This paper presents a critical examination of the process, dynamics, and implications of Taiwan's new fangled efforts at state-building and nation-formation that have been an integral part of Tawian's political development since 1987. After reviewing some of the theoretical issues concerning the historic phenomena of state-building and nation-formation, the authors criticize the much-paraded of formula of 'transition form authoritarianism to democracy'. Then the concept of a populist authoritarianism is developed to characterize the major trends in Taiwan's political transformation. The social basis of the new regime is also analysed in some detail. Finally, the paper discusses the serious tension between populism and democracy, emphasizing that the 'top-to-bottom' construction and manipulation of the concept of 'the people' is at odds with the notion of a pluralist democracy.