Taiwan is heading for a pivotal election that will define its fraught relationship with China. Here's what's at stake.

• Taiwan is set to hold a tight presidential election on Saturday.
• The main choice is between pro-Western and pro-China candidates.

Stuart Lau is the EU-China correspondent for Politico. Business Insider and Politico share a parent company, Axel Springer.

TAIPEI — The stakes for Taiwan's democracy could hardly be higher in a tight presidential election on Saturday, with China's leader, Xi Jinping, delivering an ominous New Year's address in which he insisted "reunification of the motherland is a historical inevitability."

The vote cuts to the heart of a battle for regional influence between Beijing and Washington, and all eyes will be on China's reaction to Saturday's vote.

The nightmare scenario for global security would be a regional conflict centered on an island that makes more than 90% of the world's advanced microchips, vital for iPhones and electric vehicles alike.

The frontrunner by a narrow margin is Vice President William Lai of the Democratic Progressive Party. Lai is a proponent of Taipei's sovereignty and is seeking to shore up relations with the US, Europe, and other democracies.

His main rival is Hou Yu-ih, from the Kuomintang party, who takes a friendlier approach to Beijing.

The winner will succeed Tsai Ing-wen from the DPP, who has served two terms, an eight-year stint over which Beijing has upped its aggression toward Taipei.

This has been particularly true in recent months, with the Taiwanese defense ministry saying in September that a record number of Chinese warplanes had crossed the median line of the Taiwan Strait, the 100-mile waterway separating the island from the mainland.

China's Communist government, which considers Taiwan a breakaway province, views the DPP as an archnemesis and wants to see it out of power.

The big question is how Beijing will react if the pro-independence forces win an unprecedented third term.

On Saturday evening, both Lai and Hou staged election rallies in the same district in Taoyuan, a city close to the capital, attracting tens of thousands of mostly middle-age and older supporters.

Both parties claimed an attendance of over 100,000. The DPP was out to burnish its credentials as a staunch opponent to a hostile Beijing.

"Only by building a strong national defense can we protect the Taiwan Strait's security," Lai told the crowd.

Hou, by contrast, sought to cast the DPP as corrupt and liable to precipitate a showdown with Xi.

"Corruption is on the way, dark money is on the way, warmongering is on the way, and Taiwan independence is on the way," he said at a rival gathering nearby.

"Taiwan independence" is a loaded phrase as Beijing warns such a move "means war."

Here's what you need to know about the race:

Who's in the running?

It's basically a three-way contest.

Lai of the DPP is vying to succeed his boss, the outgoing Tsai, and has been vice president for the past four years. Beijing is extremely critical of Lai, who called himself a "pragmatic worker for Taiwan independence" in 2017.

He's joined by Bi-khim Hsiao, the vice-presidential candidate who's a famous figure in Washington, having served as Taiwan's de facto ambassador to the US.

Lai, a 64-year-old Harvard graduate, hails from a humble background.

His father died in a mining accident when he was not yet a year old, and he was among six children raised by his mother. Before he became vice president, he was the mayor of Tainan and later Taiwan's premier.

On the Beijing-friendly front, the KMT, or Nationalist Party, is represented by Hou, a former police officer who is the mayor of New Taipei City, just outside the capital.

Hou, however, is viewed with skepticism by some in the KMT.

Within the KMT, the hardcore supporters believe in a pan-Chinese identity, as many of their families came from the mainland and moved to Taiwan reluctantly only after the Communist takeover in 1949.

Hou's family, in contrast, had been in Taiwan for generations, and is considered as native Taiwanese instead of Chinese from mainland provinces.

This tension prompted Hou to show proof of his father's record as a KMT veteran and warship repairer during fighting against the Communists in the 1940s, even though he was also conscripted by the Imperial Japanese Army during the colonization of Taiwan. After the wars, his father became a butcher.

There's a third party this time (which is not always the case): the Taiwan People's Party, led by former Mayor Ko Wen-je of Taipei, who's especially popular among young voters.

The party claims to occupy the middle ground between the two traditional camps.

What do the polls say?

There's no clear favorite.

Taiwan has a 10-day blackout period on polls ahead of the election.

In the most recent numbers, released last week, the DPP's Lai led Hou by 3 to 11 percentage points across different polls. Ko consistently came last.

But pollsters also cautioned about significant fluctuations.

In previous months, Lai's lead was often within the margin of error, showing it's all to play for, especially as Ko's TPP peels off youthful support and complicates the arithmetic.

How does it work?

There will be just one round. The candidate with the highest number of votes will be the winner on a first-past-the-post basis, regardless of the turnout or share of votes.

Some 19.3 million of the island's 23.6 million people are eligible voters. One million of them will be voting for the first time.

In the most recent presidential contest, in 2020, Tsai won 57%, with a record 8 million votes.

Her popularity boost was thanks largely to shock in Taiwan over Beijing's heavy-handed response to the Hong Kong protests in 2019.

The new president will be sworn in May 20.

The national parliament, or the Legislative Yuan, is also up for grabs on the same day, with the 113 lawmakers to be chosen.

The TPP vows to win enough seats to block either the DPP or the KMT from securing a simple majority, though polling remains inconclusive whether this would be likely.

Lai, the sitting vice president running as a candidate, appealed on Saturday to supporters to back all DPP candidates in the legislative poll too, warning that he would not be able to run the country efficiently if his party failed to take at least half of the legislature's seats.

When will we know the result?

The result was announced at 10:30 p.m. (9:30 a.m. ET) four years ago.

As soon as the polls close at 4 p.m., counting begins and is constantly updated, so there's a good chance of clarity before the final official announcement.

What is at stake?

The election forms part of a broader geopolitical rivalry between China and the US.

While Beijing has been beefing up its military for any conflict in the South China Sea, Chinese officials have also stressed military options are a last resort — at least in public statements — if peaceful reunification is no longer feasible.

If the ruling DPP wins, it would be the first time that the pro-independence party has won power for a third successive term since Taiwan became a democracy in 1996.

Beijing could interpret that as a signal that there's little public appetite for future reunification, especially among the younger generation that has less connection with China, raising the specter that Beijing could feel the need to up the stakes.

With that in mind, military tensions are already on the rise. In addition to the increased brinkmanship with warplanes, China in October launched a "Long March" satellite-carrying rocket into space over Taiwan, the first to take such a path.

Beijing blames the Taiwanese government for pushing the island into "the abyss of catastrophe."

"The DPP authorities are seeking independence by relying on the US, turning Taiwan into a powder keg and an island of explosives," the Chinese defense ministry spokesman Wu Qian said in December.

To some degree, Taiwan is already prepared for an escalation.

After then-US House Speaker Nancy Pelosi's whirlwind visit in 2022, Beijing's People's Liberation Army launched unprecedented joint military exercises around Taiwanese airspace and waters.

The danger is that China could go further this year.