Last weekend, Taiwan dropped a symbolic bomb on China by abandoning a policy that has underpinned its relations with its prickly Communist neighbor. Today, China countered with a bombshell of its own--the first public acknowledgment that it possesses neutron bomb technology.

China's announcement marks a significant escalation in the war of words raging across the Strait of Taiwan. While no one believes China is close to deploying such a weapon near the self-ruled island of 21 million people, analysts noted that China's announcement referred to a tactical nuclear device that could be used in a relatively small area--such as the region around Taiwan. Neutron bombs are designed to kill people but spare property, making them potentially useful offensive weapons.

"This is a stern warning to Taiwan and the United States," said Chien Chung, a nuclear expert at Taiwan's Armed Forces University.

The battle began over the weekend, when Taiwan's democratically elected president, Lee Teng-hui, told a German radio station that Taiwan wants to forge "special state-to-state" relations with China, instead of accepting the notion that Taiwan is a renegade province of China, as Beijing asserts. Taiwanese officials later expanded on Lee's comments, saying Taiwan wants to abandon the "one China" concept--which has been the bedrock of Taiwan-China relations since dialogue between the two began in the late 1980s.

On the surface, China's announcement today had nothing to do with Taiwan, but was ostensibly made to discredit a congressional report that accused Beijing of stealing neutron bomb technology from the United States.

But in the complex interplay between China, Taiwan and the United States, both Beijing and Taipei are performing on three stages at once--at home, across the Taiwan Strait and in Washington--and China's announcement is a key plot element in the unfolding drama.

Western intelligence officials suspect that China has had neutron bomb technology as far back as 1988, when it detonated a nuclear device with a profile similar to a neutron bomb. But, analysts say, China acknowledged its development program only today to shock Taiwan into realizing the depth of its opposition to Lee's shift on the "one China" formula.

In 1996, China responded to a controversial trip by Lee to the United States by lobbing tactical missiles over Taiwanese territory and conducting a massive military exercise opposite the island. This time, analysts say they believe that China--lacking the time to muster a significant demonstration of military force--decided to respond to Lee's changes by spotlighting its nuclear capability.

Hard-liners within the Beijing government comprise yet another audience to the China-Taiwan byplay.

Ever since U.S. warplanes mistakenly bombed the Chinese Embassy in Belgrade during the Kosovo war, Chinese President Jiang Zemin has faced accusations that his foreign policy is too soft. Those accusations have grown louder since Lee's reversal on "one China."

Finally, with a wary eye on the United States, China also put U.S. forces in the region on notice that it possesses the technology to construct and deliver a tactical neutron device. China has long wanted the United States to stop selling weapons to Taiwan, and it is upgrading its own navy and modernizing its missile program as a challenge to U.S. domination of the seas around Taiwan.

Lee's motivations are also complex, even though his policy shift seemed on the surface to be aimed at China. China's negotiator on Taiwan, Wang Daohan, is to visit the island in October and would thus become the highest-ranking Chinese official to do so since 1949. Now that visit is in doubt.

Lin Bi-chaw, a top Taiwanese official who led the team that formulated the new "state-to-state" policy, said that the main reason for the switch was to inform China that Taiwan would no longer tolerate China's efforts to strangle Taiwan diplomatically and that it wants to be treated as China's equal in subsequent negotiations.

But, analysts argue, other factors may be just as important. For one, Lee's party is facing a political crisis at home.

Polls show that his anointed successor in elections next March, Lien Chan, is unpopular.

At the same time, Lien is facing a challenge within Lee's Nationalist Party from James Soong, a popular and powerful political veteran. Soong is perceived to be a master of domestic issues, and, until last weekend, domestic concerns were uppermost in voters' minds.

So, by initiating an international crisis, Lee hopes to shift attention away from his party's troubles and force people to rally around him and Lien, said Lin Yu-tang, a Taiwanese political scientist who strongly opposes Lee's policy change. "The more tension for Lee the better in this situation," Lin said.

Lee also is playing to his supporters in the United States, analysts say. Early next month, Congress is to open hearings on a bill aimed at strengthening U.S. defense ties with Taiwan; Lee wants both closer defense ties and a reevaluation of the Clinton administration's "one China" policy.