The Chinese Nationalist Party or KMT suffered a crushing electoral defeat in January, losing both the presidency and its parliamentary majority. Some in the party believe the result is their worst since they lost mainland China to the communists more than six decades ago.

The KMT, the oldest, once most powerful and richest political party in Asia, faces an existential crisis. There is even serious discussion going on inside the party about dropping the prefix 'Chinese' from the party name. Take a deep breath and think about this: it is tantamount to American Republicans discussing the possibility of disowning Lincoln and Australian Liberals ditching Menzies.


Sun Yat-sen Mausoleum, Taipei. (Flickr/Matthew Stinson.)

The KMT is suffering from its historical legacy. It was founded by Dr Sun Yat-sen more than 123 years ago in Hawaii as a revolutionary party with the avowed goal of overthrowing China's last imperial dynasty. Since it lost the civil war to the Communists in 1949, it has regarded itself as the exile government of Free China on Taiwan.

It imposed brutal martial laws on the island in the name of fighting the Communist insurgents and made it a criminal offence to advocate for Taiwanese independence. For years, the party has emphasised traditional Chinese values, and school children have been taught about Chinese history and geography.

But the tide is turning against the KMT's historical Chinese roots. the vast majority of islanders see themselves as Taiwanese now, with only a small and dying cohort of people still believing in eventual reunification with the mainland.

In 2014, I interviewed Sean Chen, a senior adviser to outgoing President Ma Ying-Jeou and a former premier, who said the Party must localise in Taiwan for its own survival but at the same time, it must also aim for a higher goal such as serving a broader Chinese community. His answer illustrates the KMT's dilemma, caught between its Chinese roots and rising Taiwanese consciousness.

The KMT is also losing its once strong grip on the cross-Strait issue, which is the biggest political issue in Taiwan and traditionally one of the KMT's key political strengths. The Democratic Progress Party (DPP) under president-elect Dr Tsai Ying-wen seems more moderate and pragmatic on managing the cross-Strait relationship.

Changing perceptions of the mainland (from business opportunity to economic threat) are also robbing the KMT of its political appeal. More and more Taiwanese people see China as a threat rather an opportunity. For years, the Taiwanese business community has made a fortune on the mainland from selling everything from computer chips to instant noodles. An estimated 1.5 million Taiwanese are working and living in China now. But it is getting harder for people to do business on the mainland as China's economy matures. The young generation of Taiwanese see mainland China not only as a menace to their security but also an economic threat. That is why thousands of young people occupied the parliament in March 2014 to protest against the services agreement with mainland China.

But the KMT still seems wedded to the idea that economic integration with the mainland is good policy. These policies do make economic and business sense, but are not politically feasible. Sean Chen's attitude is typical of KMT's technocratic elites: he said 'many economies in the world are in the process of integrating with mainland China. If it is unavoidable, we must take the challenge head-on'.

The electoral fortunes of the KMT have also been undermined by generational change in Taiwan. The strongest supporters of the party are aged 50 to 70. They experienced Taiwan's high speed growth in the 1970s and 80s, and many still remember former president Chiang Ching Kuo fondly. These generations received a strongly nationalist Chinese education and are more likely to identify themselves as Chinese as well as Taiwanese.

However, the younger generation of voters received a more Taiwan-focused education, and many don't have any romantic or sentimental attachment to mainland China. This is even true for children of KMT officials and soldiers who fled to Taiwan after 1949. The stale KMT compares poorly to the dynamic DPP, which is much better organised in attracting younger voters.

All these trends point to a bleak future for Asia's oldest political party. If it cannot reinvent itself as a conservative pro-business party, it faces political irrelevance. KMT leaders need to think hard about their Chinese roots and legacy, but most importantly they have find a compelling new narrative to win over Taiwan's voters again.