Beijing and Taipei have spoken out after Tesla chief executive Elon Musk said Taiwan should become a special administrative zone of China.
The world's richest man said in a Financial Times interview he believed the two governments could reach a "reasonably palatable" arrangement.
China's ambassador to the US praised Musk but his Taiwanese counterpart said freedom is "not for sale".
Taiwan rules itself but Beijing claims it as part of its territory.
Last week, Mr Musk also drew criticism for posting a Twitter poll with his suggestions for ending the war between Russia and Ukraine, including Kyiv giving up territory to Moscow.
Mr Musk's comments come as the electric car maker hit a monthly record for sales in China.
He weighed in on heightened China-Taiwan tensions in a wide-ranging interview with the UK business newspaper the Financial Times, which was published on Friday.
"My recommendation... would be to figure out a special administrative zone for Taiwan that is reasonably palatable, probably won't make everyone happy," he said.
"And it's possible, and I think probably, in fact, that they could have an arrangement that's more lenient than Hong Kong."
On Saturday, China's ambassador to the US Qin Gang welcomed Mr Musk's suggestion to establish Taiwan as a special administrative zone.
He said on Twitter that "peaceful reunification" and the "one country two systems" model used in governing Hong Kong were China's "basic principles for resolving the Taiwan question".
"Provided that China's sovereignty, security and development interests are guaranteed, after reunification Taiwan will enjoy a high degree of autonomy as a special administrative region, and a vast space for development," he added.
What is "one country, two systems"?
In response, Hsiao Bi-khim, Taiwan's de facto ambassador to Washington said on Twitter: "Taiwan sells many products, but our freedom and democracy are not for sale."
"Any lasting proposal for our future must be determined peacefully, free from coercion, and respectful of the democratic wishes of the people of Taiwan," Ms Hsiao added.
Shihoko Goto, director for geoeconomics and Indo-Pacific enterprise at the Wilson Center in Washington DC, told the BBC that Mr Musk's suggestions could hurt his business interests.
"Let's bear in mind that Elon Musk is supposedly on the brink of purchasing Twitter. Of course, Twitter is banned in China because free speech is not allowed in China," Ms Goto said.
"So if he is investing in Twitter, his company will probably not be able to operate in a Taiwan that is going to be under pressure or under the thumb of China. That would be a suicidal act on the part of Elon Musk," she added.
China sees self-ruled Taiwan as a breakaway province that will eventually be under Beijing's control.
Meanwhile, Tesla delivered 83,135 China-made electric vehicles in September, according to a report released on Sunday by the China Passenger Car Association.
That broke the previous record set by the company in June and marked a milestone for Tesla's factory in Shanghai which has been trying to boost production.
BDST: 1241 HRS, OCT 10, 2022