"The biggest challenge that the newly inaugurated President Ma Ying-jeou faces is to find the best position for Taiwan to balance its interests among the U.S., Japan, and China," Lin said at a seminar held by the New Century Foundation, a private think tank.

He indicated that in order to develop closer, more peaceful links with China while improving Taiwan's diplomatic status -- one of Ma's promises -- the new government will have to hold some bargaining chips, such as maintaining Taiwan's identity and developing the island's self-defense capacity.

"If Ma could really improve cross-strait relations without throwing away Taiwan's identity, the U.S. and Japan will be more willing to help Taiwan on diplomatic issues and cross- strait security," the scholar said.

Former President Chen Shui-bian, whose eight-year rule just ended along with his Democratic Progressive Party's, had antagonized China with his pro independence stance, which was seen to have also hurt Taiwan-U.S. relations.

Ma, in his May 20 inauguration speech, proposed that Taiwan and China agree to a "cross-strait peace accord," but that Taiwan's dignity should be preserved.

"Only when Taiwan is no longer being isolated in the international arena can cross-strait relations move forward with confidence," Ma said in his speech.

With such a pledge, the new government needs to be careful not to sacrifice Taiwan's identity and diplomatic interests in its negotiations with China, Lin said.

"A lack of awareness and alertness in dealing with China will not just hurt Taiwan's interests, but also will cause the U.S. and Japan concern," he added.