This paper is adapted from essays written for the Britannica Book of the Year--1987. In it, the author reviews key political, economic, and foreign policy developments in China and Taiwan during 1986. In the case of China, he notes that continuing development caused strain. Domestic reform was met with the boldest challenge to authority since the Cultural Revolution--unsanctioned student protests, which were countered by a conservative movement before being banned. In economic reform, an excessive growth rate was curbed, foreign investing declined dramatically, and previous successes seemed headed to a difficult slowdown. In Taiwan, 1986 was an extraordinary economic year. Increased wealth resulted in opposition forces being permitted some formal organization and the proposed lifting of martial law in 1987. Unofficial contact with China increased markedly. The only negatives were strains over succession, economic tensions with the United States, and Taiwan's anomalous international status.