Result of Saturday's election will have wide-reaching implications but for voters the key issue is the economy

This article is more than 8 years old

This article is more than 8 years old

Select a twig of laurel from the board in front of him and, pledges fortune teller Zhang Tianyao, "I can tell you things about your career, marriage, how many kids you will have and your future."

But ask him for a more immediate prediction — the outcome of Saturday's neck-and-neck race for Taiwan's presidency — and he turns decidedly coy. He does not even know which way he will vote.

One issue tops his list of concerns, he says as he waits for customers at Taipei's Raohe night market, clad in a brown cowboy hat and navy Sun Yat-Sen suit.

"My priority is for cross-straits relations to be peaceful," he says; a response that helps to explain why the election's outcome will resonate far beyond the island's shores, in Washington and Beijing.

Taiwan has been self-ruled since Chiang Kai-shek's defeated Kuomintang retreated across the Taiwan Strait at the end of China's civil war in 1949. But Beijing yearns for reunification and refuses to rule out military action if Taiwan formally declares independence.

While the Kuomintang president, Ma Ying-jeou, has overseen an unprecedented thaw in cross-straits relations, hundreds of Chinese missiles still point across the straits.

The US government, obliged by an act of Congress to help the island defend itself, wants to ensure stability.

Now Tsai Ing-wen of the pro-independence Democratic People's party — who would be the first female president if elected — has slashed Ma's initially commanding lead.

The race has appeared relatively calm compared with previous turbulent and occasionally violent contests — though a woman with a knife was bundled out of the DPP office on Friday.

But as the candidates criss-crossed the island in a last-minute frenzy of campaigning, analysts judged the outcome too close to call.

"It matters because it is such a central question to the world's two biggest economies," said Clayton Dube, of the University of Southern California's US-China Institute, who is in Taiwan to observe the election.

"Polls show that two-thirds to three-quarters of Chinese people think if there's going to be a conflict with the US it will be over Taiwan."

In contrast, only a handful of American voters identify it as a major issue; Washington wants to ensure it does not dominate bilateral relations. Keeping things on an even keel may be even more important, and tricky, given the Obama administration's shift to a China-focused security strategy.

The US has not formally indicated a preference, but analysts say Washington is clearly hoping for another KMT victory.

Ma's leadership has seen the introduction of the first direct flights, postal services and shipping routes for six decades and an Economic Co-operation Framework Agreement to ease trade. Beijing has even sent across a pair of giant pandas, whose names together mean "reunion".

But critics say his presidency has otherwise been lacklustre, citing issues such as the government's handling of Typhoon Morakot in 2008. Growth quickly returned following the same year's financial crisis, but incomes are barely recovering, bolstering claims that Ma, 61, has been good for big business but bad for the ordinary worker.

While outsiders contemplate the election's impact on international security, Taiwan's 18 million voters seem more interested in their employment and income prospects.

"The political issues date back many decades, but it's not an issue these candidates can solve in a day. For people the only thing that matters is economic stability," says Zhang, the fortune teller.

The savvy campaign by the DPP, traditionally strong in the agricultural south and among the working classes, has focused on economic and social justice rather than Taiwanese identity. Tsai's calm competence – the 51-year-old is a former academic with an LSE doctorate, as well as an experienced negotiator – has impressed swing voters turned off the party by its in-fighting and corruption claims (former president Chen Shui-bian is in jail for money laundering and misuse of public funds).

The race is complicated by the third candidate, James Soong of the People First party, who cannot win but could become kingmaker if the PFP picked up enough seats. Tsai has floated the idea of a coalition.

The DPP leader has also toned down the party's rhetoric on cross-straits relations to counter the KMT's suggestion that voters must choose between stability and uncertainty.

"We don't want to provoke China as the previous administration did for eight years. It will not do any good for Taiwan," Ma told reporters on Thursday.

Although Beijing has been strikingly quiet so far – attempts to exert influence have backfired in previous elections – the opposition claims authorities have pressured businessmen based on the mainland to support the KMT.

Should the DPP win, "Tsai will not want to rock the boat and the US and China will not want to undo four years of improving ties", suggested Jonathan Sullivan of the University of Nottingham, whose Ballots and Bullets blog has chronicled the campaign.

But he noted: "Chen Shui-bian was moderate from 2000-2001 and Beijing ignored and undermined him at all times, which, combined with the KMT's obstructionism, led him to a more radical position. A pessimist would say that neither the CCP [Chinese Communist party] nor KMT have changed, so why should Tsai fare different?"

"I think [Beijing] will say: if we don't show any differences we lose credibility," said Yen Chen-shi of the institute of international relations at the National Chengchi University in Taipei.

The transfer of power to new leaders on the mainland this year creates further uncertainty.

"Hu [Jintao] is considered the most conciliatory Chinese leader. If all those concessions don't bring in Taiwanese votes, hardliners will say they should not do this," added Yen.

Dialogues might well stagnate and Beijing could choke off tourism, a newly lucrative business for Taiwan, or poach one of the handful of tiny territories that still recognise it diplomatically.

The economic outlook is another complication, warned Wu Jau-shieh, Taiwan's chief representative to the US under Chen and now a political analyst at the National Chengchi University. He feared China might turn to nationalism if domestic unrest emerged amid a downturn.

DPP supporters argue there is no such thing as maintaining the status quo. They believe Beijing will press harder for political talks should Ma win.

But his poll ratings plummeted when he mooted the possibility of a peace deal during the campaign.

"Whether Tsai or Ma wins, I think all sides have been reminded that pressuring Taiwan to move towards political negotiations, under the guise of a peace accord, is not an option," said Professor Christopher Hughes of the London School of Economics.