(Bloomberg) -- Taiwan elected Lai Ching-te as president of the global chip hub at the center of US-China tensions, putting in power a man Beijing has branded an “instigator of war.”

Lai, of the ruling Democratic Progressive Party, sealed victory in the island’s most hotly contested election in decades with 40.1% of the counted vote — the lowest winning percentage since another three-way race in 2000. The main opposition Kuomintang’s Hou Yu-ih trailed in second place, with the Taiwan People’s Party coming last in its first presidential campaign. Both had pledged to restart dialogue with China.

“We are telling the international community that between democracy and authoritarianism, we will stand on the side of democracy,” Lai declared at a victory rally in Taipei on Saturday night, to rounds of rapturous applause from the crowd.    

The current vice president also pledged to keep peace across the Taiwan Strait, a source of military tension for the world’s two largest economies, while vowing to walk alongside other major democracies — a reference to his party’s ties with Washington. 

President Xi Jinping’s government in Beijing called Lai — who considers his island a de-facto independent nation — a “troublemaker” and “separatist” in the runup to the election. China views self-ruled Taiwan as a breakaway province that it has vowed to reclaim someday, by force if necessary. 

President Joe Biden, who has pledged to defend Taiwan in any invasion, said in brief comments Saturday that the US doesn’t support independence for Taiwan.

China avoided mentioning the winner’s name in initial responses. The election result doesn’t “represent mainstream public opinion on the island” of 23 million people, Chen Binhua, the Taiwan Affairs Office spokesperson, said.

The Foreign Ministry in Beijing said “whatever changes take place in Taiwan,” the fact that Taiwan is part of China won’t change and China will continue opposing Taiwan independence. Other countries should adhere to the “one-China principle” and support Chinese efforts for reunification, according to the ministry.

“The election isn’t really over until Beijing’s response has played out,” said Danny Russel, vice president of the Asia Society Policy Institute. “Having warned that the election marked a choice between ‘war and peace,’ doesn’t the mainland want the voters to face consequences for their ‘wrong’ choice?”

Taiwan’s security officials have said they don’t expect China to conduct large military exercises around the island immediately after the election but see Beijing ratcheting up pressure before the new president takes office. Current leader Tsai Ing-wen will step down in May, in line with Taiwan’s two-term limits.  

“Nor can it stop the general trend that the motherland will eventually be reunified and will inevitably be reunified,” Chen added, reiterating comments made by Xi during his new year’s address. 

Read More: Live Results From Taiwan’s Presidential Election

Testing Ties

Lai’s victory speech was broadcast simultaneously in English, as the world’s only Chinese-speaking democracy marked the culmination of a race that’s been closely watched around the globe. Hsiao Bi-khim, Taiwan’s former envoy to the US and Lai’s running mate, stood at his side during his address.

The DPP’s reelection for a record third straight term will test the recent stabilization of ties between Beijing and Washington, after their leaders held talks in California in November. Biden will dispatch a bipartisan delegation of former senior officials to the island after the election, according to a senior US administration official. Beijing opposes nations having official contact with the government in Taipei.

US Secretary of State Antony Blinken said the election shows the strength of Taiwan’s democracy and reiterated that the US “is committed to maintaining cross-Strait peace and stability, and the peaceful resolution of differences, free from coercion and pressure.”

The US will work with Lai and all party leaders in Taiwan “to further our longstanding unofficial relationship” consistent with the US’s one-China policy, he said in a statement.

Despite Lai’s vows for policy continuity, Beijing views him with “deep suspicion,” according to Jennifer Welch, chief geoeconomics analyst at Bloomberg Economics. “Higher cross-strait tensions don’t mean a crisis is imminent, but would mean Taipei, Washington, and Beijing have to work harder to avoid one,” she added. 

While Lai signaled on Saturday that he would cooperate with China, his party is unlikely to be able to restart talks with Beijing, which have been suspended for the past eight years. The Communist Party demands agreement that Taiwan is part of China as a prerequisite for such dialogue, a red line for the DPP.

Taiwanese voters’ decision to back Lai despite fatigue with his party highlighted that their desire to keep China at arm’s length outweighed mounting frustrations over domestic issues, such as high property prices and slower-than-expected wage growth.

Addressing economic issues, Lai pledged to “vigorously” help further develop the island’s chip industry, which is dominated by Taiwan Semiconductor Manufacturing Co. The island’s pivotal role in the global supply chain of cutting-edge technology has been dubbed a “silicon shield” against any Chinese invasion.

Overall it was a disappointing evening for the two opposition parties, whose earlier attempt to form an alliance that could have brought them to power, and increased Beijing’s influence, collapsed in a spectacular display of public acrimony. But they could point to some small wins in the legislature.  

The TPP increased its legislative seats to eight allowing it to play kingmaker between the two main parties, which both lack an outright majority. Ko Wen-je declared that the results showed the party he founded was now a major opposition force.

The KMT increased its number of seats in the law-making body that decides all government budgets and funding for major arms purchases. Still, Hou apologized for disappointing his voters on Saturday night as he congratulated the DPP for its victory, adding: “I hope they don’t fail the Taiwanese people.”

--With assistance from Betty Hou, Jennifer Creery, Debby Wu, Jacob Gu, Michelle Jamrisko and Peter Martin.

(Updates with reaction by Biden, Chinese government and Blinken.)

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