Taiwan - Economy

Economy

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 Taiwanese citizens.

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 started a price stabilization program. These efforts helped significantly slow the inflation.

When the KMT government fled to Taiwan it brought millions of taels of gold and the foreign currency reserve of mainland China to the island, which, according to the KMT stabilized prices and reduced hyperinflation. Perhaps more importantly, as part of its retreat to Taiwan, the KMT brought the intellectual and business elites from Mainland China. 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.

In 1950, with the outbreak of the Korean War, the US began an aid program which resulted in fully stabilized prices by 1952. In 1962, Taiwan had a (nominal)per-capita gross national product (GNP) of $170, placing its economy on a par with those of Zaire and Congo. On a PPP basis, its GDP per capita in early 1960s is $1353(in 1990 constant prices). By 2011 per-capita GNP, adjusted for purchasing power parity (PPP), had risen to $37,000, contributing to a Human Development Index equivalent to that of other developed countries. Taiwan's HDI in 2007 is 0.943 (25th, very high), and stands at 0.868 in 2010 (18th, very high), according to the UN's new calculating method ("Inequality-adjusted HDI"). In 1974, Chiang Ching-kuo implemented the Ten Major Construction Projects, the beginning foundations that helped Taiwan transform into its current export driven economy.

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. Real growth in GDP has averaged about 8% 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. The Republic of China has its own currency, the New Taiwan dollar.

Since the beginning of the 1990s, the economic ties between Taiwan and Mainland China have been very prolific. As of 2008, more than US$150 billion have been invested in the PRC by Taiwanese companies, and about 10% of the Taiwanese labour force works in the PRC, often to run their own businesses. 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." 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.

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, totaling US$274.64 billion and US$251.4 billion, respectively.

In 2001, agriculture constituted only 2% of GDP, down from 35% in 1952. Traditional labor-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.

Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the 1997 Asian Financial Crisis. Unlike its neighbors, 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 coordination 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 labor 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% in the 2002–2006 period and the unemployment rate fell below 4%.

Since the global financial crisis starting with United States in 2007, the unemployment rate has risen to over 5.9% and Economic Growth fallen to –2.9%. However, Taiwan managed to emerge from the crisis in very good shape. In 2010, economic growth reached 10%, the highest rate in almost 30 years, international trade jumped more than 39% to US$526.04 billion, and the job market rose with most businesses set to recruit. As a result, the IMF estimated Taiwan's 2010 GDP-PPP per capita at over US$34,700, surpassing those of Finland, France and Japan.

The ROC often joins international organizations under a politically neutral name. The ROC is 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.