Taiwan Miracle
Encyclopedia
The Taiwan Miracle or Taiwan Economic Miracle refers to the rapid industrialization and economic growth
of Taiwan
during the latter half of the twentieth century. As it has developed alongside Singapore
, South Korea
and Hong Kong
, Taiwan became known as one of the "Four Asian Tigers".
in the late 1940s when the Kuomintang
(KMT) military regime of Chen Yi
overprinted the new Taiwan Yuan against the previous Japan Taiwan Yen, it became clear that a new and stable currency was needed. When the KMT government retreated to Taiwan after the loss of mainland China
in the Chinese Civil War
, it brought part of the precious metal and foreign currency reserve of mainland China to the island. Although war-ravaged China had held only a very small reserve, some $170 million in all, those reserves helped to establish a gold-standard reserve currency in Taiwan, which in turn helped to stabilize prices and reduce hyperinflation. More importantly, many of the Chinese intellectual and business elites moved with KMT to the island. The Japanese had built up the agricultural and industrial infrastructure as well as chemical, material, and food reserves on the island that allowed the elite of the KMT supporters to jump start their own economic endeavors. Along with the $4 billion in financial aid and soft credit provided by the US (as well as the indirect economic stimulus of US food and military aid) over the 1945-1965 period, Taiwan had the necessary capital to restart its economy. Further, the KMT government instituted many laws and land reforms that it had never effectively enacted on mainland China
.
A land reform
law, inspired by the same one that the Americans were enacting in occupied Japan
, destroyed the landlord class (which also happened in Japan), and created a higher number of small peasants whom, with the help of the state
, increased the agricultural output dramatically. This was the first excedent accumulation source. It inverted capital creation, and liberated the agricultural workforce to work in the urban sectors. However, the government imposed on the peasants an unequal exchange with the industrial economy, with credit and fertilizer controls and a non monetary exchange to trade agrarian products (machinery) for rice. With the control of the banks (at the time, being the property of the government
), and import licenses, the state oriented the Taiwanese economy to import substitutive industrialization, creating initial capitalism in a fully protected market
.
It also, with the help of USAID, created a massive industrial infrastructure, communications, and developed the educational system. Several government bodies were created and four-year plans were also enacted. Between 1952 and 1982, economic growth was on average 8.7%, and between 1983 and 1986 at 6.9%. The gross national product grew by 360% between 1965 and 1986. The percentage of global exports was over 2% in 1986, over other recently industrialized countries, (like South Korea
), and the global industrial production output grew a further 680% between 1965 and 1986. The social gap between the rich and the poor fell (Gini: 0.558 in 1953, 0.303 in 1980), even lower than some Western European countries, but it grew a little in the 80's. Health care, education, and quality of life also improved. Much of that was made possible through US economic aid, subsidizing the higher cost of domestic production. The flexibility of the productive system and the industrial structure meant that Taiwanese companies had more chances to adapt themselves to the changing international situation and the global economy.
In 1959, a 19-point program of Economic and Financial Reform, liberalized market controls, stimulated exports and designed a strategy to attract foreign companies and foreign capitals. An exports processing area was created in Kaohsiung
and in 1964, General Instruments pioneered in externalizing electronic assembly in Taiwan. Japanese companies moved in to benefit of low salaries, the lack of environmental laws and controls, a well educated and capable workforce, and the support of the Government
. But the nucleus of the industrial structure was national, and it was composed by a large number of small and medium sized enterprises, created within families with the family savings, and savings cooperatives nets (會 Pinyin
: Huì
). They had the support of the government in the form of subsidies and credits
loaned by the banks.
Most of this Huì appeared for the first time in rural zones near metropolitan areas, where families shared work (in the parcels they owned and in the industrial workshops at the same time). For instance, in 1989 in Changhua
, small enterprises produced almost 50% of the world's umbrellas. The State attracted foreign companies in order to obtain more capital
and to get access to foreign markets, but the big foreign companies got contracts with this huge net of small sized, familiar and national companies, which were a very important percentage of the industrial output.
Foreign investment never represented an important component in the Taiwanese economy, with the notable exception of the electronic market. For instance, in 1981, direct foreign investment was a mere 2% of the GNP
, foreign companies employed 4.8% of the total workforce, their production was 13.9% of the total production and their exports were 25.6% of nationwide exports. Access to the global markets was facilitated by the Japanese companies and by the American importers, who wanted a direct relationship with the Taiwanese brands. No big multinational corporation
s were created (like in Singapore
), or huge national conglomerates (like South Korea
n chaebol
s), but some industrial groups, with the support of the government, grew, and became in the 90's huge companies totally internationalized.
Most of the development was thanks to the flexibility of family businesses which produced for foreign traders established in Taiwan and for international trade nets with the help of intermediaries. But the importance of the state must not be forgotten. It was the central organism which coordinated the industrialization process, it created the infrastructures, it attracted foreign investment, it decided the strategic priorities and, when necessary, recurred to impose its conditions.
switched recognition from the Republic of China
to the People's Republic of China
as the sole legitimate representative of all China
. It was expelled by General Assembly Resolution 2758 and replaced in all UN organs with the PRC. The KMT began a process of enhancement and modernization of the industry, mainly in high technology (such as microelectronics
, personal computers and peripheral
s). One of the biggest and most successful Technology Parks was built in Hsinchu
, near Taipei
.
Many Taiwanese brands became important suppliers of worldwide known firms such as DEC or IBM
, while other established branches in Silicon Valley
and other places inside the United States
and became known. The government also recommended the textile and clothing industries to enhance the quality and value of their products to avoid restrictive import quotas, usually measured in volume. The decade also saw the beginnings of a genuinely independent
union movement
after decades of repression. Some significant events occurred in 1977, which gave the new unions
a boost.
One was the formation of an independent union at the Far East Textile Company after a two-year effort discredited the former management-controlled union. This was the first union that existed independently of the KMT in Taiwan's post-war history (although the KMT retained a minority membership on its committee). Rather than prevailing upon the state to use martial law
to smash the union, the management adopted the more cautious approach of buying workers' votes at election times. However, such attempts repeatedly failed and, by 1986, all of the elected leaders were genuine unionists. Another, and, historically, the most important, was the now called "Zhongli incident".
In the 1980s, Taiwan had become an economic power, with a mature and diversified economy, solid presence in international markets and huge foreign exchange reserves
. Its companies were able to go abroad, internationalize their production, investing massively in Asia (mainly in China
and in another Organisation for Economic Co-operation and Development
countries, mainly in the United States
.
Higher salaries and better organized trade unions in Taiwan
, together with the reduction of the Taiwanese export quotas meant that the bigger Taiwanese companies moved their production to China
and Southeast Asia
. The civil society
in a now developed country, wanted democracy, and the rejection of the KMT dictatorship
was bigger day by day. A major step occurred when Lee Teng-hui
, a native from Taiwan
, became President
, and the KMT started a new path searching for democratic legitimacy.
Two aspects must be remembered: the KMT was on the center of the structure and controlled the process, and that the structure was a net made of relations between the enterprises, between the enterprises and the State, between the enterprises and the global market thanks to trade companies and the international economic exchanges. Native Taiwanese were largely excluded from the mainlanders dominated government, so many went into the business world.
In 1962, Taiwan had a per capita gross national product (GNP) of $170, placing the island's economy squarely between Zaire and Congo. But, by 2005 Taiwan's per capita GNP, adjusted for purchasing power parity (PPP), had soared to $27,600, contributing to a Human Development Index similar to that of European countries such as Greece
.
According to economist Paul Krugman
, the rapid growth was made possible by increases in capital and labor but not an increase in efficiency. In other words, the savings rate increased and work hours were lengthened, and many more people, such as women, entered the work force.
Dwight Perkins and others cite certain methodological flaws in Krugman and Alwyn Young's research, and suggest that much of Taiwan's growth can be attributed to increases in productivity. These productivity boosts were achieved through land reform, structural change (urbanization and industrialization), and an economic policy of export promotion rather than import substitution.
, Vietnam
or other sub-developed countries, and keep innovating and investing in information technology
. Since the 1990s, Taiwanese companies have been permitted to invest in China
, and a growing number of Taiwanese businessmen are demanding easier communications between the two sides of the Taiwan Strait
.
One major difference with Taiwan, of course, is the native English
fluency of the Taiwanese. Mirroring Hong Kong
and Singapore
, the ultimate goal is to become a country
fluent in three languages (Taiwanese; Mandarin, the national language of both the People's Republic of China
(PRC) and the ROC
; and English
, becoming a bridge between East and West.
According to western financial markets, consolidation
of the financial sector
remains a concern as it continues at a slow pace, with the market split so small that no bank
controls more than 10% of the market, and the Taiwanese government is obligated, by the WTO accession treaty, to open this sector between 2005 and 2008.
However, many financial analysts estimate such concerns are based upon mirror-imaging of the Western model and do not take into account the already proven Asian Tiger model. Yet, recently, credit card debt
has become a major problem, as the ROC does not have an individual bankruptcy
law. Taiwan also remains undeveloped in some sectors, such as the lack of a bond
market, a role that has been filled by small entrepreneur-oriented investment or direct investment by foreign persons.
Generally, transport
ation infrastructure
is very good and continues to be improved, mainly in the west side of the island. Many infrastructure improvements are currently being pursued, such as the first rapid transit
lines opening in Kaohsiung in 2008 and a doubling in size of Taipei's rapid transit system by 2013 now underway; the country's highways are very highly developed and in good maintenance and continue to be expanded, especially on the less developed and less populated east coast, and a controversial electronic toll
system has recently been implemented.
The completion of the Taiwan High Speed Rail
service connecting all major cities on the western coast, from Taipei
to Kaohsiung
is considered to be a major addition to Taiwan's transportation infrastructure.The ROC government has chosen to raise private financing in the building of these projects, going the build-operate-transfer route, but significant public financing has still been required and several scandal
s have been uncovered. Nevertheless, it is hoped that the completion of these projects will be a big economic stimulus, just as the subway in Taipei has revived the real estate market there.
Taiwan continues to rely heavily on its technology
sector, a specialist in manufacturing
outsourcing
. Recent developments include moving up the food chain
in brand
building and design. LCD manufacturing and LED
lights are two newer sectors in which Taiwanese companies are moving. Taiwan also wants to move into the biotechnology
sector, the creation of fluorescent pet fish
and a research-useful fluorescent pig being two examples. Taiwan is also a leading grower of orchids.
Debate on opening "Three links
" with the People's Republic of China
was also ongoing, with the security risk of economic dependence on mainland China being the biggest barrier. By decreasing transportation costs, it is hoped more money will be repatriated to Taiwan and that businesses will be able to keep operations centers in Taiwan while moving manufacturing and other facilities to mainland China.
A law forbidding any firm investing in the People's Republic of China
more than 40% of its total assets on the mainland was dropped in June 2008, when the new KMT government relaxed the rules to invest in Mainland China
. Dialogue through semi-official organisations (the SEF and the ARATS) reopened on June 12, 2008 on the basis of the 1992 Consensus, with the first meeting held in Beijing. Taiwan hopes to become a major operations center in East Asia. In addition, many businesses and areas in Taiwan hope to make money from mainland Chinese tourists if and when the three links are negotiated.
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
of Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
during the latter half of the twentieth century. As it has developed alongside Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
and Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, Taiwan became known as one of the "Four Asian Tigers".
Background
After a period of hyperinflationHyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...
in the late 1940s when the Kuomintang
Kuomintang
The Kuomintang of China , sometimes romanized as Guomindang via the Pinyin transcription system or GMD for short, and translated as the Chinese Nationalist Party is a founding and ruling political party of the Republic of China . Its guiding ideology is the Three Principles of the People, espoused...
(KMT) military regime of Chen Yi
Chen Yi (Kuomintang)
Chen Yi and later Gongqia , sobriquet Tuisu ; 1883 – June 18, 1950) was the Chief Executive and Garrison Commander of Taiwan after it was surrendered by Japan to the Republic of China, which acted on behalf of the Allied Powers, in 1945...
overprinted the new Taiwan Yuan against the previous Japan Taiwan Yen, it became clear that a new and stable currency was needed. When the KMT government retreated to Taiwan after the loss of mainland China
Mainland China
Mainland China, the Chinese mainland or simply the mainland, is a geopolitical term that refers to the area under the jurisdiction of the People's Republic of China . According to the Taipei-based Mainland Affairs Council, the term excludes the PRC Special Administrative Regions of Hong Kong and...
in the Chinese Civil War
Chinese Civil War
The Chinese Civil War was a civil war fought between the Kuomintang , the governing party of the Republic of China, and the Communist Party of China , for the control of China which eventually led to China's division into two Chinas, Republic of China and People's Republic of...
, it brought part of the precious metal and foreign currency reserve of mainland China to the island. Although war-ravaged China had held only a very small reserve, some $170 million in all, those reserves helped to establish a gold-standard reserve currency in Taiwan, which in turn helped to stabilize prices and reduce hyperinflation. More importantly, many of the Chinese intellectual and business elites moved with KMT to the island. The Japanese had built up the agricultural and industrial infrastructure as well as chemical, material, and food reserves on the island that allowed the elite of the KMT supporters to jump start their own economic endeavors. Along with the $4 billion in financial aid and soft credit provided by the US (as well as the indirect economic stimulus of US food and military aid) over the 1945-1965 period, Taiwan had the necessary capital to restart its economy. Further, the KMT government instituted many laws and land reforms that it had never effectively enacted on mainland China
Mainland China
Mainland China, the Chinese mainland or simply the mainland, is a geopolitical term that refers to the area under the jurisdiction of the People's Republic of China . According to the Taipei-based Mainland Affairs Council, the term excludes the PRC Special Administrative Regions of Hong Kong and...
.
A land reform
Land reform
[Image:Jakarta farmers protest23.jpg|300px|thumb|right|Farmers protesting for Land Reform in Indonesia]Land reform involves the changing of laws, regulations or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution,...
law, inspired by the same one that the Americans were enacting in occupied Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, destroyed the landlord class (which also happened in Japan), and created a higher number of small peasants whom, with the help of the state
Sovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
, increased the agricultural output dramatically. This was the first excedent accumulation source. It inverted capital creation, and liberated the agricultural workforce to work in the urban sectors. However, the government imposed on the peasants an unequal exchange with the industrial economy, with credit and fertilizer controls and a non monetary exchange to trade agrarian products (machinery) for rice. With the control of the banks (at the time, being the property of the government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
), and import licenses, the state oriented the Taiwanese economy to import substitutive industrialization, creating initial capitalism in a fully protected market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
.
It also, with the help of USAID, created a massive industrial infrastructure, communications, and developed the educational system. Several government bodies were created and four-year plans were also enacted. Between 1952 and 1982, economic growth was on average 8.7%, and between 1983 and 1986 at 6.9%. The gross national product grew by 360% between 1965 and 1986. The percentage of global exports was over 2% in 1986, over other recently industrialized countries, (like South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
), and the global industrial production output grew a further 680% between 1965 and 1986. The social gap between the rich and the poor fell (Gini: 0.558 in 1953, 0.303 in 1980), even lower than some Western European countries, but it grew a little in the 80's. Health care, education, and quality of life also improved. Much of that was made possible through US economic aid, subsidizing the higher cost of domestic production. The flexibility of the productive system and the industrial structure meant that Taiwanese companies had more chances to adapt themselves to the changing international situation and the global economy.
In 1959, a 19-point program of Economic and Financial Reform, liberalized market controls, stimulated exports and designed a strategy to attract foreign companies and foreign capitals. An exports processing area was created in Kaohsiung
Kaohsiung
Kaohsiung is a city located in southwestern Taiwan, facing the Taiwan Strait on the west. Kaohsiung, officially named Kaohsiung City, is divided into thirty-eight districts. The city is one of five special municipalities of the Republic of China...
and in 1964, General Instruments pioneered in externalizing electronic assembly in Taiwan. Japanese companies moved in to benefit of low salaries, the lack of environmental laws and controls, a well educated and capable workforce, and the support of the Government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
. But the nucleus of the industrial structure was national, and it was composed by a large number of small and medium sized enterprises, created within families with the family savings, and savings cooperatives nets (會 Pinyin
Pinyin
Pinyin is the official system to transcribe Chinese characters into the Roman alphabet in China, Malaysia, Singapore and Taiwan. It is also often used to teach Mandarin Chinese and spell Chinese names in foreign publications and used as an input method to enter Chinese characters into...
: Huì
Hui (secret society)
Hui is a Chinese word, generally meaning 'conference', but which is sometimes used to refer to a secret society. It is often mutually interchangeable with terms like kongsi , a term generally used to mean 'corporation', or a Chinese clan...
). They had the support of the government in the form of subsidies and credits
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
loaned by the banks.
Most of this Huì appeared for the first time in rural zones near metropolitan areas, where families shared work (in the parcels they owned and in the industrial workshops at the same time). For instance, in 1989 in Changhua
Changhua County
Changhua County is the smallest county in Taiwan located on the westside of Taiwan. It is officially governed as a county of the Republic of China .-Urban townships:# Beidou Township # Erlin Township...
, small enterprises produced almost 50% of the world's umbrellas. The State attracted foreign companies in order to obtain more capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
and to get access to foreign markets, but the big foreign companies got contracts with this huge net of small sized, familiar and national companies, which were a very important percentage of the industrial output.
Foreign investment never represented an important component in the Taiwanese economy, with the notable exception of the electronic market. For instance, in 1981, direct foreign investment was a mere 2% of the GNP
GNP
Gross National Product is the market value of all products and services produced in one year by labor and property supplied by the residents of a country...
, foreign companies employed 4.8% of the total workforce, their production was 13.9% of the total production and their exports were 25.6% of nationwide exports. Access to the global markets was facilitated by the Japanese companies and by the American importers, who wanted a direct relationship with the Taiwanese brands. No big multinational corporation
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...
s were created (like in Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
), or huge national conglomerates (like South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
n chaebol
Chaebol
Chaebol refers to a South Korean form of business conglomerate. They are global multinationals owning numerous international enterprises. The term is often used in a context similar to that of the English word "conglomerate"...
s), but some industrial groups, with the support of the government, grew, and became in the 90's huge companies totally internationalized.
Most of the development was thanks to the flexibility of family businesses which produced for foreign traders established in Taiwan and for international trade nets with the help of intermediaries. But the importance of the state must not be forgotten. It was the central organism which coordinated the industrialization process, it created the infrastructures, it attracted foreign investment, it decided the strategic priorities and, when necessary, recurred to impose its conditions.
Era of globalization
In the 1970s, protectionism was on the rise, and the United NationsUnited Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
switched recognition from the Republic of China
Republic of China
The Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
to the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
as the sole legitimate representative of all China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
. It was expelled by General Assembly Resolution 2758 and replaced in all UN organs with the PRC. The KMT began a process of enhancement and modernization of the industry, mainly in high technology (such as microelectronics
Microelectronics
Microelectronics is a subfield of electronics. As the name suggests, microelectronics relates to the study and manufacture of very small electronic components. Usually, but not always, this means micrometre-scale or smaller,. These devices are made from semiconductors...
, personal computers and peripheral
Peripheral
A peripheral is a device attached to a host computer, but not part of it, and is more or less dependent on the host. It expands the host's capabilities, but does not form part of the core computer architecture....
s). One of the biggest and most successful Technology Parks was built in Hsinchu
Hsinchu
Hsinchu City is a city in northern Taiwan. Hsinchu is popularly nicknamed "The Windy City" for its windy climate.Hsinchu City is administered as a special municipality within Taiwan . The city is bordered by Hsinchu County to the north and east, Miaoli County to the south, and the Taiwan Strait...
, near Taipei
Taipei
Taipei City is the capital of the Republic of China and the central city of the largest metropolitan area of Taiwan. Situated at the northern tip of the island, Taipei is located on the Tamsui River, and is about 25 km southwest of Keelung, its port on the Pacific Ocean...
.
Many Taiwanese brands became important suppliers of worldwide known firms such as DEC or IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, while other established branches in Silicon Valley
Silicon Valley
Silicon Valley is a term which refers to the southern part of the San Francisco Bay Area in Northern California in the United States. The region is home to many of the world's largest technology corporations...
and other places inside the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and became known. The government also recommended the textile and clothing industries to enhance the quality and value of their products to avoid restrictive import quotas, usually measured in volume. The decade also saw the beginnings of a genuinely independent
Independent (politician)
In politics, an independent or non-party politician is an individual not affiliated to any political party. Independents may hold a centrist viewpoint between those of major political parties, a viewpoint more extreme than any major party, or they may have a viewpoint based on issues that they do...
union movement
Union Movement
The Union Movement was a right-wing political party founded in Britain by Oswald Mosley. Where Mosley had previously been associated with a peculiarly British form of fascism, the Union Movement attempted to redefine the concept by stressing the importance of developing a European nationalism...
after decades of repression. Some significant events occurred in 1977, which gave the new unions
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
a boost.
One was the formation of an independent union at the Far East Textile Company after a two-year effort discredited the former management-controlled union. This was the first union that existed independently of the KMT in Taiwan's post-war history (although the KMT retained a minority membership on its committee). Rather than prevailing upon the state to use martial law
Martial law
Martial law is the imposition of military rule by military authorities over designated regions on an emergency basis— only temporary—when the civilian government or civilian authorities fail to function effectively , when there are extensive riots and protests, or when the disobedience of the law...
to smash the union, the management adopted the more cautious approach of buying workers' votes at election times. However, such attempts repeatedly failed and, by 1986, all of the elected leaders were genuine unionists. Another, and, historically, the most important, was the now called "Zhongli incident".
In the 1980s, Taiwan had become an economic power, with a mature and diversified economy, solid presence in international markets and huge foreign exchange reserves
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
. Its companies were able to go abroad, internationalize their production, investing massively in Asia (mainly in China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
and in another Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
countries, mainly in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Higher salaries and better organized trade unions in Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
, together with the reduction of the Taiwanese export quotas meant that the bigger Taiwanese companies moved their production to China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
and Southeast Asia
Southeast Asia
Southeast Asia, South-East Asia, South East Asia or Southeastern Asia is a subregion of Asia, consisting of the countries that are geographically south of China, east of India, west of New Guinea and north of Australia. The region lies on the intersection of geological plates, with heavy seismic...
. The civil society
Civil society
Civil society is composed of the totality of many voluntary social relationships, civic and social organizations, and institutions that form the basis of a functioning society, as distinct from the force-backed structures of a state , the commercial institutions of the market, and private criminal...
in a now developed country, wanted democracy, and the rejection of the KMT dictatorship
Dictatorship
A dictatorship is defined as an autocratic form of government in which the government is ruled by an individual, the dictator. It has three possible meanings:...
was bigger day by day. A major step occurred when Lee Teng-hui
Lee Teng-hui
Lee Teng-hui is a politician of the Republic of China . He was the 7th, 8th, and 9th-term President of the Republic of China and Chairman of the Kuomintang from 1988 to 2000. He presided over major advancements in democratic reforms including his own re-election which marked the first direct...
, a native from Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
, became President
President
A president is a leader of an organization, company, trade union, university, or country.Etymologically, a president is one who presides, who sits in leadership...
, and the KMT started a new path searching for democratic legitimacy.
Two aspects must be remembered: the KMT was on the center of the structure and controlled the process, and that the structure was a net made of relations between the enterprises, between the enterprises and the State, between the enterprises and the global market thanks to trade companies and the international economic exchanges. Native Taiwanese were largely excluded from the mainlanders dominated government, so many went into the business world.
In 1962, Taiwan had a per capita gross national product (GNP) of $170, placing the island's economy squarely between Zaire and Congo. But, by 2005 Taiwan's per capita GNP, adjusted for purchasing power parity (PPP), had soared to $27,600, contributing to a Human Development Index similar to that of European countries such as Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
.
According to economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
, the rapid growth was made possible by increases in capital and labor but not an increase in efficiency. In other words, the savings rate increased and work hours were lengthened, and many more people, such as women, entered the work force.
Dwight Perkins and others cite certain methodological flaws in Krugman and Alwyn Young's research, and suggest that much of Taiwan's growth can be attributed to increases in productivity. These productivity boosts were achieved through land reform, structural change (urbanization and industrialization), and an economic policy of export promotion rather than import substitution.
Future growth
Economic growth has become much more modest since the late 1990s. A key factor to understand this new environment is the rise of China, offering the same conditions that made possible, 40 years ago, the Taiwan Miracle (a quiet political and social environment, cheap and educated workers, absence of independent trade unions). To keep growing, the Taiwanese economy must abandon its workforce intensive industries, which cannot compete with ChinaChina
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
or other sub-developed countries, and keep innovating and investing in information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
. Since the 1990s, Taiwanese companies have been permitted to invest in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, and a growing number of Taiwanese businessmen are demanding easier communications between the two sides of the Taiwan Strait
Taiwan Strait
The Taiwan Strait or Formosa Strait, formerly known as the Black Ditch, is a 180-km-wide strait separating Mainland China and Taiwan. The strait is part of the South China Sea and connects to East China Sea to the northeast...
.
One major difference with Taiwan, of course, is the native English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...
fluency of the Taiwanese. Mirroring Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
and Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, the ultimate goal is to become a country
Country
A country is a region legally identified as a distinct entity in political geography. A country may be an independent sovereign state or one that is occupied by another state, as a non-sovereign or formerly sovereign political division, or a geographic region associated with a previously...
fluent in three languages (Taiwanese; Mandarin, the national language of both the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
(PRC) and the ROC
Republic of China
The Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
; and English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...
, becoming a bridge between East and West.
According to western financial markets, consolidation
Consolidation (business)
Consolidation or amalgamation is the act of merging many things into one. In business, it often refers to the mergers and acquisitions of many smaller companies into much larger ones. In the context of financial accounting, consolidation refers to the aggregation of financial statements of a group...
of the financial sector
Financial market
In economics, a financial market is a mechanism that allows people and entities to buy and sell financial securities , commodities , and other fungible items of value at low transaction costs and at prices that reflect supply and demand.Both general markets and...
remains a concern as it continues at a slow pace, with the market split so small that no bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
controls more than 10% of the market, and the Taiwanese government is obligated, by the WTO accession treaty, to open this sector between 2005 and 2008.
However, many financial analysts estimate such concerns are based upon mirror-imaging of the Western model and do not take into account the already proven Asian Tiger model. Yet, recently, credit card debt
Credit card debt
Credit card debt is an example of unsecured consumer debt, accessed through credit cards.Debt results when a client of a credit card company purchases an item or service through the card system...
has become a major problem, as the ROC does not have an individual bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
law. Taiwan also remains undeveloped in some sectors, such as the lack of a bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
market, a role that has been filled by small entrepreneur-oriented investment or direct investment by foreign persons.
Generally, transport
Transport
Transport or transportation is the movement of people, cattle, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations...
ation infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
is very good and continues to be improved, mainly in the west side of the island. Many infrastructure improvements are currently being pursued, such as the first rapid transit
Rapid transit
A rapid transit, underground, subway, elevated railway, metro or metropolitan railway system is an electric passenger railway in an urban area with a high capacity and frequency, and grade separation from other traffic. Rapid transit systems are typically located either in underground tunnels or on...
lines opening in Kaohsiung in 2008 and a doubling in size of Taipei's rapid transit system by 2013 now underway; the country's highways are very highly developed and in good maintenance and continue to be expanded, especially on the less developed and less populated east coast, and a controversial electronic toll
Toll road
A toll road is a privately or publicly built road for which a driver pays a toll for use. Structures for which tolls are charged include toll bridges and toll tunnels. Non-toll roads are financed using other sources of revenue, most typically fuel tax or general tax funds...
system has recently been implemented.
The completion of the Taiwan High Speed Rail
Taiwan High Speed Rail
Taiwan High Speed Rail is a high-speed rail line that runs approximately along the west coast of the Republic of China from the national capital of Taipei to the southern city of Kaohsiung...
service connecting all major cities on the western coast, from Taipei
Taipei
Taipei City is the capital of the Republic of China and the central city of the largest metropolitan area of Taiwan. Situated at the northern tip of the island, Taipei is located on the Tamsui River, and is about 25 km southwest of Keelung, its port on the Pacific Ocean...
to Kaohsiung
Kaohsiung
Kaohsiung is a city located in southwestern Taiwan, facing the Taiwan Strait on the west. Kaohsiung, officially named Kaohsiung City, is divided into thirty-eight districts. The city is one of five special municipalities of the Republic of China...
is considered to be a major addition to Taiwan's transportation infrastructure.The ROC government has chosen to raise private financing in the building of these projects, going the build-operate-transfer route, but significant public financing has still been required and several scandal
Scandal
A scandal is a widely publicized allegation or set of allegations that damages the reputation of an institution, individual or creed...
s have been uncovered. Nevertheless, it is hoped that the completion of these projects will be a big economic stimulus, just as the subway in Taipei has revived the real estate market there.
Taiwan continues to rely heavily on its technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
sector, a specialist in manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
. Recent developments include moving up the food chain
Food chain
A food web depicts feeding connections in an ecological community. Ecologists can broadly lump all life forms into one of two categories called trophic levels: 1) the autotrophs, and 2) the heterotrophs...
in brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
building and design. LCD manufacturing and LED
LEd
LEd is a TeX/LaTeX editing software working under Microsoft Windows. It is a freeware product....
lights are two newer sectors in which Taiwanese companies are moving. Taiwan also wants to move into the biotechnology
Biotechnology
Biotechnology is a field of applied biology that involves the use of living organisms and bioprocesses in engineering, technology, medicine and other fields requiring bioproducts. Biotechnology also utilizes these products for manufacturing purpose...
sector, the creation of fluorescent pet fish
Fish
Fish are a paraphyletic group of organisms that consist of all gill-bearing aquatic vertebrate animals that lack limbs with digits. Included in this definition are the living hagfish, lampreys, and cartilaginous and bony fish, as well as various extinct related groups...
and a research-useful fluorescent pig being two examples. Taiwan is also a leading grower of orchids.
Debate on opening "Three links
Three Links
The Three Links or Three Linkages was a "message of Compatriots in Taiwan" calling for the unification of mainland China and Taiwan. It was sent by the PRC National People's Congress in 1979....
" with the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
was also ongoing, with the security risk of economic dependence on mainland China being the biggest barrier. By decreasing transportation costs, it is hoped more money will be repatriated to Taiwan and that businesses will be able to keep operations centers in Taiwan while moving manufacturing and other facilities to mainland China.
A law forbidding any firm investing in the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
more than 40% of its total assets on the mainland was dropped in June 2008, when the new KMT government relaxed the rules to invest in Mainland China
Mainland China
Mainland China, the Chinese mainland or simply the mainland, is a geopolitical term that refers to the area under the jurisdiction of the People's Republic of China . According to the Taipei-based Mainland Affairs Council, the term excludes the PRC Special Administrative Regions of Hong Kong and...
. Dialogue through semi-official organisations (the SEF and the ARATS) reopened on June 12, 2008 on the basis of the 1992 Consensus, with the first meeting held in Beijing. Taiwan hopes to become a major operations center in East Asia. In addition, many businesses and areas in Taiwan hope to make money from mainland Chinese tourists if and when the three links are negotiated.
See also
- Made in TaiwanMade in TaiwanThe Made in Taiwan is the country of origin label affixed to products to indicate that the said product is made in the Republic of China, commonly known as Taiwan....
- Japanese post-war economic miracleJapanese post-war economic miracleThe Japanese post-war economic miracle is the name given to the historical phenomenon of Japan's record period of economic growth following World War II, spurred mainly by Japanese economic policy, in particular through the Ministry of International Trade and Industry...
- Miracle on the Han RiverMiracle on the Han RiverMiracle on the Han River refers to South Korea's highly accelerated export-fueled economic growth, including rapid industrialization, technological achievement, education boom, exponential rise in living standards, rapid urbanization, skyscraper boom, modernization, successful hosting of the 1988...
External links
- Official Website of Taiwan for WTO affairs, Documents
- Official Website of Taiwan for WTO affairs
- Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) and the WTO
- Cross-Strait Relations between China and Taiwan
- A New Era in Cross-Strait Relations? Taiwan and China in the WTO
- China’s Economic Leverage and Taiwan’s Security Concerns with Respect to Cross-Strait Economic Relations