By Yimou Lee and Faith Hung
KINMEN, Taiwan (Reuters) - Soldiers on the tiny Taiwan-held island of Kinmen regularly conduct military drills repelling amphibious attacks by Chinese Communist troops from the mainland, but the problem may soon be free-for-all landings of Chinese shoppers and businessmen.
The war games are a reminder that this place is the front line between China and Taiwan where beaches were mined and shots traded up until as recently as the mid-1970s, and that China has not renounced force to ensure it gains control of a territory it considers its own.
"If China attacks Taiwan, we will be the first to die," said Kinmen bar owner Sam Chen, 29, as he watched recent live-fire drills with fellow residents. "Of course I am worried about war, but I also hope Kinmen can build closer ties with China. It's easier for us young people to make money."
There lies the rub. Many in Taiwan, especially a newly politicized youth movement, are angry about perceived economic dominance by China, likening it to an invasion all of its own. But many also see the benefits of closer trade.
Rustic Kinmen, with a population of less than 129,000, is a half-hour ferry ride to China, but it takes an hour to fly to major Taiwan cities. Just off its shores, glass-walled high-rises wink seductively from the booming mainland port of Xiamen in one of China's most prosperous provinces.
Kinmen is eyeing closer commercial ties with China. It wants to pipe water from Xiamen and has plans to build a bridge and set up a glittering free trade zone with the city.
Taiwan's pro-Beijing, Kuomintang-led (KMT) government also hopes greater economic integration will bolster Taiwan's economy. But Taiwan chooses a new president and parliament in January when the KMT is expected to lose to the independence-leaning Democratic Progressive Party (DPP), which is deeply suspicious of China. Beijing has claimed Taiwan since the KMT fled to the island after losing the civil war against Mao Zedong's Communists in 1949.
"KINMEN CAN DO WHAT TAIWAN DOESN'T DARE DO"
China is seeking unification with Taiwan under its "one country, two systems" formula by which Hong Kong, a former British colony, returned to Chinese rule in 1997. And Kinmen, or "Golden Gate", is a test for China's ambitions to recover Taiwan through soft power. If Beijing can't win over tiny Kinmen, what chance does it have to convince the other 23 million on the main island of Taiwan?
Kinmen's growth is supported by Chinese visitors drawn to reminders of war such as weather-beaten pillboxes, the beach defenses, bullet holes in buildings and graffiti proclaiming: "Eliminate the Communists".
It is also the site of a brand new, six-story, duty-free shopping mall, billed as the largest in Asia.
"In Kinmen, we can do what Taiwan can't, what Taiwan doesn't dare do," said Kinmen county chief Chen Fu-hai, who wants water, electricity and natural gas to be pumped from Xiamen.
Chen has a three-year roadmap to build a "special economic zone" in which Kinmen can share Xiamen's economy. The proposal is being promoted by a pro-Beijing, non-profit organization in Taiwan with close ties to the Communist Party. It wants Kinmen to decide on the free trade zone issue by referendum.
But it would still have to get the nod from the central government before a referendum can take place.
"As long as it's good for Taiwan's economy and meets the needs of its people, Xiamen will be happy to make it happen," Chinese state media quoted a Xiamen government official saying last year.
The free trade zone is controversial because it would allow unfettered Chinese investment on to Kinmen - something that is strictly controlled in Taiwan as a whole.
"Kinmen residents are really worried about China," said Andy Yang, a KMT politician who supports the free trade zone idea. "But put that aside: do we want better economic development or not?"
Kinmen map http://link.reuters.com/kap75w
(Additional reporting by J.R. Wu in Taipei and Ben Blanchard in Beijing; Editing by Nick Macfie)