Amidst tense U.S.-China relations, Taiwanese President Lee Teng-hui renounced the "One-China" context supporting cross-strait dialogue and stated that Taiwan will henceforth approach China on a special "state-to-state" basis. This definition nullifies Taiwan’s need to declare independence.

China and the United States have restrained reactions and sought clarification on the matter from Taiwan. The "One-China" policy definition is widely debated and has two interpretations. China’s definition is that there is one China, which encompasses Taiwan, with sovereign power based in Beijing. The widely accepted international meaning is that there is one China, including the mainland and Taiwan, its government yet undetermined.

Lee reassured the international community that his announcement does not imply a policy change, and national unification remains the primary goal. Leading America scholars believe that Lee intended to strengthen the ruling Nationalist Party’s position in Taiwanese domestic politics in preparation for next spring’s national elections.