BY YIMOU LEE AND FAITH HUNG

TAIPEI/HONG KONG Wed Nov 26, 2014 7:57pm EST

(Reuters) - Ever since a civil war split the two sides more than 60 years ago, China has viewed Taiwan as a renegade province that needs to be absorbed into the mainland. To that end, the legion of Taiwanese businessmen working in China is a beachhead.

In June, hundreds of those businessmen gathered in a hotel ballroom in the southern Chinese city of Shenzhen. They were there to toast the new head of a local Taiwan merchants’ association. They sipped baijiu liquor and ate seafood as a troupe performed a traditional lion dance for good luck. An honored guest, senior Communist Party official Li Jiafan, stood to deliver congratulations and a message.

“I urge our Taiwanese friends to continue to work hard in your fields to contribute to the realization of the Chinese dream as soon as possible,” said Li, using a nationalist slogan President Xi Jinping has popularized. “The Chinese dream is also the dream of the people on both sides of the Taiwan Strait – our dream of reunification.”

Li, who ended his speech to beating drums and loud applause, is a department chief in the Shenzhen arm of the United Front Work Department, an organ of the Communist Party’s Central Committee. Its mission: to spread China’s influence by ultimately gaining control over a range of groups not affiliated with the party and that are often outside the mainland.

United Front documents reviewed by Reuters, including annual reports, instructional handbooks and internal newsletters, as well as interviews with Chinese and Taiwanese officials reveal the extent to which the agency is engaged in a concerted campaign to thwart any move toward greater independence by Taiwan and ultimately swallow up the self-ruled island of 23 million.

The United Front’s 2013 annual work report for the Chinese province of Zhejiang, for instance, includes the number of Taiwanese living in the province, the number of businesses they run as well as an entry on background checks that have been conducted on the Taiwanese community in the province, an entrepreneurial hub near Shanghai.

The United Front hasn’t confined itself to the mainland. It is targeting academics, students, war veterans, doctors and local leaders in Taiwan in an attempt to soften opposition to the Communist Party and ultimately build support for unification. The 2013 work report, reviewed by Reuters, includes details of a program to bring Taiwanese students and military veterans on visits to the mainland.

INFLUENCING POLITICS

Through the United Front and other Chinese state bodies like the Taiwan Affairs Office, which is responsible for implementing policies toward Taiwan on issues including trade and transport, Beijing has also tried to influence politics on the island, in part by helping mobilize Taiwanese businessmen on the mainland.

Many of them are heading back home this weekend to vote in mayoral elections that are being viewed as a barometer of support for Taiwan’s ruling Nationalist Party, or Kuomintang (KMT), which favors closer ties with China than does the pro-independence Democratic Progressive Party (DPP). A large number of those businessmen, who a senior KMT source said will largely vote for the party, will be flying on deeply discounted airfares being offered by Chinese and Taiwanese airline companies.

“The goal is simple – peaceful unification,” said a person with ties to the Chinese leadership in Beijing. Soft power, not armed force, is the strategy. “To attack the heart is the best. To attack a [walled] city is the worst,” the source said, quoting Sun Tzu’s “Art of War.”

Questions sent by fax to the Beijing office of the United Front Work Department were not answered. The Chinese government's Taiwan Affairs Office referred Reuters to a statement on its website saying it does not comment on elections on “the island.”

What’s happening in Taiwan is part of a broader effort by Beijing to bolster its control over restive territories on its periphery.

The United Front has long been active in Hong Kong, which is ruled under the “one country, two systems” model that enshrines a wide range of personal freedoms for its residents and which China’s leaders have proposed as a model for Taiwan. Reuters reported in July that United Front operations in Hong Kong had shifted from the backroom courting of academics and businessmen to the streets, where new groups of pro-Beijing agitators were attempting to silence critics of China.

“What the United Front is doing to Taiwan now is the same as what it has been doing in Hong Kong since the 1980s – a quiet, slow but extensive penetration," said Sonny Lo, a professor at the Hong Kong Institute of Education and author of a book on China's covert control of the city.

Unlike Hong Kong, Taiwan is a fully democratic entity. It has an army but does not have membership in the United Nations, and China has refused to rule out the use of force to gain control of the island.

Since the KMT won the presidential election in 2008, cross-Strait ties have been warmer than ever. More than 20 trade deals, including the establishment of the first direct flights between Taiwan and the mainland, have been inked. No trade agreements were signed under the previous DPP-led administration. Earlier this year, Chinese and Taiwanese officials held their first official meeting since 1949.

Taiwan’s economy has become increasingly intertwined with China’s. About 40 percent of Taiwan’s exports are to China and some key sectors like technology have much of their manufacturing on the mainland. The world’s biggest electronic components maker, Foxconn Technology Group ,, which assembles Apple Inc’s iPhones, has many of its plants in China.

Taiwan presidential spokesperson Ma Weikuo said Taiwanese heading home to vote were exercising their right as citizens. “It is normal that Taiwanese businessmen living in Hong Kong, Macau, mainland China, Europe, Japan and other parts of the world want to return to Taiwan to vote,” she said.

PRIZED HONOR

The United Front’s annual work reports and handbooks provide a window into the agency’s methods. It has at least 100 offices in Zhejiang. The 2013 work report said 30,000 Taiwanese businesspeople and their families were living in the province and 6,800 Taiwanese enterprises had operations there at the end of 2012.

United Front officials reported creating a more friendly business environment by helping to smooth investment problems and resolve legal disputes for resident Taiwanese. In the Zhejiang city of Ningbo, one United Front office said it spent 110,000 yuan (about $18,000) to buy life and traffic accident insurance for 137 Taiwanese businessmen.

Under a “three must visit” system in effect across the mainland, United Front officials are instructed to visit Taiwanese businesspeople and their families during traditional holidays, when a family member is ill and when someone is facing economic troubles.

“They help with our business as well as little problems in daily life such as car accidents, illness and schooling for kids," said a Taiwanese man surnamed Lin, who works in the property sector in Changsha, the capital of Hunan Province.

One enticement China has dangled in front of the Taiwanese business community residing on the mainland, is provincial and municipal membership in the Chinese People’s Political Consultative Conference (CPPCC), which serves as an advisor to the government. It is a prized honor for businessmen whose livelihoods are directly dependent on the mainland. The position affords access to government officials and a form of protection in a country that lacks an independent judicial system.

“There will be a force that helps protect your business on the mainland,” said Lin. “They won’t make trouble if you are a CPPCC member.”

Holding CPPCC membership is a violation of Taiwanese law that bars citizens from taking positions in state or party bodies in China. It is, however, legal to be an honorary, non-voting CPPCC member. The Association of Taiwan Investment Enterprises on the Mainland (ATIEM), which lists some 130 Taiwanese business associations across China as members, met with Taiwanese President Ma Ying-jeou in December 2012 to try changing that.

Their bid to persuade him to allow Taiwanese citizens to become full-fledged CPPCC members ultimately failed. Taiwan’s Mainland Affairs Council announced that same month that Taiwanese could not sit on the CPPCC.

Earlier in 2012, Taiwan’s National Security Bureau had handed a list of 169 Taiwanese suspected of being CPPCC members to the island’s Mainland Affairs Council, which implements policy toward China on a wide array of issues including business, shipping and travel. The council whittled the list down to 32. Ultimately, no one was punished after Taiwanese authorities determined those named were all either honorary CPPCC members or weren’t holders of a Taiwanese passport.

FAR-REACHING DEALS

Taiwanese working on the mainland have actively lobbied for increased trade ties with China. ATIEM, the business lobby, lists some of Taiwan’s largest companies as members on its website. Several of the group’s founding members urged the Taiwanese government to sign far-reaching deals with China, arguing it would boost Taiwanese business on the mainland. They held meetings with Taiwan’s Mainland Affairs Council to help lay the groundwork, a senior member of the organization told Reuters.

Their efforts were rewarded when Taiwan signed trade deals in 2008 that for the first time allowed direct flights, shipping and mail links with the mainland.

ATIEM hasn’t always been on the winning side. In March, students occupied the Taiwan legislature in a bid to block passage of a deal that would have allowed for freer trade with China. The protests, dubbed the Sunflower Movement, fed off fears the pact would give China greater sway over Taiwan. The protest ended when parliament agreed to suspend a review of the bill.

ATIEM did not respond to questions sent by email.

Some Taiwanese officials warn against United Front encroachment. In late September, the head of Taiwan’s Overseas Community Affairs Council, which handles matters related to citizens living overseas, told a parliamentary committee that the United Front was stepping up work among Taiwanese business leaders and younger Taiwanese on the mainland and abroad.

“They are drawing the Taiwanese who are more receptive to China over to their side, exerting pressure on Taiwan’s government and affecting its mainland policies,” Alexander Huang, a former vice chairman of Taiwan's Mainland Affairs Council, which is responsible for ties with China, told Reuters. He didn’t cite specific examples.

Mainland Affairs Council spokesperson Wu Mei-hung said United Front activity shouldn’t be interpreted in an “overly negative way.”

“China has some political intentions,” she said. “But Taiwan has its own advantages in terms of systems, core values and soft power.  All of these, we hope, will impact China via exchanges.”

The ruling KMT dismisses charges from the opposition DPP that it is benefitting from United Front activity. Kuei Hung-cheng, the KMT’s director of China affairs, acknowledged the close relationship between Taiwanese businessmen on the mainland and the Chinese authorities, but said that did not mean Beijing held sway over the party. “The KMT will not be influenced or controled by the Chinese Communist Party. That is not possible,” he said.

A MAGIC TOOL

The United Front is a legacy of the earliest days of Leninist communist revolutionary theory. China’s version of the United Front, dubbed a “magic tool” on the agency’s own website, helped the Communist Party become established on the mainland and ultimately prevail in a civil war that forced Chiang Kai-shek’s Kuomintang (KMT) to retreat to Taiwan in 1949. The United Front has as its primary goal the promotion of “motherland unification” and blocking of “secession.”

A 2007 handbook for United Front workers in Beijing instructs cadres to “unite neutral forces in order to divide and attack enemies.” It also directs them to “make friends extensively and deeply with representatives from all sectors” in Taiwan and abroad to “form a mighty troop of patriots.”

A senior Taiwanese defense official, who did not want to be named, referred to the United Front’s tactics as a “war.” The ultimate goal was “to overturn the Republic of China,” he said, using Taiwan’s official name.

The front’s activities haven’t been confined to harnessing China-friendly forces. The southern Taiwanese city of Tainan, which is a bastion of the pro-independence DPP, has been singled out. One group in the city that has gotten special treatment is doctors, who have been invited on trips to the mainland, according to a 2011 work report from an organ associated with the United Front.

The visits had "successfully enhanced identification with the motherland among some pro-green Taiwanese," the Taiwan Democratic Self-Government League, a nominally independent political group that is permitted to operate by the Communist Party, wrote in its report. Green is the color associated with the opposition DPP.

Some politicians in Taiwan unabashedly favor unification. Among them is Chang An-lo, the head of a pro-unification party. Known as the White Wolf, Chang was once a leader in a triad group, a traditional Chinese criminal syndicate, called the Bamboo Union. He lived for a decade in China as a fugitive from the law in Taiwan but ultimately was never tried. He also spent ten years behind bars in the U.S. on drug-smuggling charges.

Sitting in his office in Taipei dressed in a white jacket and black shirt, Chang says he and his party have regular contact with Beijing’s Taiwan Affairs Office and he has “friends in the United Front.” The Chinese government, he says, has provided all-expenses paid trips for members of his party to the mainland. “Getting carrots from China is better than getting sticks,” he says.

UNSPOKEN CONSENT

The United Front and the Taiwan Affairs Office are also deeply involved in an activity that in Communist China is strictly prohibited: democratic electoral politics.

Taiwanese businessmen based in Shenzhen and Shanghai told Reuters they have been encouraged by United Front officials to head home to vote in past elections.

This year, the stakes are high for Beijing. The Democratic Progressive Party champions independence. The ruling KMT government backs a status quo position of “no unification, no independence, no war.”

Election airlifts helped the KMT to victory in 2008 and 2012. Close to a quarter million Taiwanese residents on the mainland headed home to vote in the 2012 presidential election, according to a senior member of the ruling party who estimates there are about one million Taiwanese working and living in China. As many as 80 percent voted for KMT leader Ma, who won a second term promising closer ties with Beijing, the official said, citing an internal survey.

This year, the airlift may not be enough to turn the tide in the most important mayoral run-off – in Taipei. Final opinion polls published by Taiwan’s leading media outlets showed the KMT’s candidate trailing an independent by 11.5 to 18 points. A victory for the independent would mark the first time in 16 years that the KMT has not ruled the capital.

But Beijing isn’t giving up. More than a dozen airlines, including state-owned Air China and Taiwan’s largest carrier China Airlines, have agreed to provide discounted flights from the mainland to Taiwan at the end of November, according to a notice sent to members by ATIEM. The Beijing-based organization lists the Chinese minister in charge of the Taiwan Affairs Office as an honorary chairman on its website.

A senior official at Taiwan’s China Airlines told Reuters that “with tickets selling at 50 percent off, airlines will incur losses.” But the carrier would nevertheless “100 percent meet the demand from Taiwanese businessmen.”

China Airlines spokesman Jeffrey Kuo said the company was offering “promotional tickets for all flights” because November was “the low season.” Air China did not respond to questions sent by fax and email to its Beijing office.

China’s Taiwan Affairs Office said it was aware that Taiwanese businessmen wanted to vote in the elections. ATIEM had negotiated with airline companies to allow them to fly home, it said.

He-tai Chen, president of the Taiwan Merchant Association in Shenzhen, said the Taiwanese business community on the mainland was “China's best public relations tool.”

“There are 7 to 8 votes in my family,” he said. “And am I not the one who decides to whom those votes go?”

The United Front has also been working to penetrate other layers of Taiwanese society. As part of an operation called “Collecting Stars,” it has targeted military veterans in Taiwan, inviting them to China for visits. In May 2012, retired Taiwanese and mainland generals who were once sworn enemies met for an invitational golf tournament in Zhejiang, United Front documents show.

Outreach to students takes the form of summer camps, corporate internships and discover-your-roots tours to the mainland. Tsai Ting Yu, a 15-year-old junior high school student who joined a trip in 2013 and in 2014, said she attended classes with her mainland hosts and visited popular tourist sites, including the Great Wall and the Forbidden City.

“Before the trips, I kind of resisted the idea of China. But through the programs I got to know them better and that resistance gradually disappeared,” said Tsai.

She says she is now considering doing an undergraduate degree on the mainland.

(Additional reporting by Benjamin Kang Lim in Beijing and John Ruwitch in Shanghai. Editing by Peter Hirschberg, Michael Williams and Bill Tarrant)