The Third Taiwan Strait Crisis, also called the 1995-1996 Taiwan Strait Crisis or the 1996 Taiwan Strait Crisis, was the effect of a series of missile tests conducted by the People's Republic of China in the waters surrounding Taiwan including the Taiwan Strait from July 21, 1995 to March 23, 1996. The first set of missiles fired in mid to late 1995 were allegedly intended to send a strong signal to the Republic of China government under Lee Teng-hui, who had been seen as moving ROC foreign policy away from the One-China policy. The second set of missiles were fired in early 1996, allegedly intending to intimidate the Taiwanese electorate in the run-up to the 1996 presidential election.

Lee's 1995 visit to Cornell

The crisis began when President Lee Teng-hui accepted an invitation from his alma mater, Cornell University to deliver a speech on "Taiwan's Democratization Experience." Seeking to diplomatically isolate the Republic of China, the PRC opposed such visits by ROC leaders (Nathan and Ross 1998). It argued that Lee harbored pro-Taiwan independence sentiments and was therefore a threat to stability in the region. A year earlier, in 1994, when President Lee's plane had stopped in Honolulu to refuel after a trip to South Africa, the U.S. government under President Clinton refused Lee's request for a visa. Lee had been confined to the military airfield where he landed, forcing him to spend a night on his plane. A U.S. State Department official called the situation "embarrassing" and Lee complained that he was being treated as a second-class leader.

After Lee had decided to visit Cornell, U.S. Secretary of State Warren Christopher assured PRC Foreign Minister Qian Qichen that a visa for Lee would be "inconsistent with [the U.S.'s] unofficial relationship [with Taiwan]." However, the humiliation from Lee's last visit caught the attention of many pro-Taiwan figures in the U.S. and this time, the United States Congress acted on Lee's behalf. In May 1995, resolutions asking the State Department to allow Lee to visit the U.S. passed the House 396 to 0 and the Senate 91 to 1. The State Department relented on May 22, 1995 and the PRC condemned the U.S. for ruining Sino-American relations.

Lee spent June 9-10, 1995 in the U.S. as the PRC state press branded him a "traitor" attempting to "split China".

PRC military response

The PRC government was furious over the U.S.’s policy reversal. On July 7, 1995, the Xinhua News Agency announced missile tests to be conducted by the People's Liberation Army and pointed out that this would endanger the peace and safety of the region. The PRC conducted tests from July 21 to 26 in an area only 60 kilometers north of ROC-held Pengchiayu Island. At the same time, the PRC mobilized forces in Fujian. In the later part of July and early August numerous commentaries were published by Xinhua and the People's Daily condemning Lee and his cross-strait policies.

Another set of missile firings, accompanied by live ammunition exercises, occurred from August 15 to 25, 1995. Naval exercises in August were followed by amphibious exercises in November. Though many of these military activities were part of the normal PLA training regimen, this was the first time in many years that they were announced publicly.

The U.S. response was low key: the USS Nimitz passed through the Taiwan Strait in December 1995, a few months after the PLA's tests. This transit, the first by a U.S. warship since 1976, was announced only six weeks later. Nevertheless, PLA General Xiong Guangkai warned a visiting American envoy, "In the end, you care more about Los Angeles than you do about Taipei."

Run-up to the 1996 election

Beijing intended to send a message to the Taiwanese electorate that voting for Lee Teng-hui in the 1996 presidential election meant war. A third set of PLA tests from March 8 to March 15 (just shortly preceding the March 23 election), sent missiles within 25 to 35 miles (just inside the ROC's territorial waters) off the ports of Keelung and Kaohsiung. Over 70 percent of commercial shipping passed through the targeted ports, which were disrupted by the proximity of the tests. Flights to Japan and trans-Pacific flights were prolonged by ten minutes because airplanes needed to detour away from the flight path. Ships traveling between Kaohsiung and Hong Kong had to take a two-hour detour.

On March 8, 1996, also a presidential election year in the U.S., the U.S. government under President Clinton announced that it was deploying the Independence carrier battle group (CVBG), already stationed in the western Pacific, to international waters near Taiwan. On the following day, the PRC announced live-fire exercises to be conducted near Penghu from March 12-20. On March 11, the U.S. deployed the Nimitz CVBG, which steamed at high speed from the Persian Gulf. Tensions erupted further on March 15 when Beijing announced a simulated amphibious assault planned for March 18-25.

Sending two carrier battle groups showed not only a symbolic gesture towards the ROC, but a readiness to fight on the part of the U.S. The ROC government and Democratic Progressive Party welcomed America's support, but staunch unificationist presidential candidate Lin Yang-kang and the PRC decried "foreign intervention."

Realising the U.S. Navy CVBG's credible threat to the PLA Navy, PRC decided to accelerate its military build up. Soon PRC ordered the Sovremenny Class Missile Destroyer from Russia, a cold-war era warship designed to counter the U.S. Navy’s CVBG, allegedly in mid-December 1996 during the visit to Moscow by Chinese Premier Li Peng. PRC subsequently ordered modern attack submarines (Kilo Class) and warplanes (Su-30MKK2) to counter the U.S. Navy's CVBG.

The PRC's attempts at intimidation were counterproductive. Arousing more anger than fear, it boosted Lee by 5% in the polls, earning him a majority as opposed to a mere plurality. The military tests and exercises also strengthened the argument for further U.S. arms sales to the ROC and led to the strengthening of military ties between the U.S. and Japan, increasing the role Japan would play in defending Taiwan.

The crisis, however, had a noticeable impact in disrupting the ROC economy. The stock market fell by 17% for the duration of the crisis. Capital fled the island and real estate prices fell.