“One China” Principle
The two sides sharply disagree on Taiwan's de jure political status. The People's Republic of China asserts that there is only "One China" and Taiwan is an inalienable part of it. Beijing says Taiwan is bound by the consensus reached in 1992 between the representatives of both governments in Hong Kong. Referred to as the 1992 Consensus, it states that there is only one China, but China and Taiwan can interpret that principle however they wish. Taiwan's former president Chen Shui-bian, however, rejected the very existence of the consensus. The KMT accepts it as a starting point for negotiations.
In 1979, the United States reestablished relations with Beijing and signed a joint communiqué that reasserted the One China policy. According to it, "the Government of the United States of America acknowledges the Chinese position that there is but one China and Taiwan is part of China." At that time, President Jimmy Carter terminated diplomatic relations with the ROC government in Taiwan. Just months later, the Taiwan Relations Act of 1979 affirmed U.S. support for the island's democratic system. That essential conflict has been the source of intermittent friction ever since. When Beijing judges these principles have been violated or even stretched a bit, it makes its displeasure known. Over the years, U.S. arms sales to Taiwan have frequently led to U.S.-China friction and an upsurge in bellicose rhetoric across the strait. Another CRS report (PDF) looks at the agreements and communiqués that have shaped the U.S.-China-Taiwan dynamic over the years.
China has deployed ballistic missiles along the Taiwan Strait and continues to modernize both its missile forces and its amphibious assault capabilities. Taiwan continues to purchase weapons abroad, primarily from the United States. Between 2000 and 2007, Taiwan received $8.4 billion in arms deliveries (PDF) from world wide sources. The United States has consistently been a significant source of Taiwan's arms purchases: From 2003 to 2006, $4.1 billion of Taiwan's arms purchases were procured from the United States.
Taiwan's strategic security rests heavily on the implied guarantees offered by the United States over the years--guarantees made more concrete than ever during the administration of George W. Bush, who pledged in 2002 to "do what it takes to help Taiwan defend herself, and the Chinese must understand that." China has consistently protested U.S. arms sales to Taiwan. According to Shirley A. Kan, a specialist in Asian security affairs at the Congressional Research Service, between 2007 and 2008 the United States effectively froze arms sales (PDF) to Taiwan, but the Bush administration refused to publicly acknowledge the suspension. The unofficial freeze ended in October 2008 when the United States agreed to sell Taiwan $6.4 billion in military