Soong waves to a crowd Friday, after formally breaking ranks with the ruling Nationalist Party by announcing his independent candidacy for the March presidential elections  ALSO: China acknowledges development of neutron bomb technology Report scolds Justice, FBI handling of China data MESSAGE BOARDS: China tomorrow

July 16, 1999
Web posted at: 7:35 p.m. EDT (2335 GMT)

In this story: 'One China' policy at heart of tension Popular insider challenges Nationalist candidate RELATED STORIES, SITES

From staff and wire reports

TAIPEI, Taiwan (CNN) -- The shock waves from Taiwanese President Lee Teng-Hui's bold move last week to redefine Taiwan's relationship with mainland China continued to crash over the political and diplomatic landscapes Friday.

Amid fears of a Chinese attack, Taiwan's stock market plunged more than 6 percent. And its ruling Nationalist Party splintered when an intra-party critic of Lee's policy launched a rogue presidential bid.

Meanwhile, the Chinese government in Beijing threatened to call off a long-awaited visit to Taipei by a senior Chinese envoy, Wang Daohan. Sources also tell CNN that troops in the Nanjing military region, closest to Taiwan, have been put on a higher state of alert.

The state of military preparedness was increased from its normal level three to level two, which means that all vacations are canceled, drills have been increased and all weapons have been loaded with ammunition, sources say.

'One China' policy at heart of tension

Since a civil war 50 years ago, both the Chinese communist government in Beijing, whose forces were victorious in the war, and the government in Taipei, which lost and took refuge on the island of Taiwan, have maintained that they are still part of "one China." Each has competing claims to be the legitimate government of China.

But in statements made last week, Lee seemed to back away from that policy, maintaining that China and Taiwan have "state-to-state" relations. The declaration has enraged communist authorities, who view Taiwan as a rebellious province, not a sovereign state.

Officials in Beijing have continued to repeat warnings that Taiwan's rejection of "one China" is unacceptable -- and that there will be consequences unless Lee clarifies his remarks.

China has repeated threats to invade if Taiwan declares independence. And with what appeared to be carefully calculated timing, it also announced Thursday that it could make a neutron bomb that kills people but leaves property relatively intact.

Taiwan's defense ministry has tried to reassure the public, saying that is has seen no unusual military activity on China's eastern and southeastern coasts, which face the island.

But that hasn't stopped the public jitters, which are being blamed for Friday's 6.4 percent stock market plunge. During the past week, the market has lost more than 12 percent of its value.

Popular insider challenges Nationalist candidate

Also on Friday, James Soong, a popular senior Nationalist Party insider, launched a presidential bid against Vice President Lien Chan, the party's preferred candidate in the March 2000 ballot. His announcement included veiled criticism of Lee, though he avoided a direct attack on Taiwan's leader.

"Taiwan needs a courageous but not reckless leader," Soong said.

Soong has floated a number of controversial proposals on Taiwan-China relations that have angered both his Nationalist colleagues and the opposition Democratic Progressive Party.

He has said he favors direct communication links, commerce and transportation with the mainland, now banned. And Soong has called for a prompt start to political talks with Beijing, which the Nationalist government maintains is impossible until mutual trust is established.

Soong would not say if he would leave the ruling party, although some analysts said he risked expulsion.

"The impact on the Nationalist Party will be phenomenal," said Liao Dachi, a political science professor at Sun Yat-sen University.

Beijing Bureau Chief Rebecca MacKinnon and Reuters contributed to this report.

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