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Similarly, the song played isn't the Olympic anthem -- it's the National Banner Song. Given that this song is customarily played for ROC flag-raisings anyway, it's not at all clear that this was any type of concession. The analogy would be if Britain promised not to play Rule Britannia -- big deal, they would've played God Save the Queen wanyway.
TAIWAN FOR INDEPENDENCE!!!!!!!
Not really analogous, but Palestine competes separately from Israel.
Both examples I gave above are sort of the opposite - Palestine and Israel don't want to be associated with each other, despite being within the same borders. HK is now officially part of China but it still gets to compete separately. Taiwan, on the other hand, is not part of China, but China uses a possessive word in Taiwan's name in international competitions, so it sounds like Taiwan is part of China.
I have no statistics to back up these claims (it's been told to me first-hand from numerous Taiwanese citizens), but the overwhelming victory of Ma in the recent presidential election shows that the desire for independence is not as popular as outspoken Taiwanese-Americans make it out to be.
Also, don't forget that it's not just the PRC that doesn't recognize Taiwan as a separate entity. The UN, WHO, and obviously the IOC are among the world organizations that don't recognize Taiwan as separate from China.
Even the United States, once the most powerful backer of Taiwan, is becoming ambiguous about the amount of support it would provide to Taiwan if it declares independence, if any.
That's probably why most people don't want to declare independence.
That didn't stop Taiwan from electing Chen Shui-bian back in 2000, who, despite the sugar-coating in official documents, is supportive of all-out independence.
And his exit approval ratings were hovering around 20%... apparantly people were extremely upset that the economy was tanking due to the loss of business with China (and the corruption scandals didn't help either)
Taiwan learned from that mistake and overwhelmingly elected KMT candidate Ma Ying-jeou to power in 2008, who phrases his wording to lean to that of status quo: "for our party, the eventual goal is reunification, but we don't have a timetable"
If the majority of Taiwan was ever pro-Independence (which I don't think it was), Chen's tenure surely changed that... I think it'll be a long time before another DPP gets elected as President again.