TAIPEI (Reuters) - The New Party wants reunification with China but has only a single seat in Taiwan's parliament. Its fortunes reflect the mood swings on an island where many dream of independence but know a return to China's fold is not impossible.

"What's wrong to admit we are Chinese? Why can't we say we want unification?" New Party chairman Yok Yu-ming told Reuters.

His party was formed in 1993 by disaffected members of the then ruling Nationalist Party who felt its zeal for eventual reunification with China was fading.

In presidential elections on March 20, the tiny party has thrown its weight behind Nationalist challenger Lien Chan with his conciliatory stance toward China and against independence-leaning President Chen Shui-bian.

Yok had dire warnings for Chen and his moves toward declaring independence for the self-ruling island that split from China after the Nationalists lost the Chinese civil war in 1949.

"We are small and have no chance of becoming a ruling power. But we stand firm in our beliefs," said Yok, whose party is Taiwan's sole vocal advocate of unification.

"We oppose Taiwan independence. Independence means war."

Beijing views the island as a breakaway province and has vowed to attack if it formally declares statehood.

Once a rising star in Taiwan politics, the New Party won popularity with its clean image. In its heyday in the 1995 parliament elections it won 14 percent of votes, or 1.5 million.

The political winds shifted when then president Lee Teng-hui tried to break Beijing's diplomatic embargo and reinforce a stronger Taiwan identity, a move that caught the popular mood.

Now the New Party has a single seat in the 225-member parliament and scant hope of scoring more popular support.

STATUS QUO

Opinion polls now consistently show an overwhelming majority of people favor an ambiguous political status quo, with a growing number calling themselves Taiwanese, instead of Chinese.

In the 2001 parliamentary election, only 300,000 votes, or less than three percent, went to the New Party, although it managed to win the race for head of the local government in Quemoy, a small frontline island on China's doorstep.

Quemoy residents are anxious about military action by their giant neighbor. New Party member and Quemoy commissioner Lee Chu-feng said his island no longer wanted to be caught up in the Taiwan-China rivalry.

"The security of Quemoy cannot be maintained through force, but through opening and internationalization. We want to be a bridge of peace between Taiwan and China," Lee said recently.

The former schoolteacher wants to see his tiny island pocked with abandoned foxholes and shell craters transformed into a vibrant transit hub, like Hong Kong, to the nearby mainland.

"That's how we can compete and prosper. I don't care about ideology, our people want development and convenience."

Party chairman Yok accuses Chen of igniting Taiwan nationalism to win votes.

"It's easy to stir up people's emotions and manipulate the public. But will localization get us anywhere? It only pushes us into isolation," Yok said. Only 27 countries now have formal diplomatic ties with Taiwan.

Facing a tough battle for re-election, Chen is campaigning on a manifesto that Taiwan is an independent state. He has called a referendum on the same day as the election to ask voters to back stronger defenses against China.

Beijing views the step as a dry run for a vote on independence that could lead to war.

Yok says time is not on Taiwan's side.