President Tsai had framed the election as a vote for democracy amid rising tensions with China.
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“The election results were not as expected… I should shoulder all the responsibility and I resign as DPP chairwoman immediately,” Ms Tsai, who will continue as president of the self-ruled island, told reporters.
The elections for local councils and city mayors theoretically have a domestic focus, covering issues such as crime, housing and social welfare, and those elected will not have a direct say on Taiwan’s policy regarding China.
However, Ms Tsai and government officials urged voters to use the election to send a message about standing up for democracy, as Beijing increases pressure on the island.
Voters also rejected lowering the voting age from 20 to 18, in a referendum that was run alongside the local elections.
The Chinese government sees Taiwan as a breakaway province that will, eventually, be part of the country.
But many Taiwanese people consider their self-ruled island – with its own form of government and a democratic system – to be distinct.
Tensions reached a peak in August when Beijing staged huge military drills around Taiwan in a protest against US House Speaker Nancy Pelosi’s visit to the island.
The US has long walked a tightrope over Taiwan. Officially, it has no formal ties with Taiwan, but has also pledged to supply the island with defensive weapons and stressed that any attack by China would cause “grave concern”.
SOURCE: BBC News