Here's the Taipei Times story that talks about it...

http://www.taipeitimes.com/News/front/archives/2005/10/04/2003274363

It is a bit of a sticky situation since officially the UN and most countries of the world (including the US) do have a policy of saying that legally Taiwan is part of China, and Taiwan itself is split between those who want to formally declare its independence from China once and for all (an act that China says will result in war) or to maintain the status quo that Taiwan is the "Republic of China" while China is the "People's Republic of China," or in other words there are two conflicting governments claiming the right to govern the whole of "China" (both the mainland and Taiwan)

If it weren't for the threat from China, I would say that Taiwan should declare its independence. As it stands now they are one of the only countries of the world that are not allowed UN membership and in most countries their embassies aren't accorded full diplomatic status (one notable exception is the Vatican, which recognizes Taipei instead of Bejing as being the capital of China)

Here's another example of how the PROC bullies Taiwan...

http://www.chinadaily.com.cn/english/doc/2004-08/07/content_363055.htm

http://www.chinadaily.com.cn/en/doc/2003-11/21/content_283675.htm
(this one is very interesting as it discusses to some extent the history of America)

http://en.wikipedia.org/wiki/Chinese_Taipei_at_the_2004_Summer_Olympics

http://en.wikipedia.org/wiki/Chinese_Taipei
And this article is really astounding, to see how the UN and so many companies give into what ever the PROC demands.