A small island nation calling itself the Republic of China is known to the whole world as Taiwan. It is recognized by 23 countries. Taiwan received two waves of immigrants from mainland China. The first happened when wealthy adherents of the Ming dynasty fled from the persecution of supporters of the Qing Empire (after about 1644).
The second - after the formation of the People’s Republic of China, when the armed detachments of the Chinese Communist Party defeated and ousted 1.5 million supporters of the conservative Kuomintang party to the island. Already at the end of the 20th century, educated and hardworking immigrants created a prosperous, developed economy, naturally, with Chinese characteristics.
A bit of history
The Chinese, having settled the island, gradually crowded out the indigenous population (Austronesians), which now make up about 2.3% of the country's 23.5 million population. In 1895, the Qing Empire suffered a military defeat. For 50 years, the island was ruled by the Japanese. They laid the foundations for the industrialization of the island by building a hydroelectric power station and enterprises for the production of numerous types of products. For Taiwan's economy, the history of colonization was rather positive. The island served as a kind of showcase showing the achievements of peoples conquered by the Japanese.
After World War II, the Kuomintang created the Republic of China on the island, the sovereignty of which, in his opinion, extended to mainland China. An important first step towards improving the economy was land reform. At the same time, excess land was forcibly bought from the landowners and sold to peasants with installment payments for a long time. Economic policy stimulated industrialization.
Since the 50s, it continues to grow mainly. As a sign of merit to the country, the obverse of Taiwan's coins depicts a bust of the Kuomintang and President (1949-1975) Chiang Kai-shek, the initiator of major reforms. Until 1987, the island was under martial law, but from the late 80s, the democratization of public life began. In 2000, the first peaceful transfer of presidential power took place. Over the years, Taiwan has evolved into an Asian tiger from a backward country with a command economy . He became a major investor in mainland China.
general review
Taiwan's national economy has come a long way in many ways similar to that observed in Hong Kong and Singapore. The country's dynamic capitalist economy is based on industrial production. Particularly well developed are electronics, shipbuilding, light industry, mechanical engineering and petrochemicals. There is a negative side to this, due to a strong dependence on global demand.
Another vulnerability is diplomatic isolation, since most countries of the world believe that the island belongs to China. Enterprises mainly relate to the sector of small and medium-sized businesses. The country's economic policy stimulates the production of competitive high-tech products. However, salt, tobacco, alcoholic beverages, and a number of other products are produced and sold by the state, which controls the prices of vital products.
In recent years, the government’s policy is aimed at reducing the role of the state in business. In 2017, Taiwan's economy showed particularly excellent results. Place in the world on the runway, this tiny state took 23rd, surpassing China, Korea, and Singapore. Since 2012, economic growth in Taiwan has been stable, at about 2% per year.
Starting conditions
The beginning of the development of Taiwan's economy was greatly influenced by the fact that far from poor supporters of the Kuomintang moved here. In addition to part of the state treasury and ancient Chinese treasures, they removed a lot of industrial equipment from neighboring China. Many entrepreneurs, engineers and other educated people, highly skilled workers moved here. Taiwan's economy received good start-up capital.
Like some other Asian countries, in order to counter world communism, the country received generous technical assistance from the United States. For 15 years (from 1950 to 1965) $ 1.5 billion a year were sent to the island. These funds were spent mainly on the construction of infrastructure (74%). Money was received by electric, communication and transport companies.
Initial benefits
Taiwan made excellent use of its favorable geographical position. The island is at the crossroads of world trade routes from the American Pacific coast and East Asia to Europe. The second important step in successful development was the withdrawal from the list of countries with a command economy. Taiwan went his own way. The political regime emphasized the development of industry, ensured political stability, and the protection of foreign investment. Loyalty to the industrially developed countries of the West also brought certain dividends: in return they turned a blind eye to the authoritarianism of power, the lack of basic freedoms. The main asset of the country was a disciplined, hardworking and skilled workforce.
Way to success
Good starting conditions needed to be converted into economic growth. At the first stage, Taiwan's economy focused on light industries, including the production of clothing, shoes, blankets, wigs. Fairly low cost and high productivity have given Taiwanese exports a path to the global market.
Since the 80s, heavy and petrochemical industries, as well as shipbuilding, began to develop. Production was guided by foreign technologies and imported raw materials, sending a significant part of products for export. Together with other modern economically developed Asian countries, Taiwan began to invest in the electronics industry, which also required at that time a sufficiently large amount of skilled labor. The transition to more expensive industries was also necessary because labor resources went up significantly.
High tech
The influence of the state on the economy made it easy enough to shift from the production of labor-intensive products of light and heavy industry to the production of consumer electronics, and in recent years to information technology. Since the late 90s, Taiwan has begun to invest heavily in both the digital and public economies, both public and private. About 20 billion dollars were issued only by state low-cost loans.
The country began to organize special economic zones and technology parks for enterprises. In Hsinchu - the largest of them. About 130 thousand people work here. In the best years, this technology park provided up to 15% of all marketable products of the island. Almost everyone knows the famous Taiwanese brands - Acer, Asus, producing computers and other electronic devices.
Structure of the economy
In the dynamically developing economy of Taiwan, services occupy the largest share (62.1% of GDP), followed by industry (36.1%) and agriculture (1.8%). The transformation of the country's economy continues. Almost every year, the proportion of labor-intensive products and agriculture decreases, which is associated with a shortage and cost of labor.
Since the beginning of the 90s, the share of production of the country's traditional export goods — cotton fabrics, bicycles, televisions, and other consumer electronics — has been declining. Coal in the energy sector was replaced by other energy sources - oil and liquefied gas. Now the country has built three nuclear power plants.
Large-scale production - petrochemistry and metallurgy is gradually decreasing. The government is betting on the development of digital technologies (microelectronics, telecommunications, data processing tools), the financial sector, the food industry and biotechnology.
Small and medium businesses
Taiwan's economy can be briefly described as the economy of small and medium-sized businesses. Unlike South Korea and Japan, which stimulated the creation of diversified corporations, Taiwan took a different path. Small and medium-sized enterprises account for 98% of the total number of companies. Transparent legislation, open market policies that facilitate the flow of goods and capital have enabled SMEs to become the foundation of Taiwan's economy. According to the Heritage Foundation’s economic freedom index, the state ranks 14th and is classified as a country with a predominantly free economy.
Foreign economic relations
Taiwan's diplomatic "isolation" imposes restrictions on the development of the country's international trade. The resolution of this issue is facilitated by the signing of an agreement on economic cooperation with China in 2010. As a result, the mainland Chinese market was opened for Taiwanese goods. The country also got the opportunity to conclude trade agreements with states with which it does not have diplomatic relations.
The main foreign trade partners of Taiwan are China, the USA, Japan and the countries of Southeast Asia. Taiwan, whose economic situation is highly dependent on foreign trade with China, is taking steps to develop new areas of trade, particularly with Indonesia and the Philippines.
What is selling to the world?
International trade has been a source of economic growth in the last 40 years. Taiwan is one of the largest manufacturers of integrated circuits and liquid crystal displays, network equipment and other electronics, whose share in exports is about 32%.
The main export items are: semiconductors, petroleum products, automotive parts, ships, wireless equipment, displays, steel, electronics, plastics, computers. Export volume in 2017 amounted to 344.6 billion dollars. The main import items are related to the supply of raw materials and components, including oil, semiconductors, natural gas, coal, steel, automobiles, textiles. The volume of imports in 2017 amounted to 272.6 billion dollars.
Economic relations with Russia
The structure of international trade between Taiwan and Russia is determined by the following factors: Taiwan's high degree of dependence on raw material imports, fairly low prices for Russian goods (due to the low ruble exchange rate), and high demand of the Russian market for technological products. The largest supplies of raw materials and products from Russia to Taiwan are petroleum products and ferrous metals ($ 1.5 billion each). In the third position is aluminum. Its shipments amounted to 136 million dollars. Also, a large percentage falls on the supply of Russian raw materials for the Taiwanese food industry (malt, starch, inulin, wheat gluten).
The most important imports from Taiwan are electric machinery and equipment ($ 670 million), and nuclear equipment ($ 610 million). The third position is ferrous metals. Computers, laptops, smartphones manufactured in Taiwan are also widely represented in the Russian market.
Development prospects
The state and prospects of Taiwan's economy are reflected in the Green Silicone Island program, which implies the development of a “knowledge economy”, the preservation of the environment, the widespread use of renewable energy sources and a fair society.
The government intends to build up a high-tech sector of the economy, including the opening of new industrial zones where IT companies will be provided with tax benefits and all the necessary infrastructure for work. Taiwan intends to increase investment in research and development, including in the field of digital and biotechnology.
The country is already experiencing a shortage of qualified labor resources, therefore, the system of narrow professional training and study programs abroad will be strengthened. Taiwan, whose economic development is highly dependent on the global environment, should revise its concepts and reduce risks in the following areas:
- Relations with China, its largest foreign economic partner.
- Competition with other manufacturers of electronic components, primarily South Korea.
- Labor shortage.
- An aging population.
- Diplomatic isolation.