A most phenomenal feature of the existing global trading system seems to be the coexistence of multilateralism as embodied in the World Trade Organization (WTO) and a growing number of bilateral and regional preferential trade arrangements as illustrated mostly in free trade areas (FTA). In the eyes of many people FTAs look quite at odds with WTO’s most salient principle of “Most Favored Nation” (MFN), which implies equal treatment for all WTO members. Under WTO’s Article 24, however, regional preferential trade arrangements in the form of customs unions and FTAs are openly permitted on the basis of the rationale that such regional arrangements could serve as a supplemental and practical route to the universal free trade that WTO advocates as its ultimate goal. As such, FTAs are now widely accepted as supplementary, rather than detrimental, to WTO. Through its WTO accession and its move to negotiate a FTA with the Association of Southeast Asian Nations (ASEAN) at the end of 2001, China has actively responded to this symbiosis in the global trading system. While China’s efforts to join the General Agreement on Trade and Tariffs (GATT), which evolved into WTO in 1995, started as early as 1986, its move to explore and negotiate a FTA with ASEAN is the result of Beijing’s most recent foreign economic policy adjustment. However, these two developments of 2001 in China’s foreign economic relations represent a new stage of the nation’s policy of opening to the outside world and are logically related to each other. They will not only substantially transform China’s economic relations with the outside world, but also bring significant impact on the political economy in East Asia in general and cross-Straits relations in particular. This article attempts to explore China’s recent policy initiatives and moves toward regional FTAs with neighboring economies in the context of cross-Straits mutual WTO membership, Taiwan’s responses and the implications thereof for Canada. The article is organized into six sections. The first section looks at China’s recent moves to explore FTAs with neighboring economies in East Asia. The second part examines the recent decision of Chian and ASEAN to negotiate a FTA between them. The third section speculates on how the China-ASEAN FTA will pose a challenge to Taiwan’s China policy. The fourth part discusses the effects of the mutual WTO membership of Taiwan and China on cross-Straits relations in the context of Beijing’s moves toward regional FTAs. The fifth section analyzes how Taiwan is exploring its own FTAs as a response to the external imperative. The concluding section speculates on the implications of this development in the cross-Straits relationship for Canada.