A resplendent landmark if ever there was one, Taipei's Grand Hotel looks out over the cityfrom a wooded hillside, gorgeous in scarlet pillars and a roof styled on Ming-dynasty design. It has hosted kings, American presidents and the shah of Iran - who brought his own goat's milk. The presidents of Paraguay and the Dominican Republic stayed there this year.

There are private guesthouses available for official visitors to the city. But, for palatial splendour, authorities in Taipei have nothing else that comes close to the immense, iconic Grand.

The hotel, completed in 1952, was an emblem par excellence of the ruling Kuomintang party. Madame Chiang Kai-shek, the wife of the ruling generalissimo, took a personal interest in its fortunes. So it's perhaps surprising to learn that, on September 28, 1986, liberal opposition politicians gathered there and defied the KMT's ban on all other political parties. They founded the Democratic Progressive Party (DPP) - which today holds the reins of government.

The Grand Hotel is thought to have the largest lobby in the world - 45 metres by 35 metres. The cavernous chamber is decorated with marble from Hualien, on the east coast, and 42 crimson columns. It took 400 artists four months to paint the ceiling panels. Someone with lots of spare time once counted all the dragons depicted in the hotel - and came up with a total of 29,000.

Today's businessmen tend to prefer Taipei's more central, American-style hotels, so the Grand's prices have remained moderate. A recent bargain offer stood at US$95 for a room - though not with a view.

The duty manager this week showed me the first-floor room where the DPP was established. It was medium-sized, unused when I saw it, and its windows were shaded against the brilliant August light.

"Wasn't it strange for opposition politicians to hold an illegal meeting here, of all places?" I asked. He replied with a smile: "It was a case of the authorities having one eye open and one eye shut, as we say in Taiwan."

The grandeur and sheer mass of the Grand seem to represent what Taiwan was until 1971 - a proud, permanent member of the UN Security Council and the only government of China recognised by the United States. Today, Taiwan is a very different place, a hi-tech powerhouse with one of the best-educated populations in Asia.

The DPP seems to be in disarray over accusations of corruption against President Chen Shui-bian's family and staff. Will members celebrate the party's foundation at the Grand, this time next month - 20 years on? If they do, they will find the grand old lady little changed.

It remains one of the world's most extraordinary buildings - all that was best in Chinese tradition recreated with love and dedication in the modern era.

For the visitor from overseas, Taipei's pavements must be quite a shock. Most major streets have a traditional, roofed interior pavement running in front of shops and a wider, outdoor pavement next to the road. Both have their special dangers.

Shopkeepers in older districts tend to treat the interior pavement as an extension of their floor space. They add tables outside for al-fresco dining or pile up merchandise, until only a narrow passageway is left for pedestrians.

Shops in upscale areas of eastern Taipei can be even worse. Concerned that flooding in the low-lying city will damage their expensive stock, they raise the interior pavement - sometimes by as much as 10cm. Then they tile it over with expensive-looking surfaces that become dangerously slippery when wet.

More danger lurks on the outer pavement, which in practice is an extension of the road. Taipei's ubiquitous scooter riders find most of their parking on the edge of the outer pavement. So they have no choice but to ride their scooters to and from the road along the centre of that pavement. Pedestrians are brushed aside by scooter drivers exercising their God-given right to pavement parking.

But, from the perspective of Taipei residents, the state of the city's pavements has steadily improved over the past seven years under the administration of outgoing mayor Ma Ying-jeou. Mr Ma began his first term with a campaign against luba - the "road tyrants" who occupy public pavements by chaining them off, blocking them with pots and plants, or erecting other barriers to create private parking for cars.

The campaign has been sustained for years, which is unusual, with an innovative website that citizens can use to report road tyrants. Even more unusually, Mr Ma has made sure that complaints are acted on swiftly and vigorously.

He followed the anti-luba campaign with a policy of creating designated streets where interior pavements must be kept completely clear at all times. Despite initial grumbling from shopkeepers, the policy has radically improved foot traffic. Mr Ma has also tried to find alternative parking for scooters off the exterior pavements by carving out parking bays, in the pavements, that are accessible from the road.

Overseas visitors are still unlikely to be impressed by the walking experience in Taipei. But residents feel grateful for the incremental but real improvements - especially when they visit other towns and cities in Taiwan. There, anarchy reigns unchecked on pavements that are blocked with parked cars, betel-nut stands and even private vegetable plots.

Returning from several weeks of business in the south, one non-driving friend told me that she would never again take for granted the chance to walk on unobstructed pavements.

The administration of Taiwan's president, Chen Shui-bian, now appears to be in permanent crisis mode. Mr Chen, a political fighter if nothing else, survived a recall attempt in June. That came after Taiwanese politics was rocked by allegations of insider stock trading against his son-in-law and misuse of department store gift vouchers by his wife.

Since those days of crisis in June, things have become only worse for Mr Chen. A group of academics and public intellectuals loosely associated with his Democratic Progressive Party (DPP) has called for him to step down, and opposition lawmakers have been able to flood the media with new allegations of financial irregularities. While no single allegation has demonstrated outright corruption by the president, taken as a whole, they strongly suggest a deeply rooted culture of incompetence and bad management within his administration.

That impression was reinforced this week when the minister of transportation, Kuo Yao-chi, suddenly resigned. That came after a court ruled against the government for awarding a company close to Mr Chen a fat contract to build and operate a highway toll-collection system.

With his grasp on power shakier than ever, Mr Chen's greatest vulnerability is a possible challenge from within his DPP that would force him to resign for the good of the party. There is growing sentiment, especially at the local level, that if Mr Chen does not quit soon, the party will be severely weakened for years to come.

When Mr Chen was elected in 2000 to end more than 50 years of Kuomintang rule, voters expected him to introduce radical reforms. The public may understand intellectually that Mr Chen has not had enough votes in Taiwan's parliament to push his reforms through. But it is still deeply disappointed that the "Son of Taiwan" - as Mr Chen was known in better days - has failed to deliver.

Under Mr Chen, the DPP has frittered away its political capital as the party of reform, and increasingly appears even to the faithful to be controlled from the top by a cadre of Chen loyalists. Yet, despite the public's deep disappointment with Mr Chen, there is no broad sentiment that he should step down immediately. Other than the vocal opposition media, most Taiwanese seem to think that the last thing Taiwan and its fragile economy need is a mass, people-power type of movement to force Mr Chen out of office before his term expires in 2008.

In the interim, Mr Chen - constitutionally barred from seeking a third term - looks set to be a caretaker president. On domestic issues, he has ceded much of his power to the premier, Su Tseng-chang. Mr Su is using his new authority to build up the patronage networks he will need to run for president in 2008.

Internationally, Mr Chen has already been forced to repeat his pledges to the United States not to change the status quo in the Taiwan Strait. Despite speculation that he would try to deflect domestic criticism by allowing a greater opening to mainland China, Mr Chen has in fact maintained an iron grip on policy towards the mainland. This was demonstrated at a recent economic summit between the government and the private sector: the explosive issue of caps on investments by Taiwanese companies on the mainland was not even allowed on the agenda.

Even if he wanted to, Mr Chen could not liberalise his policies towards the mainland, because he is deeply in political debt to pro-independence leaders who have stood with him throughout his summer of crisis. That leaves him with little else to do for the next two years except to work on a broad constitutional reform package that has no chance of passage in the current political climate.

Mr Chen's critics argue rightly that he has weakened the authority of the presidency. Yet, paradoxically, this may help strengthen Taiwan's democracy in the long run. That is because the extra-constitutional powers of the presidency - a legacy of the Chiang family's authoritarian rule - may finally be made subject to scrutiny by the courts and the people.

In the shorter term, though, Taiwan is suffering from a lack of effective leadership and continued political stalemate. This is at a time when it should be retooling itself domestically to become a service- and knowledge-oriented economy, while also dealing with the challenges and opportunities posed by mainland China's rise as a great power.

Historians will judge Mr Chen harshly for his inability to respond to these issues effectively, even if he is able to survive the allegations of corruption and incompetence that have tainted his second term.

Michael Fahey is a Taiwan-based political commentator.

Taiwanese normally say hello by asking if you have eaten. But this week, you are more likely to hear people asking each other if they have made offerings today.

That's because the full moon this week marked the culmination of the rituals and sacrifices to appease the dead that have lasted for the entire seventh month of the traditional lunar calendar known in English as "Ghost Month".

Ghost Month is celebrated throughout the Chinese-speaking world, and observed with special intensity in Taiwan, where traditional Chinese religions remain strong despite the society's adaptation to modern life.

I saw a classical example of this early on Monday, the peak day for the rituals, near my house. Two teenage girls made an unconventional offering - a mini Dominos pizza complete with lit joss sticks - at a tiny shrine for the lost souls of people killed in accidents at a dangerous, three-way intersection nearby.

Later, at my favourite pub, the owner and a waitress had a long debate about whether imported beer was an appropriate offering to the "Good Brothers" - as the wandering dead are politely known in Taiwanese. Eventually, it was decided that the ghosts would take this as a token of respect, since they had probably already had their fill of the domestic stuff earlier in the day.

This is the one day of the year where, even in cosmopolitan Taipei, you will see everyone - from betel-nut girls in their skimpy outfits to investment bankers in suits - out on the street holding incense and making offerings.

In the countryside, giant pigs are slaughtered and mounted on stands at the centre of the Taiwanese equivalent of a block party. They have been fattened up like Kobe steers on a strict regimen of beer, massage and soothing music, until some are too heavy to walk. The clan that sponsors the heaviest "God pig" is believed to win special blessings for the rest of the year.

Grumpy long-term foreign residents dread the peak day all year, because of the huge quantities of paper money burned indiscriminately in stairwells and balconies. The black smoke is acrid, and the ashes get into everything if you forget to close your windows.

Still, the festival, unmarked by any public holiday, is a pleasant reminder that the world is not yet entirely flat. Taipei at the height of Ghost Festival is a city of the living - many of whom believe that they are literally feeding the dead.

Yet, it's far from being morbid. Worshippers crowd excitedly around altars groaning with offerings of whole chickens, fish and chunks of pork. When the incense has finished burning and the dead are done eating, the faithful - as well as the sceptical - can overindulge in Falstaffian quantities of food and drink.

Weather forecasts are important for most Taiwanese, because potentially dangerous conditions are not unusual. The fastest computer on the island is in Taipei's Central Weather Bureau, and this week I watched one of its monitors showing lightning strikes as they occurred round the island. There was an astonishing number.

"There's a saying in Taiwan that thunderstorms never cross the road," said Daniel Wu, director of the bureau's Weather Forecast Centre. "It means if it's raining on one side of the road it won't rain on the other."

Thunderstorms are small, he noted - only some 10km in diameter. So it is quite common for Danshui, the holiday destination near Taipei, to enjoy a dry day while the city has rain. The local nature of much of Taiwan's weather was just one of the problems with which his staff must deal.

"People sometimes complain that we didn't predict a weather event," he said. "But that's something all weathermen have to put up with: I guess it's a worldwide phenomenon." The bureau maintains 24 observation stations, many in remote locations. One is on a mountaintop next to the island's highest peak, Yu Shan. One lonely observer at a time sits there, his computers running on solar power. Another is on a tiny offshore islet.

But not everything can be predicted. When the island's most recent typhoon, Bilis, roared through last week, it had an unusual wind pattern - the blasts round the perimeter were stronger than those at the centre - said Kathy Lin, the forecast centre's deputy director. So there was flooding in southern Taiwan but not in Taipei, even though Bilis passed right over the city.

Across the island, many people - from fishermen and farmers to mountaineers and firefighters - depend on the centre's elaborate collation of data and expert forecasts. Taiwan has pioneered its own Typhoon Analysis Forecast Information System, exchanging information with neighbours including Japan and Guam. Once a typhoon warning has been issued, new information is issued at press conferences every three hours, from 6am to midnight.

But weather forecasting is still not an exact science. Taipei's bureau has four professionals - out of a total staff of around 60 - working at any one time on the short-term forecast, and they consult before presenting their agreed prediction to the media. It is very much a matter of consensus and assessing the probabilities.

Funding is crucial for accurate weather forecasting, Mr Wu added. The United States has the most money available, and can afford to fly aircraft around - and sometimes into - approaching storms to measure their strength. Taiwan cannot quite afford that, at least not yet.