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fund. The bulk of this ($134.3 million) had gone in ten overseas loans and the rest had been spent on six technical assistance projects.
Relations with the Mainland
It
5. The National Unification Council met on 23 February and considered a draft of guide-lines for national reunification. These envisaged a three stage process. In the short term, there should be a period involving the gradual building of mutual understanding through exchanges of various types, during which China should promote economic reform and practise democracy (while Taiwan would establish a society in which social wealth is distributed equally among the people). This would lead on to a second stage of mutual trust and cooperation, when official channels of communication would be established, direct trade and communications would take place, and high level visits be exchanged. Finally, in the long term, there would be the establishment of a process of consultations on unification. suggested that Taipei and Peking should recognise each other as distinct political entities and renounce the state of war still technically in effect. Senior figures on Taiwan have been making very conciliatory sounding noises, but it is also clear that there a deep concerns on Taiwan, especially over the Chinese mainland leaders' continued reservation of the right to use force if necessary. Premier Hau Pei-tsun said on 1 March Peking should publicly forego its threats to use force or sign a ceasefire to terminate the state of war. The end of the period of communist rebellion which the Taiwan authorities intend to announce in May as part of their constitutional reform would not mean that the state of war was automatically at an end. There has been little immediate response from the Chinese to all this discussion. The guide-lines contain more than enough to make them unacceptable to the Chinese.
6.
On 12 February Premier Hau Pei-tsun said that Deng Xiaoping's handling of the Tiananmen incident was mistaken and would make reunification impossible in his lifetime. He added that Deng's mistake would make him a criminal in the history books. Unification would only be possible when the Communist regime abandoned its totalitarian dictatorship and permitted free election and freedom of speech.
1.
The Taiwan Mainland Affairs Council, which formally began operations on 7 February, issued a statement on 2 March accusing Peking of allowing pirates to attack, kill and rob Taiwanese fishermen off the coast of the island of Matsu in an incident on 28 February. It said it would ask the new private Foundation for Exchanges Across the Taiwan Strait" to forward a written report from the surviving fishermen to the Chinese authorities.
Domestic affairs
8.
The Taiwan government announced that it would face its highest ever budget deficit in Financial Year 1992 with a deficit of US $11.5 billion (expected revenue will be $25.2 billion and expenditures $36.7 billion). Taiwan hopes to finance this by
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