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Taiwan Economy - History

Taiwan Economy - History

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GNP (2009): $693 billion.
Annual growth rate (2009): -4%.
Per capita GDP (2009): $30,200.
Unemployment ( 2009) 6.4%.

Budget: Income .............. $60.72 Billion
Expenditure ... $78.5 Billion

Main Crops: Rice, wheat, corn, soybeans, vegetables, fruit, tea; pigs, poultry, beef, milk; fish.

Natural Resources: Small deposits of coal, natural gas, limestone, marble, and asbestos .

Major Industries: Electronics, textiles, chemicals, clothing, food processing, plywood, sugar milling, cement, shipbuilding, petroleum refining.

Taiwan has a capitalist economy, which means that privately-owned companies decide on production techniques and operate to earn a profit. Banks and industrial companies that were previously owned by the state are now also privately owned. The economy of Taiwan is the 19th largest in the world in terms of purchasing power parity. It is considered an advanced economy by the International Monetary Fund and has the highest Global Entrepreneurship Index in Asia. Additionally, it ranks as the 5th largest economy in the region of Asia.

In 2014, its nominal gross domestic product (GDP) was $529.6 billion and GDP per capita was $22,598. This country has a workforce of 11.54 million and an unemployment rate of only 4%. Of these employed individuals, 58.9% work in the services industry. This is followed by 36.1% in industry and 5% in agriculture.

Analysis of Taiwanese Economic History and Policies

Situated to the east of mainland China, Taiwan occupies a strategic position among global supply chains. Appropriately dubbed an Asian Tiger , the island’s modern infrastructure, extensive foreign reserves, and $590 billion GDP have placed it in the top 25 of 185 economies globally. Backed by one of the world’s most advanced microchip sectors , it is recognized as a developed, high-income economy, a first for the Chinese-speaking world. Initially settled by Han immigrants during the Ming Dynasty, and subsequently conquered by the Qing , Taiwan has been a frequent destination of wealthy, educated Chinese seeking independence from the government in Beijing. However, the arriving Han immigrants also displaced indigenous tribes, forcing them to settle in areas less suitable for agriculture. Constant warfare also impoverished aboriginal peoples, whose average income is now less than half of the national average. Soon, immigrant arrivals overwhelmed native populations, placing Taiwan firmly under Chinese rule. Taiwan remained under Chinese rule until the Sino-Japanese War, when it was seceded to Japan under the Treaty of Shimonoseki . The Japanese administration effectively improved the island’s educational, health, and transportation infrastructure however, most benefits were intended for Japanese immigrants , as evidenced by the island being denied representation in the Japanese government, and much of this progress was reversed during the Second World War .

Taiwan GDP over Time (Billions of USD)

Dissatisfied by the loss of Taiwan, severe economic stagnation, and failed military campaigns against Western powers, the mainland Chinese consequently overthrew the Manchu Qing Dynasty , establishing the Republic of China in its place. Today, both the mainland and Taiwanese governments credit Dr. Sun Yat-Sen , widely considered to be the Father of Modern China, for this historic occasion. After achieving victory in World War II against Japan and the remaining Axis powers, but suffering a subsequent defeat in the Chinese Civil War, the Kuomintang (Chinese Nationalist Party) fled the mainland for Taiwan. There, they re-established the Republic of China with its capital in Taipei, bringing with them much of China’s gold reserves and human capital. Having endured extensive wartime bombing and an influx of mainland immigrants, Taiwan was plagued with divisions between native and immigrant populations, weakened infrastructure, and a per-capita GDP comparable to that of the Congo . Hyperinflation was rampant, and a fatigued population was faced with the arduous task of re-development.

Asian Tiger Era and the Ten National Projects

Aware of Taiwan’s weak economic situation, the Taiwanese government launched a series of reform policies, initially focusing on curbing hyperinflation and stabilizing the Taiwanese dollar in the years immediately following 1945. The government then proceeded to redistribute land from the gentry to the lower classes. Doing so expanded Taiwan’s agricultural production, allowing the government to focus on improving education and industrial production . US economic aid subsidized industrial production costs, resulting in strong export growth . Drawn by low manufacturing costs, wages, and a relatively educated workforce Japanese companies began entering the Taiwanese market. Low interest rates on loans and government subsidies further boosted economic growth and large R&D investments developed the fledgling microchip industry. By the 1960s, annual real GDP growth averaged more than 10.3% and major companies, such as IBM, began sourcing chips and electronic components from the island.

By the 1970s, Premier Chiang Ching-Kuo’s Ten Major Construction Projects had built infrastructure across Taiwan, increased electricity production, and boosted steel production, critical components of the infrastructure-fueled boom. Costing over $10 billion in costs, the completion of Premier Ching-Kuo’s projects signaled Taiwan’s entry into the modern era. FDI inflows spiked , supporting investments such as the Hsinchu Technology Park and the expansion of family businesses, which form the backbone of the current economy. By the early 21st century, Taiwan’s GDP per capita had risen from $1400 immediately following World War II to more than $50,000 on purchasing power parity (PPP), higher than that of most developed European nations at the time. Though GDP per capita on a nominal basis remained at around $20,000 , the economy appeared to be on solid footing.

Taiwan in the 21st Century

However, the export-dependent economic engine began to stagnate as mainland China opened special economic zones towards the mid-1980s, granting access to cheaper labor . Companies began relocating supply chains elsewhere to China and Southeast Asia, causing Taiwan’s GDP growth to drop. This emphasis on pursuing lower labor costs discouraged innovation while companies left Taiwan for Southeast Asia, due to the region’s relatively lower wages and abundant raw resources. Taiwan’s focus on family-sized businesses and inability to produce global brands, such as South Korea’s chaebol Samsung and LG Electronics, stunted its competitiveness. Furthermore, exclusion from multiple free trade agreements depressed exports, which account for a sizable portion of GDP. Consequently, wage growth has remained stagnant for nearly two decades. Despite producing one of the world’s most educated workforces , the government has failed to create jobs that fully harness college graduates’ know-how. The resulting brain drain of professionals was therefore hardly surprising .

Multiple China-friendly Kuomintang (KMT) administrations have vowed to bolster relationships with China, promoting higher trade volume and stronger tourism ties. However, a skeptical public rejected such measures, voting the independence-leaning Democratic Progressive Party (DPP ) into power by 2016. To reduce dependence on China, Taiwan embarked on the New Southbound Policy to attract new investments and consumers in Southeast Asia. This policy appeared especially sound given that only a small percentage of Taiwan’s exports are covered by free trade agreements. Despite this, China continued to account for a sizable share of exports and diversification has been slow in this area.

General Outlook

Recent figures indicate economic growth at around 2.7% for 2019, a slight drop from 2018, but nevertheless an improvement from 0.8% in 2015. A recent bill which raised the monthly minimum wage by 3% and hourly minimum wage by 5% is expected to boost disposable income and consumption spending for fiscal year 2020. Businesses relocating to Taiwan to avoid tariffs from the US-China trade war are expected to temporarily create jobs and fuel investment spending. However, the possibility of further trade agreement phases between the US and China , in addition to lucrative opportunities in Vietnam , are likely to reverse such gains. Despite relatively decent performance, growth is hampered by trade tensions and future growth may decline if companies return to the mainland.

Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of Berkeley Economic Reviewstaff, the Undergraduate Economics Association, the UC Berkeley Economics Department and faculty, or the University of California, Berkeley in general.


Various names for the island of Taiwan remain in use, each derived from explorers or rulers during a particular historical period. The name Formosa ( 福爾摩沙 ) dates from 1542, when Portuguese sailors sighted an uncharted island and noted it on their maps as Ilha Formosa ("beautiful island"). [34] [35] The name Formosa eventually "replaced all others in European literature" [ attribution needed ] [36] and remained in common use among English speakers into the 20th century. [37]

In the early 17th century, the Dutch East India Company established a commercial post at Fort Zeelandia (modern-day Anping, Tainan) on a coastal sandbar called "Tayouan", [38] after their ethnonym for a nearby Taiwanese aboriginal tribe, possibly Taivoan people, written by the Dutch and Portuguese variously as Taiouwang, Tayowan, Teijoan, etc. [39] This name was also adopted into the Chinese vernacular (in particular, Hokkien, as Pe̍h-ōe-jī: Tāi-oân/Tâi-oân ) as the name of the sandbar and nearby area (Tainan). The modern word "Taiwan" is derived from this usage, which is written in different transliterations ( 大員, 大圓, 大灣, 臺員, 臺圓 and 臺窩灣 ) in Chinese historical records. The area occupied by modern-day Tainan was the first permanent settlement by both European colonists and Chinese immigrants. The settlement grew to be the island's most important trading centre and served as its capital until 1887.

Use of the current Chinese name ( 臺灣/台灣 ) became official as early as 1684 with the establishment of Taiwan Prefecture which centred in modern-day Tainan. Through its rapid development the entire Formosan mainland eventually became known as "Taiwan". [40] [41] [42] [43]

In his Daoyi Zhilüe (1349), Wang Dayuan used "Liuqiu" as a name for the island of Taiwan, or the part of it closest to Penghu. [44] Elsewhere, the name was used for the Ryukyu Islands in general or Okinawa, the largest of them indeed the name Ryūkyū is the Japanese form of Liúqiú. The name also appears in the Book of Sui (636) and other early works, but scholars cannot agree on whether these references are to the Ryukyus, Taiwan or even Luzon. [45]

The official name of the country is the "Republic of China" it has also been known under various names throughout its existence. Shortly after the ROC's establishment in 1912, while it was still located on the Chinese mainland, the government used the short form "China" (Zhōngguó ( 中國 )) to refer to itself, which derives from zhōng ("central" or "middle") and guó ("state, nation-state"), [h] a term which also developed under the Zhou dynasty in reference to its royal demesne, [i] and the name was then applied to the area around Luoyi (present-day Luoyang) during the Eastern Zhou and then to China's Central Plain before being used as an occasional synonym for the state during the Qing era. [47]

During the 1950s and 1960s, after the government had withdrawn to Taiwan upon losing the Chinese Civil War, it was commonly referred to as "Nationalist China" (or "Free China") to differentiate it from "Communist China" (or "Red China"). [49]

It was a member of the United Nations representing "China" until 1971, when it lost its seat to the People's Republic of China. Over subsequent decades, the Republic of China has become commonly known as "Taiwan", after the island that comprises 99 per cent of the territory under its control. In some contexts, especially ROC government publications, the name is written as "Republic of China (Taiwan)", "Republic of China/Taiwan", or sometimes "Taiwan (ROC)". [50] [51] [52]

The Republic of China participates in most international forums and organizations under the name "Chinese Taipei" due to diplomatic pressure from the People's Republic of China. For instance, it is the name under which it has competed at the Olympic Games since 1984, and its name as an observer at the World Health Organization. [53]

Early settlement (to 1683)

Taiwan was joined to the Asian mainland in the Late Pleistocene, until sea levels rose about 10,000 years ago. [54] Fragmentary human remains dated 20,000 to 30,000 years ago have been found on the island, as well as later artifacts of a paleolithic culture. [55] [56] [57]

Around 6,000 years ago, Taiwan was settled by farmers, most likely from what is now southeast China. [58] They are believed to be the ancestors of today's Taiwanese indigenous peoples, whose languages belong to the Austronesian language family, but show much greater diversity than the rest of the family, which spans a huge area from Maritime Southeast Asia west to Madagascar and east as far as New Zealand, Hawaii and Easter Island. This has led linguists to propose Taiwan as the urheimat of the family, from which seafaring peoples dispersed across Southeast Asia and the Pacific and Indian Oceans. [59] [60]

Han Chinese fishermen began settling in the Penghu islands in the 13th century. [61] Hostile tribes, and a lack of valuable trade products, meant that few outsiders visited the main island until the 16th century. [61] During the 16th century, visits to the coast by fishermen and traders from Fujian, as well as Chinese and Japanese pirates, became more frequent. [61]

The Dutch East India Company attempted to establish a trading outpost on the Penghu Islands (Pescadores) in 1622, but was driven off by Ming forces. [62] In 1624, the company established a stronghold called Fort Zeelandia on the coastal islet of Tayouan, which is now part of the main island at Anping, Tainan. [43] When the Dutch arrived, they found southwestern Taiwan already frequented by a mostly-transient Chinese population numbering close to 1,500. [63] David Wright, a Scottish agent of the company who lived on the island in the 1650s, described the lowland areas of the island as being divided among 11 chiefdoms ranging in size from two settlements to 72. Some of these fell under Dutch control, including the Kingdom of Middag in the central western plains, while others remained independent. [43] [64] The Company encouraged farmers to immigrate from Fujian and work the lands under Dutch control. [65] By the 1660s, some 30,000 to 50,000 Chinese were living on the island. [66]

In 1626, the Spanish Empire landed on and occupied northern Taiwan as a trading base, first at Keelung and in 1628 building Fort San Domingo at Tamsui. [67] This colony lasted 16 years until 1642, when the last Spanish fortress fell to Dutch forces. [68] The Dutch then marched south, subduing hundreds of villages in the western plains between their new possions in the north and their base at Tayouan. [68]

Following the fall of the Ming dynasty in Beijing in 1644, Koxinga (Zheng Chenggong) pledged allegiance to the Yongli Emperor of Southern Ming and attacked the Qing dynasty along the southeastern coast of China. [69] In 1661, under increasing Qing pressure, he moved his forces from his base in Xiamen to Taiwan, expelling the Dutch in the following year. Some analysts consider his regime to be loyal to the Ming, while others argue that he acted as an independent ruler and his intentions were unclear. [70] [71] [72]

After being ousted from Taiwan, the Dutch allied with the new Qing dynasty in China against the Zheng regime in Taiwan. Following some skirmishes the Dutch retook the northern fortress at Keelung in 1664. [73] Zheng Jing sent troops to dislodge the Dutch, but they were unsuccessful. The Dutch held out at Keelung until 1668, when aborigine resistance, [74] and the lack of progress in retaking any other parts of the island persuaded the colonial authorities to abandon this final stronghold and withdraw from Taiwan altogether. [75]

Qing rule (1683–1895)

In 1683, following the defeat of Koxinga's grandson by an armada led by Admiral Shi Lang of southern Fujian, the Qing dynasty formally annexed Taiwan, placing it under the jurisdiction of Fujian province. The Qing imperial government tried to reduce piracy and vagrancy in the area, issuing a series of edicts to manage immigration and respect aboriginal land rights. Immigrants mostly from southern Fujian continued to enter Taiwan. The border between taxpaying lands and what was considered "savage" lands shifted eastward, with some aborigines becoming sinicized while others retreated into the mountains. During this time, there were a number of conflicts between different ethnic groups of Han Chinese, Quanzhou Minnanese feuding with Zhangzhou and Hakkas peasants, and major clan fights between Minnans (Hoklos), Hakkas and aborigines too.

There were more than a hundred rebellions, riots, and instances of civil strife during the Qing's administration, including the Lin Shuangwen rebellion (1786–1788). Their frequency was evoked by the common saying "every three years an uprising, every five years a rebellion" (三年一反、五年一亂), primarily in reference to the period between 1820 and 1850. [76] [77] [78]

Northern Taiwan and the Penghu Islands were the scene of subsidiary campaigns in the Sino-French War (August 1884 to April 1885). The French occupied Keelung on 1 October 1884, but were repulsed from Tamsui a few days later. The French won some tactical victories but were unable to exploit them, and the Keelung Campaign ended in stalemate. The Pescadores Campaign, beginning on 31 March 1885, was a French victory, but had no long-term consequences. The French evacuated both Keelung and the Penghu archipelago after the end of the war.

In 1887, the Qing upgraded the island's administration from being the Taiwan Prefecture of Fujian Province to Fujian-Taiwan-Province, the twentieth in the empire, with its capital at Taipei. This was accompanied by a modernization drive that included building China's first railway. [79]

Japanese rule (1895–1945)

Following Qing's defeat in the First Sino-Japanese War (1894–1895), Taiwan, its associated islands, and the Penghu archipelago were ceded to the Empire of Japan by the Treaty of Shimonoseki, along with other concessions. [80] Inhabitants on Taiwan and Penghu wishing to remain Qing subjects were given a two-year grace period to sell their property and move to mainland China. Very few Taiwanese saw this as feasible. [81] On 25 May 1895, a group of pro-Qing high officials proclaimed the Republic of Formosa to resist impending Japanese rule. Japanese forces entered the capital at Tainan and quelled this resistance on 21 October 1895. [82] Guerrilla fighting continued periodically until about 1902 and ultimately took the lives of 14,000 Taiwanese, or 0.5 per cent of the population. [83] Several subsequent rebellions against the Japanese (the Beipu uprising of 1907, the Tapani incident of 1915, and the Musha incident of 1930) were all unsuccessful but demonstrated opposition to Japanese colonial rule.

Japanese colonial rule was instrumental in the industrialization of the island, extending the railways and other transport networks, building an extensive sanitation system, and establishing a formal education system in Taiwan. [84] Japanese rule ended the practice of headhunting. [85] During this period the human and natural resources of Taiwan were used to aid the development of Japan, and the production of cash crops such as rice and sugar greatly increased. By 1939, Taiwan was the seventh-greatest sugar producer in the world. [86] Still, the Taiwanese and aborigines were classified as second- and third-class citizens. After suppressing Chinese guerrillas in the first decade of their rule, Japanese authorities engaged in a series of bloody campaigns against the mountain aboriginals, culminating in the Musha Incident of 1930. [87] Intellectuals and labourers who participated in left-wing movements within Taiwan were also arrested and massacred (e.g. Chiang Wei-shui ( 蔣渭水 ) and Masanosuke Watanabe ( 渡辺政之輔) ). [88]

Around 1935, the Japanese began an island-wide assimilation project to bind the island more firmly to the Japanese Empire and people were taught to see themselves as Japanese under the Kominka Movement, during which time Taiwanese culture and religion were outlawed and the citizens were encouraged to adopt Japanese surnames. [89] By 1938, 309,000 Japanese settlers resided in Taiwan. [90]

Taiwan held strategic wartime importance as Imperial Japanese military campaigns first expanded and then contracted over the course of World War II. The "South Strike Group" was based at the Taihoku Imperial University in Taipei. During World War II, tens of thousands of Taiwanese served in the Japanese military. [91] Over 2,000 women, euphemistically called "comfort women", were forced into sexual slavery for Imperial Japanese troops. [92]

The Imperial Japanese Navy operated heavily from Taiwanese ports. In October 1944 the Formosa Air Battle was fought between American carriers and Japanese forces based in Taiwan. Important Japanese military bases and industrial centres throughout Taiwan, such as Kaohsiung and Keelung, were targets of heavy raids by American bombers. [93]

After Japan's surrender ended World War II, most of Taiwan's approximately 300,000 Japanese residents were expelled and sent to Japan. [94]

Republic of China (1912–1949)

While Taiwan was still under Japanese rule, the Republic of China was founded on the mainland on 1 January 1912, following the Xinhai Revolution, which began with the Wuchang uprising on 10 October 1911, replacing the Qing dynasty and ending over two thousand years of imperial rule in China. [95] From its founding until 1949 it was based in mainland China. Central authority waxed and waned in response to warlordism (1915–28), Japanese invasion (1937–45), and the Chinese Civil War (1927–50), with central authority strongest during the Nanjing decade (1927–37), when most of China came under the control of the Kuomintang (KMT) under an authoritarian one-party state. [96]

After the Surrender of Japan on 25 October 1945, the US Navy ferried ROC troops to Taiwan to accept the formal surrender of Japanese military forces in Taipei on behalf of the Allied Powers, as part of General Order No. 1 for temporary military occupation. General Rikichi Andō, governor-general of Taiwan and commander-in-chief of all Japanese forces on the island, signed the receipt and handed it over to General Chen Yi of the ROC military to complete the official turnover. Chen Yi proclaimed that day to be "Taiwan Retrocession Day", but the Allies considered Taiwan and the Penghu Islands to be under military occupation and still under Japanese sovereignty until 1952, when the Treaty of San Francisco took effect. [97] [98] Although the 1943 Cairo Declaration had envisaged returning these territories to China, it had no legal status as treaty, and also in the Treaty of San Francisco and Treaty of Taipei Japan renounced all claim to them without specifying to what country they were to be surrendered. This introduced the disputed sovereignty status of Taiwan and whether the ROC has sovereignty over Taiwan or only remaining over Kinmen and Matsu Islands.

The ROC administration of Taiwan under Chen Yi was strained by increasing tensions between Taiwanese-born people and newly arrived mainlanders, which were compounded by economic woes, such as hyperinflation. Furthermore, cultural and linguistic conflicts between the two groups quickly led to the loss of popular support for the new government, while the mass movement led by the working committee of the Chinese Communist Party also aimed to bring down the Kuomintang government. [99] [100] The shooting of a civilian on 28 February 1947 triggered island-wide unrest, which was suppressed with military force in what is now called the February 28 Incident. Mainstream estimates of the number killed range from 18,000 to 30,000. Those killed were mainly members of the Taiwanese elite. [101] [102]

After the end of World War II, the Chinese Civil War resumed between the Chinese Nationalists (Kuomintang), led by Director-general Chiang Kai-shek, and the Chinese Communist Party (CCP), led by CCP Chairman Mao Zedong. Throughout the months of 1949, a series of Chinese Communist offensives led to the capture of its capital Nanjing on 23 April and the subsequent defeat of the Nationalist army on the mainland, and the Communists founded the People's Republic of China on 1 October. [103]

On 7 December 1949, after the loss of four capitals, Chiang evacuated his Nationalist government to Taiwan and made Taipei the temporary capital of the ROC (also called the "wartime capital" by Chiang Kai-shek). [104] Some 2 million people, consisting mainly of soldiers, members of the ruling Kuomintang and intellectual and business elites, were evacuated from mainland China to Taiwan at that time, adding to the earlier population of approximately six million. These people came to be known in Taiwan as 'Mainlanders' (Waishengren, 外省人 ). In addition, the ROC government took to Taipei many national treasures and much of China's gold reserves and foreign currency reserves. [105] [106] [107]

After losing control of mainland China in 1949, the ROC retained control of Taiwan and Penghu (Taiwan, ROC), parts of Fujian (Fujian, ROC)—specifically Kinmen, Wuqiu (now part of Kinmen) and the Matsu Islands and two major islands in the South China Sea (within the Dongsha/Pratas and Nansha/Spratly island groups). These territories have remained under ROC governance until the present day. The ROC also briefly retained control of the entirety of Hainan (an island province), parts of Zhejiang (Chekiang)—specifically the Dachen Islands and Yijiangshan Islands—and portions of the Tibet Autonomous Region (Tibet was de facto independent from 1912 to 1951), Qinghai, Xinjiang (Sinkiang) and Yunnan. The Communists captured Hainan in 1950, captured the Dachen Islands and Yijiangshan Islands during the First Taiwan Strait Crisis in 1955 and defeated the ROC revolts in Northwest China in 1958. ROC forces in Yunnan province entered Burma and Thailand in the 1950s and were defeated by Communists in 1961.

Ever since losing control of mainland China, the Kuomintang continued to claim sovereignty over 'all of China', which it defined to include mainland China (including Tibet, which remained independent until 1951), Taiwan (including Penghu), Mongolia (known by the ROC as 'Outer Mongolia', 外蒙古 ) and other minor territories. In mainland China, the victorious Communists proclaimed the PRC to be the sole legitimate government of China (which included Taiwan, according to their definition) and that the Republic of China had been vanquished. [108]

Republic of China on Taiwan (1949–present)

Martial law era (1949–1987)

Martial law, declared on Taiwan in May 1949, [109] continued to be in effect after the central government relocated to Taiwan. It was not repealed until 38 years later, in 1987. [109] Martial law was used as a way to suppress the political opposition during the years it was active. [110] During the White Terror, as the period is known, 140,000 people were imprisoned or executed for being perceived as anti-KMT or pro-Communist. [111] Many citizens were arrested, tortured, imprisoned and executed for their real or perceived link to the Chinese Communist Party. Since these people were mainly from the intellectual and social elite, an entire generation of political and social leaders was decimated. In 1998, a law was passed to create the "Compensation Foundation for Improper Verdicts" which oversaw compensation to White Terror victims and families. President Ma Ying-jeou made an official apology in 2008, expressing hope that there would never be a tragedy similar to White Terror. [112]

Initially, the United States abandoned the KMT and expected that Taiwan would fall to the Communists. However, in 1950 the conflict between North Korea and South Korea, which had been ongoing since the Japanese withdrawal in 1945, escalated into full-blown war, and in the context of the Cold War, US President Harry S. Truman intervened again and dispatched the US Navy's 7th Fleet into the Taiwan Strait to prevent hostilities between Taiwan and mainland China. [113] In the Treaty of San Francisco and the Treaty of Taipei, which came into force respectively on 28 April 1952 and 5 August 1952, Japan formally renounced all right, claim and title to Taiwan and Penghu, and renounced all treaties signed with China before 1942. Neither treaty specified to whom sovereignty over the islands should be transferred, because the United States and the United Kingdom disagreed on whether the ROC or the PRC was the legitimate government of China. [114] Continuing conflict of the Chinese Civil War through the 1950s, and intervention by the United States notably resulted in legislation such as the Sino-American Mutual Defense Treaty and the Formosa Resolution of 1955.

As the Chinese Civil War continued without truce, the government built up military fortifications throughout Taiwan. Within this effort, KMT veterans built the now famous Central Cross-Island Highway through the Taroko Gorge in the 1950s. The two sides would continue to engage in sporadic military clashes with seldom publicized details well into the 1960s on the China coastal islands with an unknown number of night raids. During the Second Taiwan Strait Crisis in September 1958, Taiwan's landscape saw Nike-Hercules missile batteries added, with the formation of the 1st Missile Battalion Chinese Army that would not be deactivated until 1997. Newer generations of missile batteries have since replaced the Nike Hercules systems throughout the island.

During the 1960s and 1970s, the ROC maintained an authoritarian, single-party government while its economy became industrialized and technology-oriented. This rapid economic growth, known as the Taiwan Miracle, was the result of a fiscal regime independent from mainland China and backed up, among others, by the support of US funds and demand for Taiwanese products. [115] [116] In the 1970s, Taiwan was economically the second fastest growing state in Asia after Japan. [117] Taiwan, along with Hong Kong, South Korea and Singapore, became known as one of the Four Asian Tigers. Because of the Cold War, most Western nations and the United Nations regarded the ROC as the sole legitimate government of China until the 1970s. Later, especially after the termination of the Sino-American Mutual Defense Treaty, most nations switched diplomatic recognition to the PRC (see United Nations General Assembly Resolution 2758).

Until the 1970s the government was regarded by Western critics as undemocratic for upholding martial law, for severely repressing any political opposition, and for controlling media. The KMT did not allow the creation of new parties and those that existed did not seriously compete with the KMT. Thus, competitive democratic elections did not exist. [118] [119] [120] [121] [122] From the late 1970s to the 1990s, however, Taiwan went through reforms and social changes that transformed it from an authoritarian state to a democracy. In 1979, a pro-democracy protest known as the Kaohsiung Incident took place in Kaohsiung to celebrate Human Rights Day. Although the protest was rapidly crushed by the authorities, it is today considered as the main event that united Taiwan's opposition. [123]

Chiang Ching-kuo, Chiang Kai-shek's son and successor as the ROC president and chairman of the KMT, began reforms to the political system in the mid-1980s. In 1984, the younger Chiang selected Lee Teng-hui, a Taiwanese-born, US-educated technocrat, to be his vice-president. In 1986, the Democratic Progressive Party (DPP) was formed and inaugurated as the first opposition party in the ROC to counter the KMT. A year later, Chiang Ching-kuo lifted martial law on the main island of Taiwan (martial law was lifted on Penghu in 1979, Matsu island in 1992 and Kinmen island in 1993). With the advent of democratization, the issue of the political status of Taiwan gradually resurfaced as a controversial issue where, previously, the discussion of anything other than unification under the ROC was taboo.

Post-martial law era (1987–present)

After the death of Chiang Ching-kuo in January 1988, Lee Teng-hui succeeded him and became the first president born in Taiwan. Lee continued the democratic reforms to the government and decreased the concentration of government authority in the hands of mainland Chinese. Under Lee, Taiwan underwent a process of localization in which Taiwanese culture and history were promoted over a pan-China viewpoint in contrast to earlier KMT policies which had promoted a Chinese identity. Lee's reforms included printing banknotes from the Central Bank rather than the Provincial Bank of Taiwan, and streamlining the Taiwan Provincial Government with most of its functions transferred to the Executive Yuan. Under Lee, the original members of the Legislative Yuan and National Assembly (a former supreme legislative body defunct in 2005), [124] elected in 1947 to represent mainland Chinese constituencies and having held the seats without re-election for more than four decades, were forced to resign in 1991. The previously nominal representation in the Legislative Yuan was brought to an end, reflecting the reality that the ROC had no jurisdiction over mainland China, and vice versa. Restrictions on the use of Taiwanese Hokkien in the broadcast media and in schools were also lifted. [125]

Reforms continued in the 1990s. The Additional Articles of the Constitution of the Republic of China and the Act Governing Relations between the People of the Taiwan Area and the Mainland Area defined the status of the ROC, making Taiwan its de facto territory. Lee Teng-hui re-elected in 1996, in the first direct presidential election in the history of the ROC. [126] During the later years of Lee's administration, he was involved in corruption controversies relating to government release of land and weapons purchase, although no legal proceedings commenced. In 1997, "To meet the requisites of the nation prior to national unification", [127] the Additional Articles of the Constitution of the Republic of China was passed and then the former "constitution of five powers" turns to be more tripartite.

In 2000, Chen Shui-bian of the Democratic Progressive Party was elected as the first non-Kuomintang (KMT) President and was re-elected to serve his second and last term since 2004. Polarized politics emerged in Taiwan with the formation of the Pan-Blue Coalition, led by the KMT, and the Pan-Green Coalition, led by the DPP. The former prefers eventual Chinese unification, while the latter prefers Taiwanese independence. [128] In early 2006, President Chen Shui-bian remarked: "The National Unification Council will cease to function. No budget will be ear-marked for it and its personnel must return to their original posts. The National Unification Guidelines will cease to apply." [129]

On 30 September 2007, the ruling DPP approved a resolution asserting a separate identity from China and called for the enactment of a new constitution for a "normal country". It also called for general use of "Taiwan" as the country's name, without abolishing its formal name, the Republic of China. [130] The Chen administration also pushed for referendums on cross-Strait relations in 2004 and UN entry in 2008, both of which held on the same day as the presidential election. They both failed due to voter turnout below the required legal threshold of 50 per cent of all registered voters. [131] The Chen administration was dogged by public concerns over reduced economic growth, legislative gridlock due to a pan-blue, opposition-controlled Legislative Yuan and corruption involving the First Family as well as government officials. [132] [133]

Following revelations that lead to an investigation of Chen Shui-bian for corruption charges, the KMT was able to increase its majority in the Legislative Yuan in the January 2008 legislative elections, while its nominee Ma Ying-jeou went on to win the presidency in March of the same year, campaigning on a platform of increased economic growth and better ties with the PRC under a policy of "mutual non-denial". [131] Under Ma, Taiwan and China opened up direct flights and cargo shipments, with the latter country even making it possible for Taiwan to participate in the annual World Health Assembly. Threats from China faded from the public's mind, although U.S. analysts Richard Fisher and Richard Bush argued that military tensions with the PRC had not been reduced. [134]

In 2014, the a group of university students successfully occupied the Legislative Yuan and prevented the ratification of the Cross-Strait Service Trade Agreement in what became known as the Sunflower Student Movement. The movement gave rise to youth-based third parties such as the New Power Party, and is viewed to have contributed to Democratic Progressive Party (DPP) victories the 2016 presidential and legislative elections. [135] This marked the first time in Taiwanese history that the KMT lost its legislative majority.

In 2016, Tsai Ing-wen of the DPP became the president of Taiwan. In 2020, she called on the international community to defend the self-ruled island's democracy in the face of renewed threats from China and called on the latter to democratize and renounce the use of military force against Taiwan. Chinese leader Xi Jinping had earlier expressed that Taiwan was part of China, who reserves the right to use force but will strive to achieve peaceful "reunification". Xi also offered to discuss unification with parties or individuals under the precondition of "one China", but both Tsai and the KMT rejected Xi's proposal. [136] [137]

In January 2020, Tsai was re-elected and in the simultaneous legislative election President Tsai's Democratic Progressive Party (DPP) won a majority with 61 out of 113 seats. The Kuomintang (KMT) got 38 seats. [138]

In the 2020 Democracy Index published in 2021, Taiwan was one of "three countries [in Asia]" that "moved from the 'flawed democracy' category to be classified as 'full democracies'." It ranks 11th globally as of 2021. [update] [139] [140]

Taiwan is an island country in East Asia. The main island, known historically as Formosa, makes up 99 per cent of the area controlled by the ROC, measuring 35,808 square kilometres (13,826 sq mi) and lying some 180 kilometres (112 mi) across the Taiwan Strait from the southeastern coast of mainland China. The East China Sea lies to its north, the Philippine Sea to its east, the Luzon Strait directly to its south and the South China Sea to its southwest. Smaller islands include a number in the Taiwan Strait including the Penghu archipelago, the Kinmen and Matsu Islands near the Chinese coast, and some of the South China Sea Islands.

The main island is a tilted fault block, characterized by the contrast between the eastern two-thirds, consisting mostly of five rugged mountain ranges parallel to the east coast, and the flat to gently rolling plains of the western third, where the majority of Taiwan's population reside. There are several peaks over 3,500 m, the highest being Yu Shan at 3,952 m (12,966 ft), making Taiwan the world's fourth-highest island. The tectonic boundary that formed these ranges is still active, and the island experiences many earthquakes, a few of them highly destructive. There are also many active submarine volcanoes in the Taiwan Straits.

Taiwan contains four terrestrial ecoregions: Jian Nan subtropical evergreen forests, South China Sea Islands, South Taiwan monsoon rain forests, and Taiwan subtropical evergreen forests. [141] The eastern mountains are heavily forested and home to a diverse range of wildlife, while land use in the western and northern lowlands is intensive. The country had a 2019 Forest Landscape Integrity Index mean score of 6.38/10, ranking it 76th globally out of 172 countries. [142]


Taiwan lies on the Tropic of Cancer, and its general climate is marine tropical. [11] The northern and central regions are subtropical, whereas the south is tropical and the mountainous regions are temperate. [143] The average rainfall is 2,600 millimetres (100 inches) per year for the island proper the rainy season is concurrent with the onset of the summer East Asian Monsoon in May and June. [144] The entire island experiences hot, humid weather from June through September. Typhoons are most common in July, August and September. [144] During the winter (November to March), the northeast experiences steady rain, while the central and southern parts of the island are mostly sunny.

Due to climate change, the average temperature in Taiwan has risen 1.4 °C (2.5 °F) in the last 100 years, which is twice of the worldwide temperature rise. [145] The goal of the Taiwanese government is to cut carbon emissions by 20 per cent in 2030 compared to 2005 levels, and by 50 per cent in 2050 compared to 2005 levels. Carbon emissions increased by 0.92 per cent between 2005 and 2016. [146]


The island of Taiwan lies in a complex tectonic area between the Yangtze Plate to the west and north, the Okinawa Plate on the north-east, and the Philippine Mobile Belt on the east and south. The upper part of the crust on the island is primarily made up of a series of terranes, mostly old island arcs which have been forced together by the collision of the forerunners of the Eurasian Plate and the Philippine Sea Plate. These have been further uplifted as a result of the detachment of a portion of the Eurasian Plate as it was subducted beneath remnants of the Philippine Sea Plate, a process which left the crust under Taiwan more buoyant. [147]

The east and south of Taiwan are a complex system of belts formed by, and part of the zone of, active collision between the North Luzon Trough portion of the Luzon Volcanic Arc and South China, where accreted portions of the Luzon Arc and Luzon forearc form the eastern Coastal Range and parallel inland Longitudinal Valley of Taiwan, respectively. [148]

The major seismic faults in Taiwan correspond to the various suture zones between the various terranes. These have produced major quakes throughout the history of the island. On 21 September 1999, a 7.3 quake known as the "921 earthquake" killed more than 2,400 people. The seismic hazard map for Taiwan by the USGS shows 9/10 of the island at the highest rating (most hazardous). [149]

The political and legal statuses of Taiwan are contentious issues. The People's Republic of China (PRC) claims that the Republic of China government is illegitimate, referring to it as the "Taiwan Authority". [150] [151] The ROC has its own currency, widely accepted passport, postage stamps, internet TLD, armed forces and constitution with an independently elected president. It has not formally renounced its claim to the mainland, but ROC government publications have increasingly downplayed this historical claim. [152]

Internationally, there is controversy on whether the ROC still exists as a state or a defunct state per international law due to the lack of wide diplomatic recognition. Though it was a founding member of United Nations, the ROC now has neither official membership nor observer status in the organization.

Broadly speaking, domestic public opinion has preferred the status quo, with a moderate increase in pro-independence sentiment since democratization. In 2020, an annual poll run by National Chengchi University found that 52.3 per cent of respondents preferred postponing a decision or maintaining the status quo indefinitely, 35.1 per cent of respondents preferred eventual or immediate independence, and 5.8 per cent preferred eventual or immediate unification. [153]

Relations with the PRC

The political environment is complicated by the potential for military conflict should Taiwan declare de jure independence. It is the official PRC policy to force unification if peaceful unification is no longer possible, as stated in its anti-secession law, and for this reason there is a substantial military presence on the Fujian coast. [154] [155] [156] [157]

For almost 60 years, there were no direct transportation links, including direct flights, between Taiwan and the PRC. This was a problem for many Taiwanese businesses that had opened factories or branches in mainland China. The former DPP administration feared that such links would lead to tighter economic and political integration with mainland China, [ citation needed ] and in the 2006 Lunar New Year Speech, President Chen Shui-bian called for managed opening of links. Direct weekend charter flights between Taiwan and mainland China began in July 2008 under the KMT government, and the first direct daily charter flights took off in December 2008. [158]

On 29 April 2005, Kuomintang Chairman Lien Chan travelled to Beijing and met with Chinese Communist Party General Secretary Hu Jintao, [159] the first meeting between the leaders of the two parties since the end of the Chinese Civil War in 1949. On 11 February 2014, Mainland Affairs Council head Wang Yu-chi travelled to Nanjing and met with Taiwan Affairs Office head Zhang Zhijun, the first meeting between high-ranking officials from either side. [160] Zhang paid a reciprocal visit to Taiwan and met Wang on 25 June 2014, making Zhang the first minister-level PRC official to ever visit Taiwan. [161] On 7 November 2015, Ma Ying-jeou (in his capacity as Leader of Taiwan) and Xi Jinping (in his capacity as leader of Mainland China [162] ) travelled to Singapore and met up, [163] marking the highest-level exchange between the two sides since 1945. [164] In response to US support for Taiwan, the PRC defence ministry declared in 2019 that "If anyone dares to split Taiwan from China, the Chinese military has no choice but to fight at all costs". [165]

The PRC supports a version of the One-China policy, which states that Taiwan and mainland China are both part of China, and that the PRC is the only legitimate government of China. It uses this policy to prevent the international recognition of the ROC as an independent sovereign state, meaning that Taiwan participates in international forums under the name "Chinese Taipei". It is the official policy of the PRC to promote reunification but employ non-peaceful means in the event of Taiwan seccession or if peaceful unification is no longer possible. [166] [136] [167]

With the emergence of the Taiwanese independence movement, the name "Taiwan" has been used increasingly often on the island. [168] President Tsai Ing-wen has supported the 2019–20 Hong Kong protests and expressed her solidarity with the people of Hong Kong. Tsai pledged that as long as she is Taiwan's president, she will never accept "one country, two systems". [169]

Foreign relations

Before 1928, the foreign policy of Republican China was complicated by a lack of internal unity—competing centres of power all claimed legitimacy. This situation changed after the defeat of the Peiyang Government by the Kuomintang, which led to widespread diplomatic recognition of the Republic of China. [170]

After the KMT's retreat to Taiwan, most countries, notably the countries in the Western Bloc, continued to maintain relations with the ROC. Due to diplomatic pressure, recognition gradually eroded and many countries switched recognition to the PRC in the 1970s. UN Resolution 2758 (25 October 1971) recognized the People's Republic of China as China's sole representative in the United Nations. [171]

The PRC refuses to have diplomatic relations with any nation that has diplomatic relations with the ROC, and requires all nations with which it has diplomatic relations to make a statement recognizing its claims to Taiwan. [172] As a result, only 14 UN member states and the Holy See maintain official diplomatic relations with the Republic of China. [30] The ROC maintains unofficial relations with most countries via de facto embassies and consulates called Taipei Economic and Cultural Representative Offices (TECRO), with branch offices called "Taipei Economic and Cultural Offices" (TECO). Both TECRO and TECO are "unofficial commercial entities" of the ROC in charge of maintaining diplomatic relations, providing consular services (i.e. visa applications), and serving the national interests of the ROC in other countries. [173]

The United States remains one of the main allies of Taiwan and, through the Taiwan Relations Act passed in 1979, has continued selling arms and providing military training to the Armed Forces. [174] This situation continues to be an issue for the People's Republic of China, which considers US involvement disruptive to the stability of the region. In January 2010, the Obama administration announced its intention to sell $6.4 billion worth of military hardware to Taiwan. As a consequence, the PRC threatened the US with economic sanctions and warned that their co-operation on international and regional issues could suffer. [175]

The official position of the United States is that the PRC is expected to "use no force or threat[en] to use force against Taiwan" and the ROC is to "exercise prudence in managing all aspects of Cross-Strait relations." Both are to refrain from performing actions or espousing statements "that would unilaterally alter Taiwan's status". [176]

On 16 December 2015, the Obama administration announced a deal to sell $1.83 billion worth of arms to the armed forces of the ROC. [177] [178] The foreign ministry of the PRC had expressed its disapproval for the sales and issued the US a "stern warning", saying it would hurt PRC–US relations. [179]

Participation in international events and organizations

The ROC was a founding member of the United Nations, and held the seat of China on the Security Council and other UN bodies until 1971, when it was expelled by Resolution 2758 and replaced in all UN organs with the PRC. Each year since 1992, the ROC has petitioned the UN for entry, but its applications have not made it past committee stage. [180]

Due to its limited international recognition, the Republic of China has been a member of the Unrepresented Nations and Peoples Organization (UNPO) since the foundation of the organization in 1991, represented by a government-funded organization, the Taiwan Foundation for Democracy (TFD), under the name "Taiwan". [181] [182]

Also due to its One China policy, the PRC only participates in international organizations where the ROC does not participate as a sovereign country. Most member states, including the United States, do not wish to discuss the issue of the ROC's political status for fear of souring diplomatic ties with the PRC. [183] However, both the US and Japan publicly support the ROC's bid for membership in the World Health Organization (WHO) as an observer. [184] However, though the ROC sought to participate in the WHO since 1997, [185] [186] their efforts were blocked by the PRC until 2010, when they were invited as observers to attend the World Health Assembly, under the name "Chinese Taipei". [187] In 2017, Taiwan again began to be excluded from the WHO even in an observer capacity. [188] This exclusion caused a number of scandals during the COVID-19 outbreak. [189] [190]

Due to PRC pressure, the ROC has used the name "Chinese Taipei" in international events where the PRC is also a party (such as the Olympic Games) since the ROC, PRC, and International Olympic Committee came to an agreement in 1981. [191] [192] The ROC is typically barred from using its national anthem and national flag in international events due to PRC pressure ROC spectators attending events such as the Olympics are often barred from bringing ROC flags into venues. [193] Taiwan also participates in the Asia-Pacific Economic Cooperation forum (since 1991) and the World Trade Organization (since 2002) under the name "Chinese Taipei". The ROC was a founding member of the Asian Development Bank, but since China's ascension in 1986 has participated under the name "Taipei,China". The ROC is able to participate as "China" in organizations in which the PRC does not participate, such as the World Organization of the Scout Movement. A referendum question in 2018 asked if Taiwan should compete as "Taiwan" in the 2020 Summer Olympics, but failed after it was alleged that doing so could result in athletes being banned from competing entirely. [194]

Domestic opinion

Broadly speaking, domestic public opinion has preferred maintaining the status quo, though pro-independence sentiment has steadily risen since democratization, with a significant increase since 2018. In 2020, an annual poll run by National Chengchi University found that 28.5 per cent of respondents preferred postponing a decision, 25.5 per cent supported maintaining the status quo indefinitely, 35.1 per cent of respondents voted for eventual or immediate independence, and 5.8 per cent chose eventual or immediate unification. On the other hand, Taiwanese identity has seen a significant rise in the same poll since democratization: in 2020, 67 per cent of respondents identified as Taiwanese only, versus 27.5 per cent who identified as both Chinese and Taiwanese and 2.4 per cent who identified as Chinese. [153]

The KMT, the largest Pan-Blue party, supports the status quo for the indefinite future with a stated ultimate goal of unification. However, it does not support unification in the short term with the PRC as such a prospect would be unacceptable to most of its members and the public. [195] Ma Ying-jeou, chairman of the KMT and former president of the ROC, has set out democracy, economic development to a level near that of Taiwan, and equitable wealth distribution as the conditions that the PRC must fulfill for reunification to occur. [196]

The Democratic Progressive Party, the largest Pan-Green party, officially seeks independence, but in practice also supports the status quo because its members and the public would not accept the risk of provoking the PRC. [197] [198]

On 2 September 2008, Mexican newspaper El Sol de México asked President Ma of the Kuomintang about his views on the subject of "two Chinas" and if there was a solution for the sovereignty issues between the two. The president replied that the relations are neither between two Chinas nor two states. It is a special relationship. Further, he stated that the sovereignty issues between the two cannot be resolved at present, but he quoted the "1992 Consensus", currently [ when? ] accepted by both the Kuomintang and the Chinese Communist Party, as a temporary measure until a solution becomes available. [199]

On 27 September 2017, Taiwanese premier William Lai of the Democratic Progressive Party said that he was a "political worker who advocates Taiwan independence", but that as Taiwan was already an independent country called the Republic of China, it had no need to declare independence. [200]

The government of the Republic of China was founded on the 1947 Constitution of the ROC and its Three Principles of the People, which states that the ROC "shall be a democratic republic of the people, to be governed by the people and for the people". [201] It underwent significant revisions in the 1990s, known collectively as the Additional Articles. The government is divided into five branches (Yuan): the Executive Yuan (cabinet), the Legislative Yuan (Congress or Parliament), the Judicial Yuan, the Control Yuan (audit agency), and the Examination Yuan (civil service examination agency).

The head of state and commander-in-chief of the armed forces is the president, who is elected by popular vote for a maximum of 2 four-year terms on the same ticket as the vice-president. The president has authority over the Yuan. The president appoints the members of the Executive Yuan as their cabinet, including a premier, who is officially the President of the Executive Yuan members are responsible for policy and administration. [201]

The main legislative body is the unicameral Legislative Yuan with 113 seats. Seventy-three are elected by popular vote from single-member constituencies thirty-four are elected based on the proportion of nationwide votes received by participating political parties in a separate party list ballot and six are elected from two three-member aboriginal constituencies. Members serve four-year terms. Originally the unicameral National Assembly, as a standing constitutional convention and electoral college, held some parliamentary functions, but the National Assembly was abolished in 2005 with the power of constitutional amendments handed over to the Legislative Yuan and all eligible voters of the Republic via referendums. [201] [202]

The premier is selected by the president without the need for approval from the legislature, but the legislature can pass laws without regard for the president, as neither he nor the Premier wields veto power. [201] Thus, there is little incentive for the president and the legislature to negotiate on legislation if they are of opposing parties. After the election of the pan-Green's Chen Shui-bian as President in 2000, legislation repeatedly stalled because of deadlock with the Legislative Yuan, which was controlled by a pan-Blue majority. [203] Historically, the ROC has been dominated by strongman single party politics. This legacy has resulted in executive powers currently being concentrated in the office of the president rather than the premier, even though the constitution does not explicitly state the extent of the president's executive power. [204]

The Judicial Yuan is the highest judicial organ. It interprets the constitution and other laws and decrees, judges administrative suits, and disciplines public functionaries. The president and vice-president of the Judicial Yuan and additional thirteen justices form the Council of Grand Justices. [205] They are nominated and appointed by the president, with the consent of the Legislative Yuan. The highest court, the Supreme Court, consists of a number of civil and criminal divisions, each of which is formed by a presiding judge and four associate judges, all appointed for life. In 1993, a separate constitutional court was established to resolve constitutional disputes, regulate the activities of political parties and accelerate the democratization process. There is no trial by jury but the right to a fair public trial is protected by law and respected in practice many cases are presided over by multiple judges. [201]

The Control Yuan is a watchdog agency that monitors (controls) the actions of the executive. It can be considered a standing commission for administrative inquiry and can be compared to the Court of Auditors of the European Union or the Government Accountability Office of the United States. [201] It is also responsible for the National Human Rights Commission.

The Examination Yuan is in charge of validating the qualification of civil servants. It is based on the old imperial examination system used in dynastic China. It can be compared to the European Personnel Selection Office of the European Union or the Office of Personnel Management of the United States. [201] It was downsized in 2019, and there have been calls for its abolition. [206] [207]


The constitution was drafted in by the KMT while the ROC still governed the Chinese mainland, went into effect on 25 December 1947. [208] The ROC remained under martial law from 1948 until 1987 and much of the constitution was not in effect. [ citation needed ] Political reforms beginning in the late 1970s resulted in the end of martial law in 1987, and Taiwan transformed into a multiparty democracy in the early 1990s. The constitutional basis for this transition to democracy was gradually laid in the Additional Articles of the Constitution of the Republic of China. In addition, these articles localized the Constitution by suspending portions of the Constitution designed for governance of China and replacing them with articles adapted for the governance of and guaranteeing the political rights of residents of the Taiwan Area, as defined in the Act Governing Relations between the People of the Taiwan Area and the Mainland Area. [209]

National boundaries were not explicitly prescribed by the 1947 Constitution, and the Constitutional Court declined to define these boundaries in a 1993 interpretation, viewing the question as a political question to be resolved by the Executive and Legislative Yuans. [210] The 1947 Constitution included articles regarding representatives from former Qing dynasty territories including Tibet and Mongolia (though it did not specify whether this excluded Outer Mongolia). [211] [212] The ROC recognized Mongolia as an independent country in 1946 after signing the 1945 Sino-Soviet Treaty of Friendship and Alliance, but after retreating to Taiwan in 1949 it reneged on its agreement in order to preserve its claim over China. [213] The Additional Articles of the 1990s did not alter national boundaries, but suspended articles regarding Mongolian and Tibetan representatives. The ROC began to accept the Mongolian passport and removed clauses referring to Outer Mongolia from the Act Governing Relations between the People of the Taiwan Area and the Mainland Area in 2002. [214] In 2012 the Mainland Affairs Council issued a statement clarifying that Outer Mongolia was not part of the ROC's national territory in 1947, [215] and that the termination of the Sino-Soviet Treaty had not altered national territory according to the Constitution. [216] The Mongolian and Tibetan Affairs Commission in the Executive Yuan was abolished in 2017.

Major camps

Taiwan's political scene is divided into two major camps in terms of cross-Strait relations, i.e. how Taiwan should relate to China or the PRC. The Pan-Green Coalition (e.g. the Democratic Progressive Party) leans pro-independence, and the Pan-Blue Coalition (e.g. the Kuomintang) leans pro-unification. Moderates in both camps regard the Republic of China as a sovereign independent state, but the Pan-Green Coalition regard the ROC as synonymous with Taiwan, while moderates in the Pan-Blue Coalition view it as synonymous with China. These positions formed against the backdrop of the PRC's Anti-Secession Law, which threatens invasion in the event of formal independence.

The Pan-Green Coalition is composed of the pro-independence Democratic Progressive Party and Taiwan Statebuilding Party (TSP). They oppose the idea that Taiwan is part of China, and seeks wide diplomatic recognition and an eventual declaration of formal Taiwan independence. [217] [ failed verification ] In September 2007, the then ruling Democratic Progressive Party approved a resolution asserting separate identity from China and called for the enactment of a new constitution for a "normal country". It called also for general use of "Taiwan" as the country's name, without abolishing its formal name, the "Republic of China". [218] Some members of the coalition, such as former President Chen Shui-bian, argue that it is unnecessary to proclaim independence because "Taiwan is already an independent, sovereign country" and the Republic of China is the same as Taiwan. [219] Despite being a member of KMT prior to and during his presidency, Lee Teng-hui also held a similar view and was a supporter of the Taiwanization movement. [220]

The Pan-Blue Coalition, composed of the pro-unification Kuomintang, People First Party (PFP) and New Party generally support the spirit of the 1992 Consensus, where the KMT declared that there is one China, but that the ROC and PRC have different interpretations of what "China" means. They favour eventual re-unification of China. [221] The more mainstream Pan-Blue position is to lift investment restrictions and pursue negotiations with the PRC to immediately open direct transportation links. Regarding independence, the mainstream Pan-Blue position is to maintain the status quo, while refusing immediate reunification. [195] President Ma Ying-jeou stated that there will be no unification nor declaration of independence during his presidency. [222] [223] As of 2009 [update] , Pan-Blue members usually seek to improve relationships with mainland China, with a current focus on improving economic ties. [224]

National identity

Roughly 84 per cent of Taiwan's population are descendants of Han Chinese immigrants from Qing China between 1683 and 1895. Another significant fraction descends from Han Chinese who immigrated from mainland China in the late 1940s and early 1950s. The shared cultural origin combined with several hundred years of geographical separation, some hundred years of political separation and foreign influences, as well as hostility between the rival ROC and PRC have resulted in national identity being a contentious issue with political overtones.

Since democratic reforms and the lifting of martial law, a distinct Taiwanese identity (as opposed to Taiwanese identity as a subset of a Chinese identity) is often at the heart of political debates. Its acceptance makes the island distinct from mainland China, and therefore may be seen as a step towards forming a consensus for de jure Taiwan independence. [226] The Pan-Green camp supports a predominantly Taiwanese identity (although "Chinese" may be viewed as cultural heritage), while the Pan-Blue camp supports a predominantly Chinese identity (with "Taiwanese" as a regional/diasporic Chinese identity). [221] The KMT has downplayed this stance in the recent years and now supports a Taiwanese identity as part of a Chinese identity. [227] [228]

In an annual poll conducted by National Chengchi University, Taiwanese identification has increased substantially since democratization in the early 1990s, while Chinese identification has fallen to a low level and identification as both has also seen a reduction. In 1992, 17.6 per cent of respondents identified as Taiwanese only, 25.5 per cent as Chinese only, 46.4 per cent as both, and 10.5 per cent declining to state. In 2020, 64.3 per cent identified as Taiwanese, 2.6 per cent as Chinese, 29.9 per cent as both, and 3.2 per cent declining. [225] A survey conducted in Taiwan in July 2009, showed that 82.8 per cent of respondents consider the ROC and the PRC as two separate countries with each developing on its own. [229]

Administrative divisions

Taiwan is, in practice, divided into 22 subnational divisions, each with a self-governing body led by an elected leader and a legislative body with elected members. Duties of local governments include social services, education, urban planning, public construction, water management, environmental protection, transport, public safety, and more.

There are three types of subnational divisions: special municipalities, counties, and cities. Special municipalities and cities are further divided into districts for local administration. Counties are further divided into townships and county-administered cities which have elected mayors and councils, and share duties with the county. Some divisions are indigenous divisions which have different degrees of autonomy to standard ones. In addition, districts, cities and townships are further divided into villages and neighbourhoods.

  1. ^ abcdef Has an elected executive and an elected legislative council.
  2. ^ abc Has an appointed district administrator for managing local affairs and carrying out tasks commissioned by superior agency.
  3. ^ Has an elected village administrator for managing local affairs and carrying out tasks commissioned by superior agency.

The Republic of China Army takes its roots in the National Revolutionary Army, which was established by Sun Yat-sen in 1925 in Guangdong with a goal of reunifying China under the Kuomintang. When the People's Liberation Army won the Chinese Civil War, much of the National Revolutionary Army retreated to Taiwan along with the government. It was later reformed into the Republic of China Army. Units which surrendered and remained in mainland China were either disbanded or incorporated into the People's Liberation Army.

The ROC and the United States signed the Sino-American Mutual Defense Treaty in 1954, and established the United States Taiwan Defense Command. About 30,000 US troops were stationed in Taiwan, until the United States established diplomatic relations with the PRC in 1979. [230]

Today, Taiwan maintains a large and technologically advanced military, mainly as a defence to the constant threat of invasion by the People's Liberation Army using the Anti-Secession Law of the People's Republic of China as a pretext. This law authorizes the use of military force when certain conditions are met, such as a danger to mainlanders. [155]

From 1949 to the 1970s, the primary mission of the Taiwanese military was to "retake mainland China" through Project National Glory. As this mission has transitioned away from attack because the relative strength of the PRC has massively increased, the ROC military has begun to shift emphasis from the traditionally dominant Army to the air force and navy.

Control of the armed forces has also passed into the hands of the civilian government. [231] [232] As the ROC military shares historical roots with the KMT, the older generation of high-ranking officers tends to have Pan-Blue sympathies. However, many have retired and there are many more non-mainlanders enlisting in the armed forces in the younger generations, so the political leanings of the military have moved closer to the public norm in Taiwan. [233]

The ROC began a force reduction plan, Jingshi An (translated to streamlining program), to scale down its military from a level of 450,000 in 1997 to 380,000 in 2001. [234] As of 2009 [update] , the armed forces of the ROC number approximately 300,000, [235] with nominal reserves totalling 3.6 million as of 2015 [update] . [236] Conscription remains universal for qualified males reaching age eighteen, but as a part of the reduction effort many are given the opportunity to fulfill their draft requirement through alternative service and are redirected to government agencies or arms related industries. [237] Current plans call for a transition to a predominantly professional army over the next decade. [238] [239] Conscription periods are planned to decrease from 14 months to 12. [240] In the last months of the Bush administration, Taipei took the decision to reverse the trend of declining military spending, at a time when most Asian countries kept on reducing their military expenditures. It also decided to strengthen both defensive and offensive capabilities. Taipei still keeps a large military apparatus relative to the island's population: military expenditures for 2008 were NTD 334 billion (approximately US $10.5 billion), which accounted for 2.94 per cent of GDP.

The armed forces' primary concern at this time, according to the National Defense Report, is the possibility of an invasion by the PRC, consisting of a naval blockade, airborne assault or missile bombardment. [231] Four upgraded Kidd-class destroyers were purchased from the United States, and commissioned into the Republic of China Navy in 2005–2006, significantly upgrading Taiwan's protection from aerial attack and submarine hunting abilities. [241] The Ministry of National Defense planned to purchase diesel-powered submarines and Patriot anti-missile batteries from the United States, but its budget has been stalled repeatedly by the opposition-Pan-Blue Coalition controlled legislature. The military package was stalled from 2001 to 2007 where it was finally passed through the legislature and the US responded on 3 October 2008, with a $6.5 billion arms package including PAC III Anti-Air systems, AH-64D Apache Attack helicopters and other arms and parts. [242] A significant amount of military hardware has been bought from the United States, and, as of 2009 [update] , continues to be legally guaranteed by the Taiwan Relations Act. [174] In the past, France and the Netherlands have also sold military weapons and hardware to the ROC, but they almost entirely stopped in the 1990s under pressure of the PRC. [243] [244]

The first line of protection against invasion by the PRC is the ROC's own armed forces. Current ROC military doctrine is to hold out against an invasion or blockade until the US military responds. [245] There is, however, no guarantee in the Taiwan Relations Act or any other treaty that the United States will defend Taiwan, even in the event of invasion. [246] The joint declaration on security between the US and Japan signed in 1996 may imply that Japan would be involved in any response. However, Japan has refused to stipulate whether the "area surrounding Japan" mentioned in the pact includes Taiwan, and the precise purpose of the pact is unclear. [247] The Australia, New Zealand, United States Security Treaty (ANZUS Treaty) may mean that other US allies, such as Australia, could theoretically be involved. [248] While this would risk damaging economic ties with China, [249] a conflict over Taiwan could lead to an economic blockade of China by a greater coalition. [250] [251] [252] [253] [254]

The quick industrialization and rapid growth of Taiwan during the latter half of the 20th century has been called the "Taiwan Miracle". Taiwan is one of the "Four Asian Tigers" alongside Hong Kong, South Korea and Singapore.

Japanese rule prior to and during World War II brought changes in the public and private sectors, most notably in the area of public works, which enabled rapid communications and facilitated transport throughout much of the island. The Japanese also improved public education and made it compulsory for all residents of Taiwan. By 1945, hyperinflation was in progress in mainland China and Taiwan as a result of the war with Japan. To isolate Taiwan from it, the Nationalist government created a new currency area for the island, and began a price stabilization programme. These efforts significantly slowed inflation.

When the KMT government fled to Taiwan it brought millions of taels (where 1 tael = 37.5 g or

1.2 ozt) of gold and the foreign currency reserve of mainland China, which, according to the KMT, stabilized prices and reduced hyperinflation. [255] Perhaps more importantly, as part of its retreat to Taiwan, the KMT brought the intellectual and business elites from mainland China. [256] The KMT government instituted many laws and land reforms that it had never effectively enacted on mainland China. The government also implemented a policy of import-substitution, attempting to produce imported goods domestically. [257]

In 1950, with the outbreak of the Korean War, the United States began an aid programme which resulted in fully stabilized prices by 1952. [258] Economic development was encouraged by American economic aid and programmes such as the Joint Commission on Rural Reconstruction, which turned the agricultural sector into the basis for later growth. Under the combined stimulus of the land reform and the agricultural development programmes, agricultural production increased at an average annual rate of 4 per cent from 1952 to 1959, which was greater than the population growth, 3.6 per cent. [259]

In 1962, Taiwan had a (nominal) per-capita gross national product (GNP) of $170, placing its economy on a par with those of the Democratic Republic of the Congo. On a purchasing power parity (PPP) basis, its GDP per capita in the early 1960s was $1,353 (in 1990 prices). By 2011 per-capita GNP, adjusted for purchasing power parity (PPP), had risen to $37,000, contributing to a Human Development Index (HDI) equivalent to that of other developed countries.

In 1974, Chiang Ching-kuo implemented the Ten Major Construction Projects, the beginning foundations that helped Taiwan transform into its current export driven economy. Since the 1990s, a number of Taiwan-based technology firms have expanded their reach around the world. Well-known international technology companies headquartered in Taiwan include personal computer manufacturers Acer Inc. and Asus, mobile phone maker HTC, as well as electronics manufacturing giant Foxconn, which makes products for Apple, Amazon, and Microsoft. Computex Taipei is a major computer expo, held since 1981.

Today Taiwan has a dynamic, capitalist, export-driven economy with gradually decreasing state involvement in investment and foreign trade. In keeping with this trend, some large government-owned banks and industrial firms are being privatized. [260] Real growth in GDP has averaged about 8 per cent during the past three decades. Exports have provided the primary impetus for industrialization. The trade surplus is substantial, and foreign reserves are the world's fifth largest. [261] The currency of Taiwan is the New Taiwan dollar.

Since the beginning of the 1990s, the economic ties between Taiwan and the People's Republic of China have been very prolific. As of 2008 [update] , more than US$150 billion [262] have been invested in the PRC by Taiwanese companies, and about 10 per cent of the Taiwanese labour force works in the PRC, often to run their own businesses. [263] Although the economy of Taiwan benefits from this situation, some have expressed the view that the island has become increasingly dependent on the mainland Chinese economy. A 2008 white paper by the Department of Industrial Technology states that "Taiwan should seek to maintain stable relation with China while continuing to protect national security, and avoiding excessive 'Sinicization' of Taiwanese economy." [264] Others argue that close economic ties between Taiwan and mainland China would make any military intervention by the PLA against Taiwan very costly, and therefore less probable. [265]

Taiwan's total trade in 2010 reached an all-time high of US$526.04 billion, according to Taiwan's Ministry of Finance. Both exports and imports for the year reached record levels, totalling US$274.64 billion and US$251.4 billion, respectively. [266]

In 2001, agriculture constituted only 2 per cent of GDP, down from 35 per cent in 1952. [267] Traditional labour-intensive industries are steadily being moved offshore and with more capital and technology-intensive industries replacing them. High-technology industrial parks have sprung up in every region in Taiwan. The ROC has become a major foreign investor in the PRC, Thailand, Indonesia, the Philippines, Malaysia, and Vietnam. It is estimated that some 50,000 Taiwanese businesses and 1,000,000 businesspeople and their dependents are established in the PRC. [268]

Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbours in the 1997 Asian financial crisis. Unlike its neighbours, South Korea and Japan, the Taiwanese economy is dominated by small and medium-sized businesses, rather than the large business groups. The global economic downturn, however, combined with poor policy co-ordination by the new administration and increasing bad debts in the banking system, pushed Taiwan into recession in 2001, the first whole year of negative growth since 1947. Due to the relocation of many manufacturing and labour-intensive industries to the PRC, unemployment also reached a level not seen since the 1970s oil crisis. This became a major issue in the 2004 presidential election. Growth averaged more than 4 per cent in the 2002–2006 period and the unemployment rate fell below 4 per cent. [269]

The ROC often joins international organizations (especially ones that also include the People's Republic of China) under a politically neutral name. The ROC has been a member of governmental trade organizations such as the World Trade Organization under the name Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) since 2002. [270]

The Ministry of Transportation and Communications of the Republic of China is the cabinet-level governing body of the transport network in Taiwan.

Civilian transport in Taiwan is characterised by extensive use of scooters. In March 2019, 13.86 million were registered, twice that of cars. [271]

Both highways and railways are concentrated near the coasts, where the majority of the population resides, with 1,619 km (1,006 mi) of motorway.

Railways in Taiwan are primarily used for passenger services, with Taiwan Railway Administration (TRA) operating a circular route and Taiwan High Speed Rail (THSR) running high speed services on the west coast. Urban transit systems include Taipei Metro, Kaohsiung Rapid Transit, Taoyuan Metro and New Taipei Metro.

Major airports include Taiwan Taoyuan, Kaohsiung, Taipei Songshan and Taichung. There are currently seven airlines in Taiwan, the largest ones being China Airlines and EVA Air.

There are four international seaports: Keelung, Kaohsiung, Taichung, and Hualien.

Taiwan's higher education system was established by Japan during the colonial period. However, after the Republic of China took over in 1945, the system was promptly replaced by the same system as in mainland China which mixed features of the Chinese and American educational systems. [272]

Taiwan is well known for adhering to the Confucian paradigm of valuing education as a means to improve one's socioeconomic position in society. [273] [274] Heavy investment and a cultural valuing of education has catapulted the resource-poor nation consistently to the top of global education rankings. Taiwan is one of the top-performing countries in reading literacy, mathematics and sciences. In 2015, Taiwanese students achieved one of the world's best results in mathematics, science and literacy, as tested by the Programme for International Student Assessment (PISA), with the average student scoring 519, compared with the OECD average of 493, placing it seventh in the world. [275] [276] [277]

The Taiwanese education system has been praised for various reasons, including its comparatively high test results and its major role in promoting Taiwan's economic development while creating one of the world's most highly educated workforces. [278] [279] Taiwan has also been praised for its high university entrance rate where the university acceptance rate has increased from around 20 per cent before the 1980s to 49 per cent in 1996 and over 95 per cent since 2008, among the highest in Asia. [280] [281] [282] The nation's high university entrance rate has created a highly skilled workforce making Taiwan one of the most highly educated countries in the world with 68.5 per cent of Taiwanese high school students going on to attend university. [283] Taiwan has a high percentage of its citizens holding a tertiary education degree where 45 per cent of Taiwanese aged 25–64 hold a bachelor's degree or higher compared with the average of 33 per cent among member countries of the Organisation for Economic Cooperation and Development (OECD). [282] [284]

On the other hand, the system has been criticised for placing excessive pressure on students while eschewing creativity and producing an excess supply of over-educated university graduates and a high graduate unemployment rate. With a large number of university graduates seeking a limited number of prestigious white collar jobs in an economic environment that is increasingly losing its competitive edge, this has led many graduates to be employed in lower-end jobs with salaries far beneath their expectations. [285] [274] Taiwan's universities have also been under criticism for not being able to fully meet the requirements and demands of Taiwan's 21st-century fast-moving labour market, citing a skills mismatch among a large number of self-assessed, overeducated university graduates who don't fit the demands of the modern Taiwanese labour market. [286] The Taiwanese government has also received criticism for undermining the economy as it has been unable to produce enough jobs to meet the demands of numerous underemployed university graduates. [280] [287]

As the Taiwanese economy is largely science and technology based, the labour market demands people who have achieved some form of higher education, particularly related to science and engineering to gain a competitive edge when searching for employment. Although current Taiwanese law mandates only nine years of schooling, 95 per cent of junior high graduates go on to attend a senior vocational high school, university, junior college, trade school, or other higher education institution. [283] [288]

Since Made in China 2025 was announced in 2015, aggressive campaigns to recruit Taiwanese chip industry talent to support its mandates resulted in the loss of more than 3,000 chip engineers to mainland China, [289] and raised concerns of a "brain drain" in Taiwan. [290] [289] [291]

Many Taiwanese students attend cram schools, or buxiban, to improve skills and knowledge on problem solving against exams of subjects like mathematics, nature science, history and many others. Courses are available for most popular subjects and include lectures, reviews, private tutorial sessions, and recitations. [292] [293]

As of 2018 [update] , the literacy rate in Taiwan is 98.87 per cent. [294]

Taiwan has a population of about 23.4 million, [295] most of whom are on the island of Taiwan. The remainder live on the outlying islands of Penghu (101,758), Kinmen (127,723), and Matsu (12,506). [296]

Largest cities and counties

The figures below are the March 2019 estimates for the twenty most populous administrative divisions a different ranking exists when considering the total metropolitan area populations (in such rankings the Taipei-Keelung metro area is by far the largest agglomeration). The figures reflect the number of household registrations in each city, which may differ from the number of actual residents.

Ethnic groups

The ROC government reports that over 95 per cent of the population is Han Taiwanese, of which the majority includes descendants of early Han Chinese immigrants who arrived in Taiwan in large numbers starting in the 18th century. Alternatively, the ethnic groups of Taiwan may be roughly divided among the Hoklo (70 per cent), the Hakka (14 per cent), the Waishengren (14 per cent), and indigenous peoples (2 per cent). [11]

The Hoklo people are the largest ethnic group (70 per cent of the total population), whose Han ancestors migrated from the coastal southern Fujian region across the Taiwan Strait starting in the 17th century. The Hakka comprise about 15 per cent of the total population, and descend from Han migrants to Guangdong, its surrounding areas and Taiwan. Additional people of Han origin include and descend from the 2 million Nationalists who fled to Taiwan following the communist victory on the mainland in 1949. [11]

The indigenous Taiwanese aborigines number about 533,600 and are divided into 16 groups. [297] The Ami, Atayal, Bunun, Kanakanavu, Kavalan, Paiwan, Puyuma, Rukai, Saisiyat, Saaroa, Sakizaya, Sediq, Thao, Truku and Tsou live mostly in the eastern half of the island, while the Yami inhabit Orchid Island. [298] [299]


Mandarin is the primary language used in business and education, and is spoken by the vast majority of the population. Traditional Chinese is used as the writing system. [300] The Republic of China does not have any legally designated official language , but Mandarin plays the role of the defacto official language. [301]

Since the May Fourth Movement, written vernacular Chinese had replaced Classical Chinese and emerged as the mainstream written Chinese in the Republic of China. But Classical Chinese continued to be widely used in the Government of the Republic of China. Most government documents in the Republic of China were written in Classical Chinese until reforms in the 1970s, in a reform movement spearheaded by President Yen Chia-kan to shift the written style to a more integrated vernacular Chinese and Classical Chinese style (文白合一行文). [302] [303] After January 1st 2005, the Executive Yuan also changed the long-standing official document writing habit from vertical writing style to horizontal writing style.

Today, pure Classical Chinese is occasionally used in formal or ceremonial occasions, religious or cultural rites in Taiwan. The National Anthem of the Republic of China ( 中華民國國歌 ), for example, is in Classical Chinese. Taoist texts are still preserved in Classical Chinese from the time they were composed. Buddhist texts, or sutras, are still preserved in Classical Chinese from the time they were composed or translated from Sanskrit sources. In practice there is a socially accepted continuum between vernacular Chinese and Classical Chinese. Most official government documents, legal, courts rulings and judiciary documents use a combined vernacular Chinese and Classical Chinese style (文白合一行文). [304] For example, most official notices and formal letters are written with a number of stock Classical Chinese expressions (e.g. salutation, closing). Personal letters, on the other hand, are mostly written in vernacular, but with some Classical phrases, depending on the subject matter, the writer's level of education, etc.

70 per cent of the population belong to the Hoklo ethnic group and speak Hokkien natively in addition to Mandarin. The Hakka group, comprising some 14–18 per cent of the population, speak Hakka. Although Mandarin is the language of instruction in schools and dominates television and radio, non-Mandarin Chinese varieties have undergone a revival in public life in Taiwan, particularly since restrictions on their use were lifted in the 1990s. [300]

Formosan languages are spoken primarily by the indigenous peoples of Taiwan. They do not belong to the Chinese or Sino-Tibetan language family, but to the Austronesian language family, and are written in Latin alphabet. [305] Their use among aboriginal minority groups has been in decline as usage of Mandarin has risen. [300] Of the 14 extant languages, five are considered moribund. [306]

Taiwan is officially multilingual. A national language in Taiwan is legally defined as "a natural language used by an original people group of Taiwan and the Taiwan Sign Language". [8] As of 2019, policies on national languages are in early stages of implementation, with Hakka and indigenous languages designated as such.


Estimated religious composition in 2020 [307]

The Constitution of the Republic of China protects people's freedom of religion and the practices of belief. [308] Freedom of religion in Taiwan is strong and ranks high at 9.2 in 2018 according to world bank. [309]

In 2005, the census reported that the five largest religions were: Buddhism, Taoism, Yiguandao, Protestantism, and Roman Catholicism. [310] According to Pew Research, the religious composition of Taiwan in 2020 [311] is estimated to be 43.8 per cent Folk religions, 21.2 per cent Buddhist, 15.5 Others (including Taoism), 13.7 per cent Unaffiliated, 5.8 per cent Christian and 1% Muslim. Taiwanese aborigines comprise a notable subgroup among professing Christians: ". over 64 per cent identify as Christian. Church buildings are the most obvious markers of Aboriginal villages, distinguishing them from Taiwanese or Hakka villages". [312] There has been a small Muslim community of Hui people in Taiwan since the 17th century. [313]

Confucianism is a philosophy that deals with secular moral ethics, and serves as the foundation of both Chinese and Taiwanese culture. The majority of Taiwanese people usually combine the secular moral teachings of Confucianism with whatever religions they are affiliated with.

As of 2019 [update] , there were 15,175 religious buildings in Taiwan, approximately one place of worship per 1,572 residents. 12,279 temples were dedicated to Taoism and Buddhism. There were 9,684 Taoist Temples and 2,317 Buddhist Temples. [314] In Taiwan’s 36,000 square kilometers of land, there are more than 33,000 places for religious (believers) to worship and gather. On average, there is one temple or church (church) or religious building for every square kilometer. The high density of place of worship is rare in the world, and it is the area with the highest density of religious buildings in the Chinese-speaking world. Taiwan is also the most religious region in the Chinese-speaking world. Even for Christianity, there are 2,845 Churches. [315]

A significant percentage of the population of Taiwan is non-religious. Taiwan's strong human rights protections, lack of state-sanctioned discrimination, and generally high regard for freedom of religion or belief earned it a joint #1 ranking in the 2018 Freedom of Thought Report, alongside the Netherlands and Belgium. [316]

Taiwan is clearly an outlier in the top 3, all-clear countries. It is non-European, and demographically much more religious. But in its relatively open, democratic and tolerant society we have recorded no evidence of laws or social discrimination against members of the non-religious minority. [317]

On 24 May 2017, the Constitutional Court ruled that then-current marriage laws had been violating the Constitution by denying Taiwanese same-sex couples the right to marry. The Court ruled that if the Legislative Yuan did not pass adequate amendments to Taiwanese marriage laws within two years, same-sex marriages would automatically become lawful in Taiwan. [318] On 17 May 2019, Taiwan's parliament approved a bill legalising same-sex marriage, making it the first in Asia to do so. [319] [320] [321]

The current healthcare system in Taiwan, known as National Health Insurance (NHI, Chinese: 全民健康保險 ), was instituted in 1995. NHI is a single-payer compulsory social insurance plan that centralizes the disbursement of healthcare funds. The system promises equal access to healthcare for all citizens, and the population coverage had reached 99 per cent by the end of 2004. [322] NHI is mainly financed through premiums, which are based on the payroll tax, and is supplemented with out-of-pocket co-payments and direct government funding. Preventative health service, low-income families, veterans, children under three years old, and catastrophic diseases are exempt from co-payment. Low income households maintain 100 per cent premium coverage by the NHI and co-pays are reduced for disabled or certain elderly people. [ citation needed ]

Early in the program, the payment system was predominantly fee-for-service. Most health providers operate in the private sector and form a competitive market on the health delivery side. However, many healthcare providers took advantage of the system by offering unnecessary services to a larger number of patients and then billing the government. In the face of increasing loss and the need for cost containment, NHI changed the payment system from fee-for-service to a global budget, a kind of prospective payment system, in 2002.

The implementation of universal healthcare created fewer health disparities for lower-income citizens in Taiwan. According to a recently published survey, out of 3,360 patients surveyed at a randomly chosen hospital, 75.1 per cent of the patients said they are "very satisfied" with the hospital service 20.5 per cent said they are "okay" with the service. Only 4.4 per cent of the patients said they are either "not satisfied" or "very not satisfied" with the service or care provided. [323]

The Taiwanese disease control authority is the Taiwan Centers for Disease Control (CDC), and during the SARS outbreak in March 2003 there were 347 confirmed cases. During the outbreak the CDC and local governments set up monitoring stations throughout public transportation, recreational sites and other public areas. With full containment in July 2003, there has not been a case of SARS since. [324] Owing to the lessons from SARS, a National Health Command Center was established in 2004, which includes the Central Epidemic Command Center (CECC). The CECC has since played a central role in Taiwan's approach to epidemics, including the COVID-19 pandemic.

In 2019, the infant mortality rate was 4.2 deaths per 1,000 live births, with 20 physicians and 71 hospital beds per 10,000 people. [325] [326] Life expectancy at birth in 2020 is 77.5 years and 83.9 years for males and females, respectively. [327]

The cultures of Taiwan are a hybrid blend from various sources, incorporating elements of traditional Chinese culture, attributable to the historical and ancestral origin of the majority of its current residents, Japanese cultural influence, traditional Confucianist beliefs, and increasingly Western values.

During the martial law period in which the Republic of China was officially anti-communist, the Kuomintang promoted an official traditional Chinese culture over Taiwan in order to emphasize that the Republic of China represents the true orthodoxy to Chinese Culture (and therefore the "real and legitimate China") as opposed to Communist China. [328] The government launched what's known as the Chinese Cultural Renaissance movement in Taiwan in opposition to the cultural destructions caused by the Chinese Communist Party during the Cultural Revolution. The General Assembly of Chinese Culture (中華文化總會) was established as a movement promotion council to help promote Chinese Culture in Taiwan and overseas. It was Kuomintang's first structured plan for cultural development on Taiwan. Chiang himself was the head of the General Assembly of Chinese Culture. Subsequent President of the Republic of China also became the head of this General Assembly. The Chinese Cultural Renaissance movement in Taiwan coupled with Chinese Cultural education in Taiwan had helped to elevate the cultural refinement, mannerism and politeness of many Taiwanese, in contrast to the cultural destruction (uncultured behaviour) of many mainland Chinese due to the Cultural Revolution. [329] This has also led to Chinese Culture (esp. its soft culture) being better preserved in Taiwan than in mainland China, esp. when it comes to traditional religious and cultural customs, not to mention the continued use of Traditional Chinese. The influence of Confucianism can be found in the behaviour of Taiwanese people, known for their friendliness and politeness. [330]

Reflecting the continuing controversy surrounding the political status of Taiwan, politics continues to play a role in the conception and development of a Taiwanese cultural identity, especially in its relationship to Chinese culture. [331] In recent years, the concept of Taiwanese multiculturalism has been proposed as a relatively apolitical alternative view, which has allowed for the inclusion of mainlanders and other minority groups into the continuing re-definition of Taiwanese culture as collectively held systems of meaning and customary patterns of thought and behaviour shared by the people of Taiwan. [332] Identity politics, along with the over one hundred years of political separation from mainland China, has led to distinct traditions in many areas, including cuisine and music.

Acclaimed classical musicians include violinist Cho-Liang Lin, pianist Ching-Yun Hu, and the Lincoln Center Chamber Music Society artist director Wu Han. Other musicians include Jay Chou and groups such as Mayday and heavy metal band Chthonic, led by singer Freddy Lim, which has been referred to as the "Black Sabbath of Asia". [333] [334]

Taiwanese television shows are popular in Singapore, Malaysia, and other Asian countries. Taiwanese films have won various international awards at film festivals around the world. Ang Lee, a Taiwanese director, has directed critically acclaimed films such as: Crouching Tiger, Hidden Dragon Eat Drink Man Woman Sense and Sensibility Brokeback Mountain Life of Pi and Lust, Caution. Other famous Taiwanese directors include Tsai Ming-liang, Edward Yang, and Hou Hsiao-hsien. Taiwan has hosted the Golden Horse Film Festival and Awards since 1962.

Taiwan hosts the National Palace Museum, which houses more than 650,000 pieces of Chinese bronze, jade, calligraphy, painting, and porcelain and is considered one of the greatest collections of Chinese art and objects in the world. [335] The KMT moved this collection from the Forbidden City in Beijing in 1933 and part of the collection was eventually transported to Taiwan during the Chinese Civil War. The collection, estimated to be one-tenth of China's cultural treasures, is so extensive that only 1 per cent is on display at any time. The PRC had said that the collection was stolen and has called for its return, but the ROC has long defended its control of the collection as a necessary act to protect the pieces from destruction, especially during the Cultural Revolution. Relations regarding this treasure have since warmed, with the National Palace Museum loaning artwork to various museums in the PRC in 2010. [336]

Popular culture

Karaoke, drawn from contemporary Japanese culture, is extremely popular in Taiwan, where it is known as KTV. KTV businesses operate in a hotel-like style, renting out small rooms and ballrooms according to the number of guests in a group. Many KTV establishments partner with restaurants and buffets to form all-encompassing and elaborate evening affairs for families, friends, or businessmen. Tour buses that travel around Taiwan have several TVs, primarily for singing Karaoke. The entertainment counterpart of a KTV is MTV Taiwan, particularly in urban areas. There, DVD movies can be played in a private theatre room. However, MTV, more so than KTV, has a growing reputation for being a place that young couples will go to be alone and intimate. [337] [ citation needed ]

Taiwan has a high density of 24-hour convenience stores, which, in addition to the usual services, provide services on behalf of financial institutions or government agencies, such as collection of parking fees, utility bills, traffic violation fines, and credit card payments. [338] They also provide a service for mailing packages. Chains such as FamilyMart provide clothing laundry services, [339] and it is possible to purchase or receive tickets for TRA and THSR tickets at convenience stores, specifically 7-Eleven, FamilyMart, Hi-Life and OK. [340] [341]

Taiwanese culture has also influenced other cultures. Bubble tea has now become a global phenomenon with its popularity spreading across the globe. [342]


Baseball is Taiwan's national sport and is a popular spectator sport. There have been sixteen Taiwanese Major League Baseball players in the United States as of the 2020 MLB Season, including former pitchers Chien-Ming Wang and Wei-Yin Chen. The Chinese Professional Baseball League in Taiwan was established in 1989, [343] and eventually absorbed the competing Taiwan Major League in 2003. As of 2019 [update] , the CPBL has four teams with average attendance over 5,826 per game. [344]

Besides baseball, basketball is Taiwan's other major sport. [345] The P. League+ was established in September 2020 as Taiwan's professional basketball league, consisted of 4 teams. [346] A semi-professional Super Basketball League (SBL) has also been in play since 2003. [347] Two other teams from Taiwan compete in the ASEAN Basketball League, a professional men's basketball league in East and Southeast Asia.

Taiwan participates in international sporting organizations and events under the name of "Chinese Taipei" due to its political status. In 2009, Taiwan hosted two international sporting events on the island. The World Games 2009 were held in Kaohsiung between 16 and 26 July 2009. Taipei hosted the 21st Summer Deaflympics in September of the same year. Furthermore, Taipei hosted the Summer Universiade in 2017. [348] In the near future, Taipei and New Taipei City will co-host the 2025 World Masters Games, as governed by the International Masters Games Association (IMGA). [349]

Taekwondo has become a mature and successful sport in Taiwan in recent years. In the 2004 Olympics, Chen Shih-hsin and Chu Mu-yen won the first two gold medals in the women's flyweight event and the men's flyweight event, respectively. Subsequent taekwondo competitors such as Yang Shu-chun have strengthened Taiwan's taekwondo culture.

Taiwan has a long history of strong international presence in table tennis. Chen Pao-pei was a gold medalist in the women's singles at the Asian Table Tennis Championships in 1953 and gold medalist with Chiang Tsai-yun in the 1957 women's doubles and women's team events. Lee Kuo-ting won the men's singles at the 1958 Asian Table Tennis Championships. More recently Chen Chien-an won the 2008 World Junior Table Tennis Championships in singles and pairing with Chuang Chih-yuan won the men's doubles in 2013 at the 52nd World Table Tennis Championships. Playing for Taiwan Chen Jing won a bronze medal at the 1996 Olympic Games and a silver medal at the 2000 Olympic Games. 17-year-old Lin Yun-Ju upset both reigning world champion Ma Long and world ranked No. 3 Fan Zhendong to win the 2019 men's singles in the T2 Diamond Series in Malaysia. [350] [351] [352] [353]

In Tennis, Hsieh Su-wei is the country's most successful player, having been ranked inside the top 25 in singles in the WTA rankings. [354] She became joint No. 1 in doubles with her partner Peng Shuai in 2014. [355] The sisters Chan Yung-jan (Latisha Chan) and Chan Hao-ching are doubles specialists. They won their 13th WTA tournament together at the 2019 Eastbourne International, [356] the second-highest number of wins for a pair of sisters after the Williams sisters. [357] Latisha Chan became joint No. 1 with partner Martina Hingis in 2017. [358] The most successful men's player was Lu Yen-hsun, who reached No. 33 in the ATP rankings in 2010. [359]

Taiwan is also a major Asian country for Korfball. In 2008, Taiwan hosted the World Youth Korfball Championship and took the silver medal. [360] In 2009, Taiwan's korfball team won a bronze medal at the World Game. [361]

Yani Tseng is the most famous Taiwanese professional golfer currently playing on the US-based LPGA Tour. She is the youngest player ever, male or female, to win five major championships and was ranked number 1 in the Women's World Golf Rankings for 109 consecutive weeks from 2011 to 2013. [362] [363] [364]

Taiwan's strength in badminton is demonstrated by the current world No. 1 ranking female player, Tai Tzu-ying, and the world No.2 ranking male player Chou Tien-chen in the BWF World Tour. [365] [366]


The standard Gregorian calendar is used for most purposes in Taiwan. The year is often denoted by the Minguo era system which starts in 1912, the year the ROC was founded. 2021 is year 110 Minguo (民國110年). The East Asian date format is used in Chinese. [367]

Prior to standardisation in 1929, the official calendar was a lunisolar system, which remains in use today for traditional festivals such as the Lunar New Year, the Lantern Festival, and the Dragon Boat Festival. [368]

Dancing with the Dragon: An Economic History of Taiwan’s China Policy

We live in a time where politicians and entire governments group themselves based on their stance on Chinese trade. Emerging markets have welcomed China’s economic cooperation, while more protectionist countries such as the US seem to be distancing themselves further and further away. Most are stuck trying to find a compromise in the rapidly widening gulf between the world’s two superpowers. Over the past 70 years, the evolution of Taiwan’s intricate relationship with China has shown a combination of all three trends—cooperation, decoupling, and compromise.

In 1949, the Chinese Civil War ended with the retreat of the Kuomintang (KMT) to the island of Taiwan. Both Taipei and Beijing claimed to be the only legitimate government of China, and what ensued was four long decades of “unremitting hostility.” Cross-strait relations were essentially non-existent during this time.

Before the war, Taiwan was an importer of manufactured goods and an exporter of primary products, mainly sugar and rice. By the 1970s, Taiwan had reversed the situation, transforming into a major exporter of textiles, electronics, and other manufactured products. This export-driven growth miraculously turned the insignificant island economy into one of the biggest markets in Asia. In 1974 , Taiwan’s population was only 16 million, but its import numbers were 40% greater than India’s (population of 596 million), and 80% greater than Indonesia’s (population of 128 million).

This rapid economic expansion was accompanied by diplomatic and international isolation. President Chiang-kai Shek adhered to a “One China” principle : Taiwan would break off relations with any country that established ties with Mainland China. This led to a shrinking number of international allies, and in 1971, the United Nations voted to declare the People’s Republic of China (PRC) as the rightful representative of China. The ROC (Taiwan) government was subsequently expelled.

Hesitant Rapprochement and Pragmatic Diplomacy

In the 1980s, Taiwan-China contact grew as a new generation of Taiwanese leaders sought to enhance Taiwan’s international status while stabilizing relations with China. Politicians began developing the argument that since Taiwan was already independent, there was no need to provoke China by officially declaring independence. This new perspective paved the way for the next two decades of “strategic ambiguity.” During this time, policy-makers emphasized domestic issues appealing to Taiwanese nationalism, while publicly assuring that Taiwan would not challenge the cross-strait status quo. Taiwan’s China policy had shifted from an era of outright confrontation, to one of cautious and calculated compromise. Building on this new relationship, Taiwan relaxed restrictions on cross-strait economic interactions, setting off an explosion of Taiwanese entrepreneurs entering China, known as the Taishang (“Taiwanese businessman”).

Emergence of the Taishang

Taishang first emerged in the late 1980s and increased steadily through the 1990s. The democratization of Taiwan had led to stricter environmental and labor regulations, contributing to rising production costs. Taiwanese manufacturers saw Mainland China, with its cheap labor and lax regulations, as a better alternative. In 1989, the Tiananmen Square Massacre resulted in foreign investors pulling out of China, which created a window of opportunity for Taishang to enter and fill the void. They brought with them global connections, business know-how, and 30+ years of experience as a global manufacturing hub.

In the early 1990s, as the growth of Taiwanese investment to Mainland China greatly outpaced investment in Southeast Asia, the government introduced a series of “Go South” policies . These aimed to prevent excessive economic integration between Taiwan and Mainland China, instead encouraging firms to relocate to Southeast Asia. Though initially successful, the “Go South” policies were in the end ineffective. Businesses were reluctant to leave the cheap, close, and culturally-familiar investment climate of China.

Consequently, cross-strait investment continued to grow at a fast rate. Local Chinese government officials, eager to attract the employment, economic growth, and tax revenue created by Taishang investment, introduced a plethora of incentives and concessions for Taiwanese businesses. Entire manufacturing supply chains had already moved en-masse to the mainland, and now technology-intensive industry also began entering on a large scale. From 1987 to 2008, Taishang brought more than $166 billion USD in investment , and from 1998 to 2008, Taishang were responsible for 14% of China’s foreign trade.

Closer Ties, Economic Integration, and a New “Taiwanese” Identity

In 2008, president Ma Ying-jheo took office with the intention of creating a more cooperative relationship with the mainland. Ma further liberalized cross-strait relations, and signed more than twenty economic and technical agreements. Most notable was the Economic Cooperation Framework Agreement (ECFA), a preferential trade agreement between Taiwan and China.

From 2009 to 2015, Taiwanese investment in China grew from $7 billion, to nearly $11 billion USD . Improved China relations also made further economic interaction between Taiwan and Southeast Asia possible, something Ma’s China-wary predecessors had failed to achieve. ASTEP , a free trade agreement between Singapore and Taiwan, was signed without objection from Beijing because the ECFA had already been agreed. However, rising tensions in the South China Sea undermined Beijing’s credibility in the region, and a potential triangular relationship between Taiwan, Southeast Asia, and China instead tilted towards a Taiwan-China partnership. At the time, Taiwan’s economic integration into the mainland seemed inevitable and irreversible.

Unfortunately for him, Ma’s China-friendly policies coincided with the consolidation of Taiwanese national identity. People now viewed themselves as uniquely “Taiwanese,” as opposed to “Chinese.” Combined with concerns over inequality and job losses, this led to widespread unease about Taiwan’s increasing economic dependence on the mainland.

At the same time, Taishang were beginning to lose their once-favorable position. As more and more foreign manufacturers swarmed into China, Taiwanese businesses faced reduced profits due to the rollback of government incentives and the rising price of land and facilities. The advantages Taishang held over Chinese firms in global connections and business know-how were also quickly eroding. Taishang had fallen from a dominant role to an increasingly marginalized one.

In 2016, presidential candidate Tsai-Ing Wen rode a wave of democracy support and anti-China sentiment to a landslide win. Tsai’s victory brought Taiwan-China relations to their lowest point since the Cold War. Days after the election , China’s People’s Liberation Army held televised military drills in the coastal city of Xiamen, only 10 km away from the Taiwanese outpost of Quemoy. To punish Tsai’s pro-independence leanings, China also began actively reducing group tours to Taiwan in an attempt to cripple its important tourism industry. This renewed hostility fueled worries of further economic retribution, spurring Taiwanese policy-makers to accelerate Taiwan’s decoupling from the mainland.

President Tsai launched her New Southbound Policy (NSP) in late 2016, which, similar to previous “Go South” policies, aims to enhance ties with countries in Australasia and Southeast Asia. After the US-China trade war began in 2018, Taiwan also offered a three-year incentive plan for Taiwanese companies to move back across the strait. In November 2019, t he UN Conference on Trade and Development listed Taiwan as the biggest beneficiary of the US-China trade war, after experiencing an increase of $4.2 billion in exports to the US in the first half of 2019.

These measures have made a marked impact on the structure of Taiwanese trade. Last year, outbound investment to NSP countries grew by 16% , while investment to China fell by 51%. In addition, despite China’s efforts, Taiwan’s tourist numbers have continued to grow. In 2019, the number of foreign visitors hit an all-time high, thanks in large part to an increase of 2.7 million visitors from NSP countries.

Looking to the future

Taiwan’s current situation demonstrates China’s willingness to use economic and military tools to advance political objectives. As a result, a major concern for potential trade partners are the implications that Taiwanese economic cooperation could have on Chinese relations. As the Chinese economy grows in size and influence, the question remains if, like the “Go South” policies of the 1990s, Taiwan’s trajectory of expanding away from the mainland will prove ultimately unsustainable. It will be intriguing to watch whether the small, isolated East Asian economy will be able to step out of China’s shadow in an increasingly China-centric world.

Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of Berkeley Economic Review staff, the Undergraduate Economics Association, the UC Berkeley Economics Department and faculty, or the University of California, Berkeley in general.

Lessons from Taiwan's Economic Development

Taiwan changed from a traditional agriculture society into an industrialized modern country within roughly one century. This fast development was regarded as a model for developing countries. Taiwan together with Hong Kong, Singapore, and South Korea became known as the Four Asian newly industrialized countries (NICs) in the 1970s, recognized for their successful economic development. However, on its way to becoming a high-income developed country, Taiwan encountered a number of difficulties. Some of them might have been caused by the political threat from China, but there were other challenges that were common to many middle income countries. Taiwan's experiences of the latter may offer lessons to other developing countries. The difficulties for Taiwan caused by China may offer more alarming lessons for countries—including developing countries—that face growing interactions with China.

Pochih Chen is a Taiwanese politician who served as the Minister of the Council for Economic Planning and Development of the Executive Yuan from May 20, 2000 until February 1, 2002. His most recent book is Don’t Blame Only Ma Ying-Jeou, 2015.

Taiwan History and Economy

Immediately following World War II, Taiwan was still a predominated agricultural economy with half its labor force employed in agriculture and about 44 percent of net domestic product generated in that sector. However, basing on the infrastructure left behind by Japanese, a strong agriculture foundation and the capital assistance gathered from the United States, Taiwanese remarkably developed the pre-condition for economic takeoff. They successfully managed agriculture to provide a considerable net capital flow to non-agriculture. Consequently, Taiwan moved from an agriculture-based economy in the late forties and fifties to a semi-industrialized one by the early seventies, and is presently reaching the stage of a full-fledged industrialization.

During the structure transformation, international trade played a crucial role, which had function of push and go fueled by the long term rate of capital accumulation and technical change. Certainly, for a country like Taiwan, which is relatively small and not particularly well endowed with a range of natural resource, the gain from trade must be very helpful in its economic evolution. When Taiwan&aposs modern growth epoch began in the 1950s, the dominant strategy chosen was import substitution. On the one hand, it imported raw materials to produce commodities needed. On the other hand, it protected the domestic industries. Around 1960, because of the success of relatively neutral incentive policies, which had supported import substitution, domestic market had been satisfied for many goods. The prospects of further using import substitution strategy were considerably less rosy. As a result, Taiwan made a critical decision, switching import substitution to export-oriented strategy, which altered the structure of production. Via exporting, Taiwan has generated the incomes to allow saving and investment on the scale required to raise per capita about tenfold in thirty years. Eventually, international trade, the engine of Taiwan&aposs growth, makes the island transform from developing to mature economy.

Following several waves of structure adjustment, Taiwan has already reached the stage of a developed economy. As its economy grows, the relative importance of agriculture is decreasing. Small and medium-scale enterprises not only are dominant from outset but, even more startling, expand more rapidly than large-scale enterprises. With Taiwan&aposs comparative advantage shifting away from cheap labor and towards technology and skill-intensive goods, today, they have focused on capital intensive industries which include construction, utilities, high pricing textiles, refining, petrochemicals, shipbuilding,

Could war erupt over Taiwan?

A top concern among U.S. analysts is that China’s growing military capabilities and assertiveness, as well as the deterioration in cross-strait relations, could spark a conflict. Such a conflict has the potential to lead to a U.S.-China confrontation. That’s because China hasn’t ruled out using force to achieve Taiwan’s “reunification” and the United States hasn’t ruled out defending Taiwan if China attacks. The U.S. Department of Defense said in a 2020 report [PDF] that China’s military, the People’s Liberation Army (PLA), is “likely preparing for a contingency to unify Taiwan with the mainland by force.”

However, experts disagree about the likelihood and timing of a Chinese invasion. The top U.S. military commander in the Indo-Pacific warned that China could try to invade Taiwan within the next decade [PDF], while some experts believe that such an invasion is further off. Others believe 2049 is a critical date Xi has emphasized that unification with Taiwan is essential to achieving what he calls the Chinese Dream, which sees China’s great-power status restored by 2049.

Regardless, the PLA has made preparing for a Taiwan contingency one of its top priorities, and Taiwan has been a major catalyst for China’s military modernization. In a 2019 defense white paper, the PLA said it would “resolutely defeat anyone attempting to separate Taiwan from China.”

Taiwan likely doesn’t have the capabilities to defend against a Chinese attack without external support, analysts say. China’s defense spending is at least fifteen times Taiwan’s, and the PLA has invested heavily in equipment needed for a Taiwan Strait contingency. Tsai and the DPP have emphasized plans for boosting defense spending her cabinet proposed a 10 percent increase in the defense budget for fiscal year 2021 compared to the previous year, reaching a total of more than $15 billion. Part of this expanded military budget will go toward acquiring cruise missiles, naval mines, and advanced surveillance systems to defend Taiwan’s coasts.

The United States has attempted to maintain a delicate balance between supporting Taiwan and preventing a war with China through its policy of strategic ambiguity. Citing increased Chinese aggression, some experts, such as CFR’s Richard N. Haass and David Sacks, and several members of the U.S. Congress have argued that Washington should explicitly say it would respond to any Chinese use of force against Taiwan. Other experts have disagreed with this position. The United States has encouraged Taiwan to increase its defense spending and regularly sails ships through the Taiwan Strait to demonstrate its military presence in the region.

Taiwan Economic Growth Set To Grow At Fastest In Seven Years Thanks To Global Tech Demand

Taiwan’s economy, already an outlier last year as Covid-19 tore through most of the world, will grow at its fastest pace in seven years in 2021, the government said, buoyed by global demand for the island’s technology products.

Gross domestic product is expected to expand 4.64% this year, the statistics bureau said, up from a forecast of 3.83% growth made in November.

Exports from Taiwan’s electronics industry indicate that the economy will rise because of global demand for new technology products, the government office said Saturday. It said the island’s signature semiconductor sector should expect growth in shipments for devices that support 5G wireless, the internet of things and high-performance computing. Automotive chips, though backlogged now because of demand for consumer electronics, would offer Taiwan’s chipmakers additional revenue.

Taiwan’s whole tech hardware supply chain, a hallmark of its economy over the past 40 years, will see demand from consumers worldwide who are adapting to new work and study habits, says Tracy Tsai, Taipei-based research vice president with the market analysis firm Gartner. That demand will create orders for everyday PCs as well as built-in cameras, chips for artificial intelligence and devices that aid with cloud computing, she says.

“If you look at the supply chain from end-user all the way upstream and (contracting) in the middle, they're all related to Taiwan and that's going to have a direct or indirect relation to Taiwan's GDP,” Tsai says.

Taiwan Economy - overview

Taiwan has a dynamic capitalist economy that is driven largely by industrial manufacturing, and especially exports of electronics, machinery, and petrochemicals. This heavy dependence on exports exposes the economy to fluctuations in global demand. Taiwan's diplomatic isolation, low birth rate, rapidly aging population, and increasing competition from China and other Asia Pacific markets are other major long-term challenges.

Following the landmark Economic Cooperation Framework Agreement (ECFA) signed with China in June 2010, Taiwan in July 2013 signed a free trade deal with New Zealand - Taipei’s first-ever with a country with which it does not maintain diplomatic relations - and, in November of that year, inked a trade pact with Singapore. However, follow-on components of the ECFA, including a signed agreement on trade in services and negotiations on trade in goods and dispute resolution, have stalled. In early 2014, the government bowed to public demand and proposed a new law governing the oversight of cross-Strait agreements, before any additional deals with China are implemented the legislature has yet to vote on such legislation, leaving the future of ECFA uncertain. President TSAI since taking office in May 2016 has promoted greater economic integration with South and Southeast Asia through the New Southbound Policy initiative and has also expressed interest in Taiwan joining the Trans-Pacific Partnership as well as bilateral trade deals with partners such as the US. These overtures have likely played a role in increasing Taiwan’s total exports, which rose 11% during the first half of 2017, buoyed by strong demand for semiconductors.

Taiwan's total fertility rate of just over one child per woman is among the lowest in the world, raising the prospect of future labor shortages, falling domestic demand, and declining tax revenues. Taiwan's population is aging quickly, with the number of people over 65 expected to account for nearly 20% of the island's total population by 2025.

The island runs a trade surplus with many economies, including China and the US, and its foreign reserves are the world's fifth largest, behind those of China, Japan, Saudi Arabia, and Switzerland. In 2006, China overtook the US to become Taiwan's second-largest source of imports after Japan. China is also the island's number one destination for foreign direct investment. Taiwan since 2009 has gradually loosened rules governing Chinese investment and has also secured greater market access for its investors on the mainland. In August 2012, the Taiwan Central Bank signed a memorandum of understanding (MOU) on cross-Strait currency settlement with its Chinese counterpart. The MOU allows for the direct settlement of Chinese renminbi (RMB) and the New Taiwan dollar across the Strait, which has helped Taiwan develop into a local RMB hub.

Closer economic links with the mainland bring opportunities for Taiwan’s economy but also pose challenges as political differences remain unresolved and China’s economic growth is slowing. President TSAI’s administration has made little progress on the domestic economic issues that loomed large when she was elected, including concerns about stagnant wages, high housing prices, youth unemployment, job security, and financial security in retirement. TSAI has made more progress on boosting trade with South and Southeast Asia, which may help insulate Taiwan’s economy from a fall in mainland demand should China’s growth slow in 2018.

Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.

Source: CIA World Factbook - This page was last updated on Friday, November 27, 2020