Taiwan's weekend vote will be a test for its president, as China looks on

  • Taiwan holds local elections on Saturday that analysts say are a de facto referendum on the midway point of President Tsai Ing-wen's term.
  • Voters will choose mayors and local councils, as well as cast ballots on same-sex marriage and phasing out nuclear power.
  • Concerns about the economy and relations with China will be on voters' minds, analysts say.
Taiwan President Tsai Ing-wen waves to the crowd on May 20, 2016 in Taipei, Taiwan.
Ashley Pon | Getty Images
Taiwan President Tsai Ing-wen waves to the crowd on May 20, 2016 in Taipei, Taiwan.

Taiwan will be holding local elections on Saturday at the mid-point of President Tsai Ing-wen's leadership — and the focus will be on the island's sluggish economy and often fraught relations with China.

While Tsai is not on the ballot, the polls are seen as a chance for the electorate to rate her performance as they vote for mayors, councils and other positions.

Relations across the Taiwan Strait ebb and flow depending on who holds power in Taipei — and tensions with Beijing have risen since Tsai's independence-leaning Democratic Progressive Party (DPP) swept to power two years ago.

China prefers the Kuomintang (KMT), or Nationalist Party, which eschews talk of going it alone and stresses economic ties with the mainland, from which troops fled in 1949 after defeat in the Chinese Civil War.

"The trade relationship with China matters a great deal to many people here." -Michael Boyden, TASC Taiwan Asia Strategy Consulting

The KMT last ruled Taiwan from 2008 to 2016, after winning back power from the DPP.

Taiwan-China relations flourished during that time, and leaders from both sides – Chinese President Xi Jinping and Taiwan's then-president Ma Ying-jeou – met in Singapore for a historic summit in 2015.

Beijing will be watching the results for Saturday's polls, looking for clues about how voters view Tsai's administration, said Michael Boyden, managing director at TASC Taiwan Asia Strategy Consulting.

"Certainly, I think the Chinese government would like to see the KMT come on strong in this election as a pointer to the presidential and legislative elections in 2020," Boyden said Friday on CNBC's "Squawk Box."

'Matters a great deal'

China regards Taiwan as a renegade province and opposes other countries pursuing diplomatic ties with the island. Beijing often backs anti-independence warnings with military threats.

While Tsai has been critical of China, she has tread carefully on the hot button issue of independence, which may anger some hardcore DPP supporters.

Voters on Saturday will also be asked to cast ballots on same-sex marriage, phasing out nuclear power and whether the island should seek to participate in international sporting events under the name "Taiwan" instead of the current "Chinese Taipei."

Michael Kovrig, senior advisor for North East Asia at the International Crisis Group, said he will be closely watching the cities of Kaohsiung and Taichung.

"A major setback for the DPP could be interpreted as a repudiation of Tsai's policies," Kovrig told CNBC on Friday in an email. "To secure the nomination for 2020, Tsai might feel compelled to be more active in trying to satisfy the demands of grassroots Taiwan independence supporters."

Boyden said that economic connections with the mainland will likely be a big factor on voters' minds.

"The trade relationship with China matters a great deal to many people here," he said.

Despite China's efforts to isolate Taiwan politically, Beijing has long courted Taipei's investments and their economic ties remain robust. Taiwanese technology giant Foxconn, which manufactures iPhones for Apple and Kindles for Amazon in factories in southern China, is a major job-provider.