ON a Taipei street bustling with Chinese lunar new year crowds, money-changers do a brisk business relaying $1,000 cash gifts from Taiwan residents to their less fortunate kin on China's mainland. Around the block, shoppers snap up inexpensive bags of ginseng, dried Chinese wolfberries, lotus seeds, and other mainland specialties, the fruits of a booming trade across the Taiwan Strait.
On beaches not far from the city, ``snakeheads,'' or smugglers, ferry ashore boatloads of mainland immigrants impatient for a taste of Taiwan's prosperity. Many evade capture and head for inland factories, where officials estimate tens of thousands are now working illegally as manual laborers.
After four decades of hostility, the flow of people, goods, and currency between this thriving capitalist island and communist China is expanding with such momentum that in many areas it is beyond Taiwan's control. (See accompanying stories.)
So far, the exchange has accentuated the differences between the two societies, one poor and locked in repression, and the other vibrant and moving toward democracy.
The flood of contacts began in November 1987, when Taiwan allowed elderly citizens to visit kin on the mainland. The move ended a strict ban on ties imposed by Nationalist Gen. Chiang Kai-shek, who fled to the island with some 2 million followers after his defeat by communist forces in 1949.
Swept up in what the local press calls ``mainland fever,'' some 1.5 million of Taiwan's population have rushed across the strait to see relatives, tour, or conduct business in the past three years. The government has abandoned all but a few travel restrictions as journalists, politicians of Taiwan's ruling Kuomintang (KMT), or Nationalist Party, and others openly defied them.
Meanwhile, thousands of businessmen ignore Taipei's ban on direct trade and investment with the mainland. The ban aims at maintaining the island's economic independence and preventing its executives from being ``taken hostage'' by the communist regime, says government spokesman Shaw Yu-ming.
Recent calls from Taiwan's increasingly affluent and vocal population for democracy forced KMT to lift martial law, ease controls on the press, and legalize an opposition party over the past four years. Growing numbers of residents consider the pace of exchanges too slow, opinion polls show.
Meanwhile, Beijing's communist leadership has toned down its ideological warfare with Taiwan since 1980 and called for direct postal links, navigation, and trade across the strait. A decade of market-oriented reform has created new opportunities for ``Taiwan compatriots,'' who are wooed with tax breaks and attractive investment offers.
Unable to restrain the increase in ties, Taipei hopes to channel it toward ``canceling out communism'' and recovering the mainland on its own terms. (Both Taipei and Beijing claim sovereignty over all China, uphold reunification as a central goal, and oppose independence for Taiwan.)
In November Taipei set up the Strait Exchange Foundation as a de facto consulate. The foundation plans to open offices in Beijing, Shanghai, and other major mainland cities to perform tasks such as issuing visas and entry permits, authenticating documents, and settling legal disputes with mainland authorities. Though technically private, the foundation is partially government-funded.
Beijing has not responded to Taipei's offer to allow reciprocal offices on Taiwan.
Taipei also intends to open its doors wider to mainland visitors, who have numbered about 7,000 since 1988. Plans include inviting mainland students to attend college and reporters to set up news bureaus here.
And in a major policy shift, the government has considered permitting Chinese Communist Party members to travel to Taiwan.
``If they declare they are communists, they will be exempt from prosecution on those grounds,'' says Mr. Chen. Propagating communism is a major offense in Taiwan.
Beijing is pressing for direct talks between the Communist Party and the KMT. It has voiced concern that uniting China will grow more difficult with the passing of veteran leaders and the rise of an outspoken Taiwan independence movement.
In response, Taipei outlined a plan to end its longstanding policy of ``no official contact, no compromise, and no negotiation'' with the mainland. But it demanded that Beijing first renounce the use of force against Taiwan, stop trying to isolate it diplomatically, and introduce democracy.
Signaling the new flexible approach to relations across the strait, Taipei in May will terminate the state of war with the mainland by abolishing the ``Period of Mobilization for the Suppression of the Communist Rebellion'' set down in a 1948 constitutional amendment.
``We can't necessarily consider the other side a rebel group anymore, they have to be treated at least as equals,'' says KMT Central- Committee member Ma Ying-jeou.