Taiwan Island of Quiet Anxiety

When President Chiang Ching-kuo left Taipei’s Veterans General Hospital last week after a cataract operation, the Taiwan government was characteristically stingy with details about his health. Unlike President Reagan, whose battle with colon cancer was reported extensively, Chiang has the luxury of stepping out of–or into–the public spotlight whenever he pleases with little fear of protest. In fact, though his country is suffering a period of quiet political and economic unrest, the 75-year-old leader’s personal popularity has remained remarkably intact. “The man is a symbol of stability, and he has managed to maintain his effectiveness as that symbol through difficult times,” says one Western political observer, who then compared him to Ronald Reagan. “You might say Chiang is the Asian Teflon President.”

That quality has helped him weather a recent ebbing of confidence in his government. First came the revelation last January that military intelligence officers played a role in the 1984 death of Henry Liu, a Chinese-American writer who was murdered in his California home. Vice Admiral Wang Hsi-ling, former head of the Defense Ministry’s intelligence bureau, was convicted in June of plotting Liu’s death. Along with two gangsters who carried out the murder, Wang was given a life sentence. The trials were unusually open for Taiwan, but many felt that the harsh punishment was intended largely to placate the U.S.

Another setback for the government came in February with the collapse of the Tenth Credit Cooperative, a major Taiwan savings and loan institution, and the Cathay Investment & Trust Co., linchpin of the mighty Cathay group (estimated 1984 assets: $2.5 billion). The cooperative’s chairman, Tsai Chen-chou, had funneled more than $190 million from Tenth Credit to fund his own shaky business schemes. Many citizens feel that members of the ruling Kuomintang (K.M.T.) knew of the scandal but looked the other way. Indeed, Tsai and his half brother Tsai Chen-nan, chairman of the Cathay Investment & Trust Co., had been indulging in questionable practices since 1974, but government regulators moved in only after a run by depositors threatened to close Tenth Credit. By that time, hundreds of creditors had lost an estimated $320 million.

A number of Taiwan officials have lost their jobs as a result of the Cathay affair, but President Chiang denies that it has soiled Taiwan’s good name. “I do not see any wavering of public confidence as a result of (the Cathay scandal),” he said in an interview with TIME (see box). “Actually the government benefits by taking measures to overhaul the financial system.” An investigative committee of the Control Yuan, the government’s watchdog agency, ! assigned blame for the scandal last month to Finance Minister J.K. Loh, who resigned within hours, and to Hsu Li-teh, who quit as Economics Minister last March.

The Cathay scandal came at a particularly inauspicious time for the Taiwanese economy. After a muscular 10.9% growth rate in 1984, economic activity in the first half of this year rose less than 6%. Productivity has risen almost 9% annually over the past decade, but that has not been nearly enough to keep pace with the average 16% increase in wages. “From these figures, you can see we really are in danger,” says one of Taiwan’s leading economic policymakers.

To back up that concern, Chiang last April established a special Economic Revitalization Committee. When it completes its work next month, the committee will probably recommend a wide range of reforms, including a sharp cut in business taxes, free trading in gold, an easing of foreign-exchange controls and restructured credit cooperatives.

One topic that is still too sensitive for the committee, however, is direct trade with mainland China. Indirect trade through Hong Kong is brisk. Taiwan last year exported $430 million in goods to China, up 171% from 1983. Although the government winks at the practice, which is technically illegal, many businessmen want Taipei to let them tackle the mainland market head on. “We should open an office in Hong Kong to find out what the (Chinese) need,” says a Taipei businessman. But Chiang remains unimpressed with mainland economic reforms. “They are Communists, and that will never change,” he says. “They used to wear Mao suits without a tie, and now they wear Western suits with a tie. And you Westerners call that a change!”

Although Chiang is generally well liked by Taiwan’s 19.1 million people, his age and diabetic condition have stirred speculation about a successor. Under the constitution, Vice President Lee Teng-hui, 62, would automatically succeed if a vacancy occurred. But Lee is a native Taiwanese who did not accompany Chiang’s father, Chiang Kai-shek, when the Nationalists fled to Taiwan after the Communist takeover of the mainland in 1949, and he has never made it to the innermost circle of the KMT. Premier Yu Kuo-hwa, 71, who does not suffer those handicaps, has had to take much of the heat for the Tenth Credit scandal. As governor of the Central Bank before becoming Premier, he was financial czar for 15 years.

The one rumored successor in the Chiang family, Second Son Chiang Hsiao-wu, $ 40, a broadcasting executive, has suffered from being linked in the press, perhaps unfairly, with the Henry Liu affair. Besides, many in Taiwan are uncomfortable with the idea of a Chiang dynasty. For the moment, having survived the worst scandals in the KMT’s 39-year rule of Taiwan, people are mostly hoping that the current Chiang remains in good health.