Chiang Ching-kuo’s first major challenge of the 1980s was the Iranian hostage crisis. Dozens of Chinese citizens had been held hostage by radical Iranians since 1979. Iran was angry at China, but the Iranian government would soon find that China was far from their greatest concern. The United States had begun to fund Islamist rebels in the closing months of Ford’s presidency. America became the greatest enemy of Iran. The government was eager to stoke the flames of anti-Americanism. Then the students who held the Chinese embassy workers hostage were persuaded to let them go. Iran didn’t want China to take action against their regime. The hostages were quietly released and flown to China in 1981. Chiang Ching-kuo was there to greet them at the airport. Their return was hailed in the Chinese media as a success for Chiang’s foreign policy.
Another important event was the handover of Macao. In March 1980, the flag of Portugal was lowered and the flag of the Republic of China was raised. For most residents of Macao, their life continued as it had before. The city became a part of Guangdong Province, but was exempt from many of the laws passed at both the provincial and federal level. One specific exemption was that Macao was allowed to continue to have legal gambling. There were some changes. Residents of Macau could now freely travel around China with the exception of a few areas that were restricted from civilians. Taxes would now be paid to the government of China. It was the start of a new era for Macau.
Chiang Ching-kuo was facing mounting opposition from both the right and the left. In 1981, 15 KMT members of the Legislative Yuan joined the China Democratic Socialist Party. This would make the CDSP the second largest party in the legislative Yuan at 131 seats. The KMT was reduced to 479 seats, as there was another defector to the China Youth Party. The Party still held 62% of the seats in the Legislative Yuan, however. CDSP leader Wang Shixian, who represented the old guard of the party, supported continued cooperation with the KMT (this gave CDSP members access to government patronage). Younger party members believed that the CDSP should act as the main opposition to the KMT. As Chiang Ching-kuo and the KMT moved to the right on economics, the rift between the KMT and CDSP would deepen.
Right-wing opposition to Chiang Ching-kuo was mostly about his perceived insufficient anti-Communism. There was some push for him to go further right on economics. Much of the hard right in China wanted Chiang to do more to oppose Communism. Some called for the expulsion of the members of the New Democratic League from the Legislative Yuan. The party was considered by many on the right to be a Communist fellow traveler organization, and its members were generally more conciliatory towards the Soviet Union. Some members of the Legislative Yuan wanted to force a vote on funding Islamist rebels in Iran. In 1982, Gao Wenyuan of Qinghai introduced a bill to provide money and weapons for rebels in Iran and increased support for rebels in Afghanistan and Kazakhstan. He was joined by 254 others from both the KMT and the China Youth Party. While it fell far short of the 387 votes required to pass, it represented one of the first attempts from the legislative branch to oppose the executive branch.
In 1982, elections were held in the provinces of Suiyuan, Chahar, and Xingan. These provinces had been left out of the democratic reforms in 1979, as Chiang Ching-kuo used ongoing Communist activity as an excuse to delay free elections there. There were protests and riots in these provinces as a response. Chiang eventually allowed them to have free elections, and now only Tibet and Xinjiang were exempt from the 1979 reforms. The KMT was not popular in any of these provinces. The party’s gubernatorial candidates won with a plurality of the vote in Suiyuan and Xingan due to a divided opposition. Qin Fengchuan defeated KMT candidate Tong Xiuming 35-34%. Qin was not a member of one of the more mainstream parties such as the CDSP or CYP. Rather, the first non-KMT candidate (outside of Tibet) to win a gubernatorial election was from the New Democratic League, the party. Years after Qin’s death in 1991, it was revealed that he had been in contact with Communist spies while serving in the Chinese Army during the Civil War.