"NO ENTRY," says the notice, "for those wearing slippers or slovenly dress." In free-wheeling Taipei, the one place where irreverence is not tolerated is the Chiang Kia-shek memorial hall, a splendid pagoda with octagonal blue-tiled roof in the heart of the city.

In this building, where the generalissimo's statue sits like Lincoln, guarded by steel-helmeted soldiers who goose-step in slow motion, memories are kept alive of the flight from communist China of the Kuomintang army in 1949 and the setting up a rival capitalist state, today called simply the "Republic of China".

Taiwan's military strength, relying mainly on US armaments, has kept Beijing from asserting its authority over the island in the China Seas for half a century. "Our existence in Taiwan is because we are too strong, not because of their mercy," said Mr R T Yang, European Affairs Director of the Taiwan Foreign Ministry.

The US has kept Taiwan, with only 0.4 per cent the land area of China, in a strong military position, and will continue to do so, as long as Taipei does not provoke the mainland by declaring independence.

Even as Deng Xiaoping was being cremated last week, the Taiwan army was test-firing a new `Patriot' anti-missile missile, one of 200 ordered from the US along with 150 F-16 fighter jets which have helped tip the military balance in Taiwan's favour. The day after the Chinese patriarch's funeral, Taipei's navy was commissioning the third of six French-made missile frigates, a stealth" warship, clad with radar-defying composite materials, bought from France in the early 1990s.

But there will be no more arms deals with Paris, as the French government has since bowed to Chinese pressure to stop arming Taiwan. To bring Taiwan into line, China is pursuing a policy of using its size and economic clout to wear down the diplomatic efforts of its wayward province.

In the black marble hall of the Foreign Ministry building a few blocks from the memorial, an impressive line of thirty national flags stand on gold bases behind potted plants and miniature orange trees. They represent the countries with which Taiwan maintains diplomatic contact.

But the world ranking of these nations is not so impressive, and it is dwindling. It comprises mainly poor African and Latin American countries which Taiwan supports with billions of dollars, among them Liberia, Haiti, Guatemala, Paraguay and Panama. When Washington recognised Beijing on January 1st 1979, most countries followed suit. The biggest remaining is South Africa, but its president, Nelson Mandela, told Taiwan in November that he would switch to Beijing in 1997. Then there will be 29.

Major countries like the US and UK keep trade missions in Taipei run by officials with ambassadorial status, but the differing world status of the two Chinas was sharply illustrated last weekend, when the US Secretary of State, Madeline Albright, called at Beijing, not Taipei, on her global tour, while the foreign leader being hosted in Taipei at the same time was Liberia's warlord, Charles Taylor, and his wife Jewel.

Taiwan is in a historical dilemma. "We are not trying to establish two Chinas," explained Mr Chang Laing-Jen, deputy secretary-general of the Straits Exchange Foundation which handles relations with the mainland. The diplomatic scramble is embarrassing and costly for Taiwan. But having diplomatic relations with other countries "will reinforce our confidence to seek unification," said Mr Chang. "If we are not strong enough in our foreign relations, if we feel insecure, then how can we make bold moves to develop relations?"

Taiwan watched warily the events in Beijing after the death of Deng Xiaoping. The signs were all that pressure for re-unification will increase. Where Mao Zedong secured independence and Deng Xiaoping won back Hong Kong, President Jiang Zemin will want to complete the final act, bringing Taiwan into the fold. "Complete reunification of the motherland will certainly be achieved," said President Jiang during his funeral eulogy for Deng Xiaoping on Monday.

The sub-tropical island has left behind the totalitarian aspects of the rule of Chiang Kai-Shek, who died in 1975, and instituted a robust democracy, but Chinese Prime Minister Li Peng declared yesterday that Taiwan should understand that no matter how its political system changes, "it will not change the fact that Taiwan is part of China".

Beijing will continue to press for reunification under an eight-point initiative laid down by President Jiang two years ago. This is based on Deng's "one country-two systems" model under which Hong Kong will be reunited with China. Taiwan rejects reunification under this model.

Taiwan's leaders have asked this week for a continuation of high-level contacts, broken off when President Lee Teng-hui visited the US in 1995 in what Beijing saw as a pro-independence manoeuvre. Beijing spokesman Tang Guoqiang said this week such talks could be resumed only if Taiwan authorities "stop engaging in activities splitting the motherland".

When Ms Albright spoke to Chinese officials on Monday, she found there was no give and take on the issue. President Jiang raised China's complaints about American arms sales to Taipei with US President Clinton when they met in Manila in November. He told him that Taiwan would he the first item on the agenda of the Sino-US summit meetings planned for 1997-1998.

But economic integration is moving ahead of political union. As China opened up after 1979, trade between the mainland and Taiwan got under way, mostly through Hong Kong. From 1979 to 1993, cross-strait trade rose from $25 million to $7.6 billion, said Chi Schive, director of the Department of Economics at National Taiwan University.

Taiwanese investors have poured an accumulated $60 billion into China and set up 30,000 businesses by the end of 1996, according to Chinese statistics. In 1994, each entity became the other's fourth-largest trading partner. Two-way trade totalled $29 billion last year, with Taiwan enjoying a $10 billion surplus.

Taiwan is uneasy about interdependence. It is about 2.4 times more dependent on external trade than the mainland, said Mr Chi. China wants direct air and shipping links. So do Taiwanese companies which would save billions of US dollars, and in January, Taiwan agreed to allow ships to leave for the Chinese cities of Fuzhou and Xiamen. But vessels from China are still banned to keep the island from becoming an economic hostage to China.

The Chinese take-over of Hong Kong is being watched very carefully in Taiwan. With control over Hong Kong, China's leverage on Taiwan can only increase. Polls show that the more China is seen to "lean on" the British territory, the more Taiwan will see eventual integration in negative terms. Mr Chi thinks it is "wishful thinking" that "one China-two systems" can work. "We regard China as divided, with two governments," said Mr Yang.

The world has a huge stake in the political transitions in Asia being managed adroitly by both sides. Beijing for now clearly hopes to achieve more by locking Taiwan's economy more securely into China's markets - while cutting world ties with Chiang Kaishek's former stronghold.