In the last two decades of the twentieth century, interactions among Taiwan, Hong Kong, and mainland China have undergone extensive change, moving from intensified confrontation to closer economic exchange. After Taipei legalized travel to the mainland in November 1987, new economic opportunities were opened up to both sides of the Strait. This change aroused plenty of discussions, with the main discussion centered around the possibility of an economically integrated Greater China . The great volume of trade across the strait and the huge amount of investments on the mainland by Taiwanese entrepreneurs have created a dense economic relationship that is potentially beneficial to further integration. In view of this, many scholars and political elites in the region have expressed their optimistism on the formation of Greater China through many of their discourses. The usages of terms such as “Greater China,” “Chinese Economic Area,” “Common Chinese Market,” or “South China Economic Sphere” all reflect these scholars’ eager expectation. However, the concerns for each side’s security, sovereignty, and domestic politics hinder such development, and the expected spillover from economic corporation into a higher level of integration has not yet appeared. In this paper, I would try to answer why the economic integration is unlikely in Greater China. And I would like to argue that the current economic interaction and given cultural similarity cannot lead to economic integration in the absence of political understanding. On the surface, comparative advantages come from complementary economic development on both sides of the Strait , geographic proximity (reducing transportation costs) and cultural affinity (reducing transaction costs in investment and technology transfer). However, fundamental sovereignty and identity differences remain. In the first part of this paper, I would like to apply Keohane and Nye’s framework, interdependence, to argue that the growing trade and investment volume flowing across the Strait does not imply interdependence. Since interdependence is a necessary antecedent to economic integration, integration is unlikely without any interdependence. Even if the ongoing trend can lead us to cross the threshold of interdependence, the political concerns are still able to undermine further institutionalization. In the second part of this paper, I would like to focus on the concept of cultural affinity which is supposed to be a plus for integration. However, given current political considerations, what we have are perceived hostility and alienated identification, and these factors reverse the plus to a minus for integration. In the third part, I would like to emphasize contested sovereignty, identity, and security tensions which can be seen as the prerequisites for the progress of economic integration. According to Joanne Gowa, security matters, however, enlightened by David Laitin’s study on leadership, I argue that the government/leader’s political concerns towards sovereignty and identity can play the most important role in hindering the progress of negotiation, furthermore, the future process of integration. I would like to conclude that since the political issue, especially sovereignty and identity issues, is not settled yet, it is too optimistic to expect the spillover effect that brings the current thriving economic interaction into a more institutionalized economic integration in the Greater China region. [ABSTRACT FROM AUTHOR]