BEIJING, Aug 28 (Reuters) - Taiwan's president, trying to salvage his reputation after a deadly typhoon, is treading a delicate path as an upcoming visit by the Dalai Lama threatens to rock warming relations with China [ID:nTP291457].

WHY IS CHINA ANGRY ABOUT THE DALAI LAMA'S PROPOSED VISIT?

A visit to Taiwan by the Dalai Lama brings into sharp focus two of China's most sensitive territorial claims, over Taiwan and Tibet, and thus strikes a raw nerve.

China regards Taiwan as a breakaway province that must eventually be reunified with the mainland, by force if necessary. The island, a former colony of Japan, came under the rule of Nationalist or Kuomintang (KMT) forces when they retreated there in 1949 as the Communists took over the mainland.

Taiwan has been under KMT rule since, except between 2000 and 2008 when the independence-leaning Democratic Progressive Party (DPP) won presidential elections twice in a row.

The Dalai Lama fled Tibet in 1959, following a failed uprising against Chinese rule. Since then, he has campaigned for self-determination for his homeland, seeking the high-level autonomy for Tibet that Chinese law claims to bestow.

Beijing says his demands amount to a campaign for independence.

HOW COULD CHINA RESPOND?

In addition to angry words, China might curtail some meetings between officials.

But the wording of its protest indicates it is likely to avoid directly denouncing President Ma Ying-jeou or the ruling KMT, with whom it is trying to build better relations with an eye to eventual reunification.

China also has to avoid making threats that raise expectations among its own people, especially the more vociferous nationalists, that it might take action to stop the visit.

So far it has reserved its ire for the opposition DPP, which invited the Dalai Lama and generally follows a more anti-China stance.

The DPP's constituency is largely the Taiwanese, especially in Taiwan's south, whose presence on the island dates from before 1949 and therefore have little loyalty to mainland China.

WILL THIS DAMAGE TRADE FLOWS?

Unlikely.

Past behaviour indicates that China is unlikely to take steps that could directly damage trade and investment flows.

China, including Hong Kong, is Taiwan's largest trading partner with trade on both sides totalling about $130 billion in 2008, official data from Taiwan showed.

China, with its 1.3 billion population, is also Taiwan's favourite investment destination with Taiwanese companies investing more than $100 billion there, private estimates showed.

With China's own export-oriented economy fragile, it is unlikely to do anything to damage investments by the many Taiwanese whose capital has fuelled mainland growth for three decades. (Reporting by Lucy Hornby and Chris Buckley; Editing by Lee Chyen Yee and Alex Richardson)

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