labor. I think the US hasn't thought much about what to do about China's foreign assistance. US may support it as another way to promote development in poor countries. But US uses some Pacific islands for strategic reasons. Some criticism of China destabilizing the world market in oil and other commodities.

Discussion of race issues, who is really Chinese. Chinese colonizers of Taiwan taking local wives. Q: What about culture? A Taiwanese groups stir up these issues to win the election. If KMT wins, it will die down

Taiwanese foreign aid to a huge leap in 1989. But now many Taiwanese feel poor. Conflict between perception of decline in Taiwan and desire of Taiwanese not to feel isolated. Taiwanese consumer confidence is lowest in Asia; very low confidence in the government. KMT accusations that Chen ruined the Taiwanese economic miracle.

In a sense China is giving economic assistance to Taiwan by buying up agricultural products well above market price. Many Taiwanese companies do quite well in China.

Speculation about China's manipulation of Taiwan. Stock market manipulation.

Q: What about Vatican relations? Recent election of a bishop in China suggesting tacit approval of Chinese government. Will the Vatican dump Taiwan and recognize Beijing? A: yes, the Vatican would switch if these could reach an agreement with Beijing. Pope won't give up the right to select bishops in China. Point from audience: Vatican has apostolic representatives, not ambassador, and so could have both China and Taiwan. —I don't think China would tolerate that.

Q: Doesn't this aid competition benefit the small countries? Would foreign aid to these entities decline sharply if Taiwan and China merged?

Q: What is the Chinese population in Panama that could influence Panamanian opinion?

A: I'm not sure— there's enough to — they are a minority community and they have money to influence politics.

Discussion about identity and race in Taiwan. Many Taiwanese elite hold dual US/Taiwan citizenship. Promotion of Taiwanese language, which they acknowledge is impractical. It's not entirely rational. (Joel's note: At the Taiwanese birthday dinner I went to the other night, forty Taiwanese sang happy birthday in English, Mandarin, and Taiwanese.)

Q: In the US there are many undocumented workers, we often call them "illegals". The same situation exists in China. The labor flow may be very important in foreign aid issues. A: In the US, you are talking about 15% of the population (Joel's note: the most common number is 12 million, which is closer to 3% of US population); the number would be much smaller in China. Africans in China? I've never heard anybody say that. —I've seen Africans in Malaysia, students and people holding good jobs. —I've studied a report that there are over 200,000 illegal African workers in Guangzhou alone.