The economic situation in Taiwan continued to show signs of a nascent turnaround, but Ma Ying-jeou’s political fortunes continued their downward slide. ECFA remains a focus of DPP opposition, but both Taipei and Beijing seem committed to completing the agreement by May, and formal talks have begun. At the same time, cross-Strait political dialogue appears to have been put on the back burner for now, though both sides believe it will be necessary at some future point. In this context emerged the sharp PRC reaction against the Obama administration’s announcement of a $6.4 billion package of arms for Taiwan. What Beijing will actually do to demonstrate its strong objections remains to be seen, as does the Chinese response to the forthcoming visit of the Dalai Lama to the White House. In light of the potential importance of the PRC’s new, more assertive approach to what it sees as assaults on its “core interests,” most of this essay is devoted to examining the arms sales issue.