HONG KONG — A DEEPENING conflict between Taiwan's pro-independence opposition and the ruling Nationalist Party (Kuomintang or KMT) is jeopardizing democratic reforms on the island as a milestone election approaches.The KMT-dominated government arrested and expelled independence advocate Kuo Cheng-kuang on Monday, bringing to 11 the number of such activists apprehended in a sweeping crackdown since mid-October. In response, the opposition Democratic Progressive Party (DPP) accused the KMT of colluding with communist China to deny Taiwan's 20 million people the right of self-determination. "KMT conservatives are dancing to the music of communist China," a DPP official said. The open conflict over the long-suppressed question of Taiwan's formal independence from China is a vivid illustration of how political discourse on the island has broadened since the government ended nearly four decades of martial law in 1987. For example, the New Nationalist Alliance, an influential faction of young, Taiwan-born KMT reformers, split with party ranks last week and called for a popular vote on independence. Alliance legislators defended their action, saying the call was a ploy intended to shock the public into backing the KMT's pro-reunification stance. But even as such, it amounted to an encouragement of public debate on a taboo issue. If the partisan conflict intensifies, however, spilling over into social unrest and prompting a larger-scale government crackdown, it could set back the planned democratic reforms of President Lee Teng-hui and other moderate KMT leaders. "Taiwan's people need more democracy and openness, but they are not ready to tackle this question [of independence]," says one KMT moderate. Fear of political instability sent Taiwan's stock market tumbling 10 percent last week. The crisis began on Oct. 13, when the DPP voted to adopt a clause in the party charter calling for a plebiscite on the establishment of a "Republic of Taiwan" separate from mainland China. The vote reflected the rise of the party's radical, pro-independence New Tide faction over its more moderate Formosa wing. The KMT immediately condemned the motion as "irresponsible" and threatened to dissolve the DPP for breaking sedition laws. The KMT regime, which retreated to Taiwan after its overthrow by China's communists on the mainland in 1949, claims sovereignty over all China and bans as seditious any advocacy of independence for the island. Meanwhile, China quickly accused the DPP's pro-independence activists of "going too far down the road of splitting the country" and warned of unspecified retaliation if the activists failed to "rein themselves in." China's communist rulers consider Taiwan part of Chinese territory and have threatened in the past to invade the island if it attempted to become a sovereign state. The DPP's aim is apparently to gain publicity and votes by making Taiwan independence one of the major issues in Dec. 21 elections for the National Assembly. An estimated 10 percent to 20 percent of Taiwan's people support independence. "In Taiwan, there are a lot of people who do not support reunification. We want to give those people a voice," says DPP spokesman Su Rui-yun. The vote is crucial. Many more Taiwan-born representatives will gain seats as all the aged assemblymen elected on the mainland before 1949 are forced to step down. According to President Lee's reform program, the new National Assembly will revise Taiwan's Constitution and political institutions. Yet the DPP admits its strategy of forcing the independence issue is risky. So far, the KMT response has been muted, partly because party moderates seek to avoid alienating voters by reverting to past, repressive tactics. Arrests have targeted members of outlawed pro-independence groups rather than the DPP as a whole.