Since the 1960s, the province has focused on industrial development. It has now formed an island-type industrial and commercial economy with processing for export as the mainstay, but has been impacted by the economic crisis of western capitalist countries from time to time. There are mainly light industries such as textiles, garments, food processing, sugar, electronics, etc. and industrial sectors such as machinery, iron and steel, shipbuilding, oil refining, chemicals, etc. There are processing and exporting zones in Kaohsiung, Taichung and Nanzi. Among them, Kaohsiung is the largest industrial zone in the province. Land transportation on Taiwan Island is well developed. The total length of the railroad is 1,229 kilometers, and there are many narrow-gauge railroads and special railroads for sugar companies. The main highway routes are the Ring Road, the Transcontinental Highway and the North-South Expressway. The western plain concentrates 90% of the transportation routes, with electrified railroads and highways from Keelung in the north to Kaohsiung in the south. Sea and air routes reach all continents of the world
Taiwan's economic development
Source: china-taiwan.com
Since 1949, Taiwan's economic development has roughly gone through four periods:
I.Economic Recovery Period (1949-1952)
At that time, Taiwan's population had increased dramatically, prices had soared, and industrial and agricultural production had almost come to a industrial and agricultural production almost came to a standstill, while military expenditures accounted for more than half of fiscal expenditures, making life difficult for the people and bringing the economy to the brink of collapse. In response, the Taiwan authorities adopted a series of policies and measures aimed at stabilizing society and restoring the economy: land reform, reform of the currency system, foreign exchange trade control, and prioritization of the development of the electric power, fertilizer, and textile industries, etc. In the 1950s, Taiwan's agricultural development was rapid, with an average annual growth rate of 4.7%. In addition, from the second half of 1950, the United States began to provide economic assistance to Taiwan, injecting large amounts of money to help Taiwan recover its economy. By 1952, Taiwan's economy had basically returned to its pre-World War II peak.
Second, the period of agricultural development (1952-1960)
Taiwan's economy at that time was basically based on agriculture, with a surplus of labor, a serious deficit in foreign trade and the balance of payments, an extreme shortage of foreign exchange, and an inability of the public to consume imported industrial products due to low income. With the guiding principle of seeking development through stability, the Taiwan authorities established the policy of fostering industry through agriculture and developing agriculture through industry. The land reform promoted the improvement of agricultural labor productivity, and agricultural products and their processed products accounted for a very high proportion of total exports, as high as 71.5% in 1957, becoming the main force for foreign exchange generation. The Taiwanese authorities, in turn, captured profits by means of unequal exchanges, such as fertilizer for grain and compulsory purchases, and transferred it to the industrial sector. In the industrial sector, the focus was on livelihood industries with low capital requirements, low technological requirements, and short factory building cycles, replacing imports with on-island production to suit the island's consumption level and to save foreign exchange expenditures, create more job opportunities, and alleviate the pressure on employment. It has formed the processing industries of agricultural and sideline products such as sugar, tea, pineapple and lemongrass oil, as well as the import substitution industries of cement, glass, wood products, paper making, fertilizer, textile, cooking oil, flour, plastic raw materials and products, man-made fibers, bicycles, sewing machines and household appliances.
Third, the period of export-oriented economic development (1960-1986)
Because of the narrowness of Taiwan's market, the market for the products of import-substituting industries at that time was already saturated, and continued development would lead to a lack of economic strength. Taiwan seized the opportunity of changes in the international division of labor at the time to take advantage of the international comparative advantage of low wages, and vigorously developed the processing and export industry to drive economic development, and successively amended or formulated policies and measures aimed at promoting exports, such as reforming foreign exchange trade, implementing the "Incentive Investment Regulations", encouraging private savings, implementing tax and financing incentives for export manufacturers, and setting up export processing centers. and financing incentives for export manufacturers, and the establishment of export processing zones and bonded warehouses. During this period, foreign investment played an important role in Taiwan's industrialization and export expansion, and private enterprises shifted from import substitution to export industries, becoming the main force of economic growth. Taiwanese enterprises imported production materials from Japan and exported industrial goods to the United States, creating a triangular trade relationship that depended on Japan for production and the United States for markets. Taiwan's industry developed at a rapid pace. From 1963 to 1973, the average annual growth rate of industry was as high as 18.3%, of which the average annual growth rate of manufacturing industry amounted to 20.1%, and the proportion of industrial output value in GDP increased from 26.9% in 1960 to 43.8% in 1973; and the proportion of industrial products in the export trade volume increased from 32.3% in 1960 to 84.6% in 1973. By this time, Taiwan's industry had established an industrial pillar based on export processing zones, with processing industries such as light textiles and home appliances as the core, thus leading to the development of the economy.
Fourth, the period of economic transformation (1986 to the present)
Since the 1980s, due to changes in Taiwan's internal and external economic environment, the NT dollar appreciated sharply against the U.S. dollar, wages also rose sharply, there was a shortage of labor, and the labor-intensive processing export industries gradually lost their comparative benefits and comparative advantages, leading to a low willingness to invest in the private sector, and the economy was in a predicament. For this reason, the Taiwan authorities proposed in 1986 the implementation of liberalization, internationalization and institutionalization of economic transformation, to further improve and perfect the market economy mechanism, and industrial upgrading and expansion of foreign trade markets other than the United States as a major adjustment to determine the communications, information, consumer electronics, semiconductors, precision instruments and automation, aerospace, advanced materials, special chemicals and pharmaceuticals, health care and pollution prevention and control. Ten emerging industries have been identified as the pillar industries. After nearly 10 years of economic transformation, Taiwan's economy has made some progress in liberalization and internationalization, and industrial upgrading has begun to bear fruit, with capital- and technology-intensive industries accounting for 61.5% of the manufacturing industry, among which the information industry has developed particularly prominently, with its output value ranking among the world's top. The center of gravity of Taiwan's foreign export market has also gradually shifted from Europe and the United States to Asia, with the proportion of exports to the United States dropping from 48.8% in 1984 to 23.7% in 1995, and the proportion of exports to Asia rising from 32.8% in 1988 to 52.6% in 1995. The structure of export products has also changed considerably, with electronics, information, machinery, electrical machinery and means of transportation products accounting for more than 50 per cent of total exports. Outward investment grew substantially and began to become a net capital-exporting region; cumulatively, by 1995, outward investment amounted to about US$30 billion. During this period, Taiwan's economic ties with the motherland and Hong Kong also became increasingly close.
The reasons for Taiwan's faster economic development are summarized as follows:
(1) It benefited from a large amount of U.S. economic aid as well as the development of the capitalist world economy in the postwar period. The U.S. from its own strategic interests, from 1950 to 1965 to Taiwan's economic assistance *** counted 1.5 billion U.S. dollars. 15 years, "the U.S. aid on average accounted for about 34% of Taiwan's gross investment, while compensating for the 91% of Taiwan's merchandise and labor services into the super". U.S. economic assistance to Taiwan is not limited to funds or materials, but also includes military assistance, low-interest loans, direct investment, technology transfer, and personnel support. The role of USAID in the process of Taiwan's economic development is not trivial. According to Taiwanese scholars, without USAID, "Taiwan's economy would have lagged behind at least 20-10 years from what it is now." In addition, the post-war economic boom in the West in the 1960s and 1970s provided a huge market for Taiwan to develop an export-oriented economy.
(2) The wealth and talents brought from the motherland played an unmissable role. When the ruling group of the Kuomintang was defeated and retreated from Taiwan, it transported 800,000 taels of gold from Shanghai as well as a large number of silver dollars and U.S. banknotes to Taiwan, and transferred 2 billion dollars by the Kong and Song families to U.S. banks, such as Citibank and Volkswagen, and brought a large number of various types of financial and economic talents with it. These funds and talents played an important role in the development of Taiwan's economy. In addition, the Kuomintang ruling group shipped a large number of machines and equipment to Taiwan.
(3) The people of Taiwan have made important contributions to economic development. The people of Taiwan were diligent, thrifty, hard-working, and made important contributions to Taiwan's efforts to raise the savings rate in order to gather capital and to develop international markets. Farmers have made sacrifices in the process of industrialization, and small and medium-sized entrepreneurs have become the protagonists of the export trade.
(4) The Taiwan authorities have formulated economic policies such as seeking development in stability. For example, in the development strategy, agriculture and labor-intensive industries were developed first, then capital- and technology-intensive industries; import-substitution industries were developed first, and then export-oriented industries were developed, which was a better combination of Taiwan's actual situation and effectively utilized the opportunities arising from changes in the international economic environment.
(5) The development of cross-Strait economic and trade relations has had a significant impact on Taiwan's economic development. Over the past 10 years or so, cross-strait economic exchanges and cooperation have taken on a certain scale, and a situation of complementarity and mutual benefit is taking shape, with the motherland having become the hinterland for Taiwan's economic development. Taiwan's huge annual surplus from cross-Strait trade has ensured the balance of its trade balance and increased its investment capacity on the island. A large number of Taiwan's labor-intensive enterprises have invested in the mainland, easing their difficulties in developing on the island and facilitating the transformation and upgrading of Taiwan's industries, especially the growth of high-tech industries. The rising share of the motherland in Taiwan's export share has reduced Taiwan's excessive dependence on the U.S. market for foreign trade, and has also played an important role in stabilizing Taiwan's economy.
Taiwan's economy has a high per capita GNP, but the domestic demand market is small, natural resources are small, and the scientific and technological base is weak, and by this constraint, the formation of a "shallow dish economy" characteristics. This feature is mainly manifested in the high degree of dependence on overseas markets and technology; in 1980, Taiwan's economic development dependence on foreign trade was as high as 95.6%, of which the dependence on export trade also amounted to 47.89%; in 1995, although the degree of dependence declined, it was still as high as 81.65%, of which the dependence on export trade was still 42.36%. In recent years, although Taiwan's industrial upgrading has achieved certain results, the key technology is still highly dependent on foreign countries, for example, the output of integrated circuit chips has jumped to the forefront of the world, but the key technology of circuit design is still mainly dependent on developed countries. Therefore, although Taiwan's industrial upgrading has made progress, there has been no breakthrough in overall industrial technology, and the basic pattern of weak capacity for independent development of industrial technology remains unchanged. Taiwan's economy has a high degree of external dependence and is subject to the influence and constraints of the external environment. In recent years, Taiwan's economy has been able to maintain moderate growth, and the effects of new market development and trade creation have been greater than those of technology creation.
For a long time, Taiwan's financial situation has been poor, the tax base has shrunk, and the annual growth rate of tax revenues has declined from 19.7% in 1992 to -2.8% in 1996. At the same time, expenditures at all levels of the public treasury and the "national treasury" grew rapidly, from 3.0% and 0.1% in 1993 to 9.6% and 7.6% in 1996, respectively. In the structure of expenditures, arms expenditures accounted for a large proportion of the fiscal budget, for example, "defense expenditures" (excluding the special budget for the purchase of armaments) accounted for 22.1 per cent of the 1996 budget; if administrative expenditures are included, the proportion of unproductive expenditures in the overall fiscal expenditures is very large. The unbalanced growth of fiscal revenues and expenditures has led to an ever-widening fiscal deficit, which amounted to NT$ 294.692 billion in 1992 and increased to NT$ 488.920 billion in 1995. The deteriorating fiscal situation has left the Taiwan authorities with limited financial capacity for infrastructure construction, and the repeated delays in the progress of construction of major public *** facilities have led to a serious lag in Taiwan's infrastructure development. In order to solve the problem of insufficient financial resources, the Taiwan authorities have adopted the method of issuing public debt, and the amount of public debt issued has grown rapidly, increasing from 18.0% of the yearly output in 1990 to 52.4% in 1996, and from 2.9% to 8.2% of the GNP. The excessive proportion of public debt aggravated inflationary pressure and led to the fiscal deficit being caught in a vicious circle of ever-increasing size.
Taiwan's economic development has also been affected by the island's fierce internal political disputes and unstable cross-strait relations. In recent years, Taiwan's political party disputes have been unusually intense and frequent, greatly affecting the formulation and implementation of relevant policies and regulations, and becoming one of the reasons for administrative inefficiency; coupled with the rampant "black gold politics", the progress and quality of many major projects have been negatively affected. At the same time, the unstable cross-strait relations caused by the secessionist policy of the Taiwan authorities have affected the willingness of Taiwan's private capital and foreign capital to invest in Taiwan.
In summary, the major problems facing Taiwan's economy are all deep-rooted political and economic structural problems. Although the Taiwan authorities have taken certain corresponding measures, some of which are not unhelpful, it is difficult to solve the problems fundamentally.