In 1972, Lee Huan was appointed as Director General of the Department of Organization for the Kuomintang (KMT) when Chiang Ching-kuo was premier.

In 1976, Chiang Ching-kuo instructed Lee Huan to select several dozen young party leaders for the highest level cadre training program at the Institute of Revolutionary Practice.

Among the 60 individuals chosen for the training, half were Taiwanese,[3] including Lien Chan, Wu Po-hsiung, Shih Chi-yang.

The Kuomintang believed that Lee Huan's placatory approach to the Tangwai movement had caused the incident and forced him to resign.

[7] In a speech to the KMT's Kaohsiung headquarters in September 1987, Lee declared that the KMT's goal was no longer to replace the communist party ruling mainland China, but rather to "push for democracy, freedom of the press, and an open economy in the mainland so as to rid China of Communism and to move it toward a democratic modern state.

[13] Despite being forced from office, conservative leaders within the KMT such as Lee Huan, Premier Hau, Judicial Yuan President Lin Yang-kang, and the second son of Chiang Kai-shek, Chiang Wei-kuo, formed a bloc (called the "Non-mainstream faction") to oppose those who followed President Lee (the "Mainstream faction").