The passing of Taiwan's historic referendum bill on Thursday has set the stage for heightened debate over political reform on the island, with both sides claiming the high ground ahead of next year's presidential election.
The Taiwan legislature passed a watered-down version of a proposed referendum law that allows a vote on key constitutional and policy issues.
The KMT still wants reunification with China
However, the bill also specifically prohibits referenda being held on the most controversial sovereignty issues in Taiwan, namely to change the island's name, flag or territorial status.
The ruling Democratic Progressive Party (DPP) had sought to have referenda on name, flag and status either specifically allowed, or not specifically prohibited. That move prompted harsh words from Beijing, which promised a strong reaction should Taiwan pass a bill to allow unrestricted referendums.
In the legislature on Thursday, the opposition Kuomingtang (KMT) and People's First Party alliance used its majority to push through a version of Article 2 of the bill that specifically lists those three issues as not up for referenda.
Included in the bill however is a "defensive referendum" mechanism that allows the cabinet to call a referendum on the island's sovereign status if it comes under attack from a foreign power.
On paper, the results of the vote appear to be a defeat to President Chen Shui-bian's government, with most of the articles adopted being those drafted by the opposition.
That result has already eased tension with China, which within hours of the vote in Taiwan appeared to have cooled its threats toward the island.
However, the very fact that a referendum bill has been tabled and passed is a victory to Mr Chen's pro-reform agenda, if not his perceived pro-independence agenda.
"In the past, referendum was a taboo, now it's a bill," said Lo Chih-cheng, executive director of Taiwan's Institute for National Policy Research.
The nationalist KMT had long been opposed to a referendum law, which would allow President Chen to go ahead with his pledge to hold a referendum on public policy issues at the same time as the presidential election next March.
But in the past month, KMT Chairman Lien Chan has bowed to public opinion and thrown his party's weight behind the law, and in the process watered it down.
"At the very beginning, the opposition party was against the referendum bill and then they gave in and agreed that there should be a referendum bill," Mr Lo said
One day after the bill went through, attention in Taiwan focused on the fact the bill had been watered down - which appears to have eased tensions with Beijing - and on how it will affect the race for president.
"We believe a referendum is a right of the people, and we don't want any referendum (to) endanger cross-strait relations. So our bill can solve all the problems, people can defend their rights and at the same time the cross-strait relationship can stay the same," said KMT spokesman Justin Chou.
He rejected criticism that the KMT had bowed to Beijing.
"This isn't because of China, this is because we think Taiwan needs to maintain stability," he said.
The KMT delivered a key defeat for the ruling DPP by approving one article which prohibits the president or cabinet from initiating a referendum. Instead, only the legislature or a public petition signed by 5% of voters can do so.
Any such proposal must first be reviewed by a supervisory committee whose membership would reflect the membership of the legislature.
With the opposition dominating the legislature, the ruling party has conceded that any referendum to coincide with next year's election is almost impossible.
The DPP has responded to the vote by labelling the KMT opposition as anti-reform, a tactic it hopes will woo moderate voters.
President Chen is probably slightly ahead in the presidential race, having been helped by his pressing for the referendum bill and his proposal for political reform, such as cutting the number of legislators.
But Mr Lo said the election campaign still had a long way to run.
"This is the beginning of the game. The issue will now shift to who is pro-reform and who is not. Many see referendum as a reform issue as well as an independence issue," he said.