35,967 sq. km. (13,887 sq. mi.).
Cities (2006): Capital--Taipei (pop.
2.6 million). Other cities--(Kaohsiung 1.5 million), Taichung (1.0 million).
Two thirds of the island is largely mountainous with 100 peaks over 3,000 meters
Climate: Maritime subtropical.
Population (July, 2006 est.) 23.0 million.
Annual growth rate (2006
Languages: Mandarin Chinese (official), Taiwanese, Hakka.
Years compulsory--9. Attendance (2005)--99.4%. Literacy (2005)--97.3
Health: Infant mortality rate (2006 est.)--0.63%. Life expectancy
(2006 est.) male 74.67 yrs.; female 80.47 yrs.
Work force (2006 est.):10.6
Type: Multi-party democracy. There are four major parties forming two alliances
known as Pan-Blue and Pan-Green. The Pan-Blue includes the Kuomintang (KMT) and
the People First Party (PFP). The Pan-Green includes the Democratic Progressive
Party (DPP) and the Taiwan Solidarity Union (TSU). The Pan-Blue coalition holds
a slight majority of seats in the Legislative Yuan (LY).
25, 1946; last amended 2005.
Branches (Yuan): Executive, Legislative, Judicial,
Major political parties: Democratic Progressive Party
(DPP); Kuomintang (KMT or Nationalist Party); People First Party (PFP); Taiwan
Solidarity Union (TSU).
Suffrage: Universal over 20 years of age.
budget proposed (FY 2007): $50.8 billion.
Defense proposed (2007): 18.7 % of
(2006 est.): $364 billion.
Real annual growth rate (2006 est.): 4.3%.
capita GNP (2006): $16,024.
Unemployment (Jan-Aug. 2006) 3.9%.
Small deposits of coal, natural gas, limestone, marble and asbestos.
(1.7% of GDP): Major products--pork, rice, fruit and vegetables, sugarcane,
poultry, shrimp, eel.
Services: (73.3% of GDP). Industry (25.0% of GDP): Types--electronics
and computer products, chemicals and petrochemicals, basic metals, machinery,
textiles, transport equipment, plastics, machinery.
Trade (2005): Exports--$198
billion: electronics, optical & precision instruments, information and communications
products, textile products, basic metals, plastic and rubber products. Major
markets--U.S. $29 billion, PRC and Hong Kong $78 billion, Japan $15 billion.
Imports--$183 billion: electronics, optical & precision instruments,
information & communications products, machinery & electrical products,
chemicals, basic metals, transport equipment, crude oil. Major suppliers--Japan
$46 billion, PRC $20 billion, U.S. $21 billion. (Note: 2005 trade figures are
revised because Taiwan began early this year to include re-exports in its exports
and re-imports in its imports. End Note.)
has a population of 22.8 million. More than 18 million, the "native" Taiwanese,
are descendants of Chinese who migrated from Fujian and Guangdong Provinces on
the mainland, primarily in the 18th and 19th centuries. The "mainlanders," who
arrived in Taiwan after 1945, came from all parts of mainland China. About 370,000
aborigines inhabit the mountainous central and eastern parts of the island and
are believed to be of Malayo-Polynesian origin. Of Taiwan's total population,
approximately one million, or 4.4%, currently reside in Mainland China.
A 9-year public educational system has been in effect since 1979. Six years
of elementary school and 3 years of junior high are compulsory for all children.
About 93.5% of junior high graduates continue their studies in either a senior
high or vocational school. Taiwan has an extensive higher education system with
more than 150 institutions of higher learning. Each year, over 100,000 students
attempt to enter higher education institutes; about 75% of the candidates are
admitted to a college or university. Opportunities for graduate education are
expanding in Taiwan, but many students travel abroad for advanced education. In
FY 2006, over 16,000 U.S. student visas were issued to Taiwan passport holders.
A large majority of people in Taiwan speak Mandarin Chinese, which has been
the medium of instruction in the schools for more than five decades. Native Taiwanese
and many others also speak one of the Southern Fujianese dialects, Min-nan, also
known as Taiwanese. Recently there has been a growing use of Taiwanese in the
broadcast media. The Hakka, who are concentrated in several counties throughout
Taiwan, have their own distinct dialect. As a result of the half-century of Japanese
rule, many older people also can speak Japanese. The method of Chinese romanization
most commonly used in Taiwan is the Wade-Giles system. In 2002, Taiwan authorities
announced adoption of the pinyin system also used on the Mainland to replace the
Wade-Giles system, but its use is not consistent throughout society, often resulting
in two or more romanizations for the same place or person.
According to Taiwan's Interior Ministry figures, there are about 11.2 million
religious believers in Taiwan, with more than 75% identifying themselves as Buddhists
or Taoists. At the same time, there is a strong belief in Chinese folk religion
throughout the island. These are not mutually exclusive, and many people practice
a combination of the three. Confucianism also is an honored school of thought
and ethical code. Christian churches have been active on Taiwan for many years,
and today, the island has more than 600,000 Christians, a majority of whom are
culture is a blend of its distinctive Chinese heritage and Western influences.
Fine arts, folk traditions, and popular culture embody traditional and modern,
Asian, and Western motifs. One of Taiwan's greatest attractions is the Palace
Museum, which houses over 650,000 pieces of Chinese bronze, jade, calligraphy,
painting, and porcelain. This collection was moved from the mainland in 1949 when
Chiang Kai-shek's Nationalist Party (KMT) fled to Taiwan. The collection is so
extensive that only 1% is on display at any one time.
aboriginal peoples, who originated in Austronesia and southern China, have lived
on Taiwan for 12,000 to 15,000 years. Significant migration to Taiwan from the
Chinese mainland began as early as A.D. 500. Dutch traders first claimed the island
in 1624 as a base for Dutch commerce with Japan and the China coast. Two years
later, the Spanish established a settlement on the northwest coast of Taiwan,
which they occupied until 1642 when they were driven out by the Dutch. Dutch colonists
administered the island and its predominantly aboriginal population until 1661.
The first major influx of migrants from the Chinese mainland came during the Dutch
period, sparked by the political and economic chaos on the China coast during
the Manchu invasion and the end of the Ming Dynasty.
1664, a Chinese fleet led by the Ming loyalist Cheng Ch'eng-kung (Zheng Chenggong,
known in the West as Koxinga) retreated from the mainland and occupied Taiwan.
Cheng expelled the Dutch and established Taiwan as a base in his attempt to restore
the Ming Dynasty. He died shortly thereafter, and in 1683, his successors submitted
to Manchu (Qing Dynasty) control. From 1680, the Qing Dynasty ruled Taiwan as
a prefecture and, in 1875, divided the island into two prefectures, north and
south. In 1887 the island was made into a separate Chinese province.
the 18th and 19th centuries, migration from Fujian and Guangdong provinces steadily
increased, and Chinese supplanted aborigines as the dominant population group.
In 1895, a weakened Imperial China ceded Taiwan to Japan in the Treaty of Shimonoseki
following the first Sino-Japanese war.
During its 50 years (1895-1945) of
colonial rule, Japan expended considerable effort in developing Taiwan's economy.
At the same time, Japanese rule led to the "Japanization" of the island, including
compulsory Japanese education and forcing residents of Taiwan to adopt Japanese
At the end of World War II in
1945, Taiwan reverted to Chinese rule. During the immediate postwar period, the
Nationalist Chinese (KMT) administration on Taiwan was repressive and corrupt,
leading to local discontent. Anti-mainlander violence flared on February 28, 1947,
prompted by an incident in which a cigarette seller was injured and a passerby
was shot to death by Nationalist authorities. The island-wide rioting was brutally
put down by Nationalist Chinese troops, who killed thousands of people. As a result
of the February 28 Incident, the native Taiwanese felt a deep-seated bitterness
toward the mainlanders. For 50 years the KMT authorities suppressed accounts of
this episode in Taiwan history. In 1995 a monument was dedicated to the victims
of the "2-28 Incident," and for the first time, Taiwan's leader, President Lee
Teng-hui, publicly apologized for the Nationalists' brutality.
before World War II and continuing afterwards, a civil war was fought on the mainland
between Chiang Kai-shek's KMT government and the Chinese Communist Party led by
Mao Zedong. When the civil war ended in 1949, 2 million refugees, predominately
from the Nationalist government, military, and business community, fled to Taiwan.
In October 1949 the People's Republic of China (PRC) was founded on the mainland
by the victorious communists. Chiang Kai-shek established a "provisional" KMT
capital in Taipei in December 1949. During the 1950s, the KMT authorities implemented
a far-reaching and highly successful land reform program on Taiwan. They redistributed
land among small farmers and compensated large landowners with commodities certificates
and stock in state-owned industries. Although this left some large landowners
impoverished, others turned their compensation into capital and started commercial
and industrial enterprises. These entrepreneurs were to become Taiwan's first
industrial capitalists. Together with refugee businessmen from the mainland, they
managed Taiwan's transition from an agricultural to a commercial, industrial economy.
has developed steadily into a major international trading power with nearly $381
billion in two-way trade (2005) and the world's 17th largest economy.
Taiwan's accession to the World Trade Organization in 2002 has expanded its trade
opportunities and further strengthened its standing in the global economy. Tremendous
prosperity on the island has been accompanied by economic and social stability.
Chiang Kai-shek's successor, his son Chiang Ching-kuo, began to liberalize Taiwan's
political system, a process that continued when President Lee Teng-hui took office
in 1988. The direct election of Lee Teng-hui as president in 1996 was followed
by opposition Democratic Progressive Party candidate Chen Shui-bian's election
victory in March 2000. Chen was re-elected in March 2004 in a tightly contested
authorities in Taipei exercise control over Taiwan, Kinmen, Matsu, the Penghus
(Pescadores) and several other smaller islands. Taiwan is divided into counties,
provincial municipalities, and two special municipalities, Taipei and Kaohsiung.
At the end of 1998, the Constitution was amended to make all counties and cities
directly administered by the Executive Yuan. From 1949 until 1991, the authorities
on Taiwan claimed to be the sole legitimate government of all of China, including
the mainland. In keeping with that claim, when the Nationalists moved to Taiwan
in 1949, they re-established the full array of central political bodies, which
had existed on the mainland. While much of this structure remains in place, the
authorities on Taiwan in 1991 abandoned their claim of governing mainland China,
stating that they do not "dispute the fact that the PRC controls mainland China."
first National Assembly, elected on the mainland in 1947 to carry out the duties
of choosing the President and amending the constitution, was re-established on
Taiwan when the KMT moved. Because it was impossible to hold subsequent elections
to represent constituencies on the mainland, representatives elected in 1947-48
held these seats "indefinitely." In June l990, however, the Council of Grand Justices
mandated the retirement, effective December 1991, of all remaining "indefinitely"
elected members of the National Assembly and other bodies.
second National Assembly, elected in 1991, was composed of 325 members. The majority
were elected directly; 100 were chosen from party slates in proportion to the
popular vote. This National Assembly amended the Constitution in 1994, paving
the way for the direct election of the President and Vice President the first
of which was held in March 1996. In April 2000, the members of the National Assembly
voted to permit their terms of office to expire without holding new elections.
The National Assembly elected in May 2005 voted to abolish itself the following
month, leaving Taiwan with a unicameral legislature. The President is both leader
of Taiwan and Commander-in-Chief of its armed forces. The President has authority
over four of the five administrative branches (Yuan): Executive, Control, Judicial,
and Examination. The President appoints the President of the Executive Yuan, who
also serves as the Premier. The Premier and the cabinet members are responsible
for government policy and administration.
main lawmaking body, the Legislative Yuan (LY), was originally elected in the
late 1940s in parallel with the National Assembly. The first LY had 773 seats
and was viewed as a "rubber stamp" institution. The second LY was not elected
until 1992. The third LY, elected in 1995, had 157 members serving 3-year terms,
while the fourth LY, elected in 1998, was enlarged to 225 members. The LY has
greatly enhanced its standing in relation to the Executive Yuan and has established
itself as a major player on the central level. With increasing strength, size,
and complexity, the LY now mirrors Taiwan's recently liberalized political system.
In the 1992 and 1995 elections, the main opposition party--the Democratic Progressive
Party (DPP)--challenged the half-century of KMT dominance of the Legislature.
In both elections, the DPP won a significant share of the LY seats, leaving only
half of the LY seats in the hands of the KMT. In 2001, the DPP won a plurality
of LY seats – 88 to KMT's 66, PFP’s 45 seats, TSU’s 13, and other parties’ 13.
In the December 2004 LY election, the Pan-Blue coalition won a slender majority
of 114 of the 225 seats (later increased to 115) compared to the Pan-Green coalition's
101 (later reduced to 111 and 97 seats, respectively, of the 220 occupied seats).
1994, when the National Assembly voted to allow direct popular election of the
President, the LY passed legislation allowing for the direct election of the Governor
of Taiwan Province and the mayors of Taipei and Kaohsiung Special Municipalities.
These elections were held in December 1994, with the KMT winning the Governor
and Kaohsiung Mayor posts, and the DPP’s Chen Shui-Bian winning the Taipei Mayor's
position. In 1998, the KMT's Ma Ying-jeou wrestled back control of the mayorship
of Taipei from Chen Shui-bian, and DPP leader Frank Hsieh defeated the KMT incumbent
to become Mayor of Kaohsiung. Additionally, in a move to streamline the administration,
the position of elected Governor and many other elements of the Taiwan Provincial
Government were eliminated.
Yuan (CY) monitors the efficiency of public service and investigates instances
of corruption. The 29 Control Yuan members are appointed by the President and
approved by the National Assembly; they serve 6-year terms. In recent years, the
Control Yuan has become more activist, and it has conducted several major investigations
and impeachments. Since December 2004, however, the pan-Blue dominated LY has
refused to approve the new slate of CY members proposed by President Chen, leaving
the CY inactive.
The Judicial Yuan (JY)
administers Taiwan's court system. It includes a 16-member Council of Grand Justices
(COGJ) that interprets the constitution. Grand Justices are appointed by the President,
with the consent of the National Assembly, to 9-year terms.
Examination Yuan (EY) functions as a civil service commission and includes two
ministries: the Ministry of Examination, which recruits officials through competitive
examination, and the Ministry of Personnel, which manages the civil service. The
President appoints the President of the Examination Yuan.
Vice President--Annette Lu (Lu Hsiu-lien)
Vice Premier--Tsai Ing-wen
Legislative Yuan President--Wang
Judicial Yuan President--Weng Yueh-sheng
Foreign Minister--James Huang (Huang Chih-fang)
Minister of Justice--Shih
Mainland Affairs Council Chairperson--Joseph Wu (Wu Chao-hsieh)
Information Office Minister--Cheng Wen-tsan
Cabinet Spokesperson--Cheng Wen-tsan
Until 1986, Taiwan's political system was effectively controlled
by one party, the Kuomintang (KMT), the chairman of which was also Taiwan's President.
As the ruling party, the KMT was able to fill appointed positions with its members
and maintain political control of the island.
1986, the KMT's hold on power was challenged by the emergence of competing political
parties. Before 1986, candidates opposing the KMT ran in elections as independents
or "nonpartisans." Before the 1986 island-wide elections, many "nonpartisans"
grouped together to create Taiwan's first new political party, the Democratic
Progressive Party (DPP). Despite the official ban on forming new political parties,
Taiwan authorities did not prohibit the DPP from operating, and in the 1986 island-wide
elections, DPP and independent candidates captured more than 20% of the vote.
In 1987, President Chiang Ching-kuo lifted the emergency decree, which had been
in place since 1948 and which had granted virtually unlimited powers to the President
for use in the anti-communist campaign. This decree provided the basis for nearly
four decades of martial law under which individuals and groups expressing dissenting
views were dealt with harshly. Expressing views contrary to the authorities' claim
to represent all of China or supporting independent legal status for Taiwan was
treated as sedition. Since ending martial law, Taiwan has taken dramatic steps
to improve respect for human rights and create a democratic political system.
Almost all restrictions on the press have ended, restrictions on personal freedoms
have been relaxed, and the prohibition against organizing new political parties
has been lifted. Lee Teng-hui succeeded Chiang Ching-kuo as President when Chiang
died on January 13, 1988. The Civic Organizations Law passed in 1989 allowed for
the formation of new political parties, thereby legalizing the DPP, and its support
and influence increased. Lee was elected by the National Assembly to a 6-year
term in 1990, marking the final time a President was elected by the National Assembly.
In the 1992 Legislative Yuan elections, the DPP won 51 seats in the 161-seat body.
While this was only half the number of KMT seats, it made the DPP's voice an important
factor in legislative decisions. Winning the Taipei mayor's position in December
1994 significantly enhanced the DPP's image. The DPP continued its strong showing
in the 1995 LY race, winning 45 of the 157 seats to the KMT's 81. In 1996, Lee
Teng-hui was elected President and Lien Chan Vice President in the first direct
election by Taiwan voters. In the November 1997 local elections, the Democratic
Progressive Party (DPP) won 12 of the 23 county magistrate and city mayor contests
to the Kuomintang (KMT)'s 8, outpolling the KMT for the first time in a major
election. In the 2001 LY elections, the DPP won a plurality of seats for the first
time. In March 2000, DPP candidate Chen Shui-bian became the first opposition
party candidate to win the presidency. His victory resulted in the first-ever
transition of the presidential office from one political party to another, validating
Taiwan's democratic political system. In a hotly contested election on March 20,
2004, President Chen Shui-bian was re-elected by 50.1% of the popular vote to
a second term. The election was marred by a shooting incident the day before the
election during which President Chen and his running mate Vice President Annette
Lu were slightly wounded. While the opposition contested the results, it was the
first time that the DPP had won an outright majority in an island-wide election.
March election also included a "defensive referendum." Historically, the issue
of referenda has been closely tied to the question of Taiwan independence, and
thus has been a sensitive issue in cross Strait relations. There were two referenda
before the voters on March 20. The first asked in light of the PRC missile threat
whether Taiwan should purchase anti-missile systems. The second asked whether
Taiwan should adopt a "peace framework" for addressing cross Strait differences
with the PRC. However both referenda failed to obtain support from over 50% of
registered voters, as required to be valid.
President Chen Shui-bian called
for major constitutional reforms by 2006 – later changed to 2008 – aimed at further
reducing layers of government, and making other structural changes aimed at improving
governance. The People's Republic of China has accused Chen of using the constitution
issue to move Taiwan towards independence. Chen pledged, however, in his May 20,
2004 inaugural address not to use constitutional reform to alter the constitution's
approach to Taiwan’s status vis-à-vis China.
final National Assembly passed a set of constitutional amendments in June, 2005
that will halve the number of LY seats from 225 to 113 and create single-member
legislative election districts beginning with the next legislative election scheduled
for 2007. The constitutional revisions also abolished the National Assembly and
provided for the public to confirm or reject future constitutional amendments
passed by the LY. President Chen has called for "Round Two" of constitutional
revision focusing on the form of government (presidential or parliamentary, 5-branch
or 3-branch) and on human, labor, and aborigine rights. He has pledged not to
include independence or name change in his proposed constitutional revisions.
the December 2004 Legislative election, the ruling DPP won a plurality with 89
of the 225 seats, gaining 2 seats more than it did in 2001. The opposition KMT
won 79 seats, or 11 more than it did in 2001. The KMT's "pan-Blue" coalition partner,
the PFP, won only 34, 12 fewer than it won in 2001, while the DPP's partner, TSU
won 12 seats. The New Party won one seat. The ruling "pan-Green" coalition's inability
to secure a majority has left the LY in virtual gridlock since the election. The
KMT won a landslide victory in December 2005 local elections, however, winning
14 of the 23 city mayor and county magistrate races to the ruling DPP's 6.
In addition to the KMT (described above in 'History' and 'Political
Conditions'), there are three other major parties. The DPP, membership is made
up largely of native Taiwanese, and its platform includes outspoken positions
on some of the most sensitive issues in Taiwan politics. For example, the DPP
maintains that Taiwan is an entity separate from mainland China, in contrast to
the KMT position that Taiwan and the mainland, though currently divided, are both
part of "one China." In sharp contrast to the tenets of both KMT and PRC policy,
a number of ranking DPP officials openly advocate independence for Taiwan.
People First Party (PFP) was formed in the wake of the March 2000 presidential
election, composed of former KMT members who supported former KMT Taiwan Provincial
Governor James Soong's presidential bid. PFP and KMT subsequently formed the "Pan-Blue"
Alliance to oppose the DPP government. Former KMT President Lee Teng-hui, in turn,
broke with the KMT and formed the pro-independence Taiwan Solidarity Union (TSU)
in 2001. The TSU, which advocates changing Taiwan's official name and completely
replacing the 1947 constitution, allied itself with the DPP as part of the ruling
Taiwan and the
Despite differences between Taiwan and the PRC, contact between
the two sides of the Taiwan Strait has grown significantly over the past decade.
Taiwan has continued to relax restrictions on unofficial contacts with the PRC,
and cross-Strait interaction has mushroomed. In January 2001, Taiwan formally
allowed the "three mini-links" (direct trade, travel, and postal links) from Quemoy
and Matsu Islands to Fujian Province and permitted direct cross-strait trade in
February 2002. Cross-Strait trade has grown rapidly over the past 10 years. China
is Taiwan's largest trading partner, and Taiwan is China's fifth largest. Estimates
of Taiwan investment on the mainland, both officially approved by Taiwan authorities
and investment made by Taiwan firms through third parties, start from $100 billion,
making Taiwan and Hong Kong the two largest investors. This trade runs heavily
in Taiwan's favor and continues to grow, providing another engine for the island's
economy. The trend in cross-Strait economic interaction is one of steady growth
with, so far, only temporary setbacks due to political factors such as the PRC’s
March 2005 passage of an Anti-Secession Law. In August 2001, President Chen accepted
the recommendation of the Economic Development Advisory Council to set aside the
"no haste, be patient" policy of the Lee administration and replace it with an
"active opening, effective management policy." However, in January 2006, President
Chen reversed the policy to "active management, effective opening." In February
2003, Taiwan and the PRC agreed to allow Taiwan carriers to fly non-stop via Hong
Kong or Macao to bring Taiwan residents on the mainland home for the Lunar New
Year holiday. The two sides agreed to conduct Lunar New Year charter flights again
in 2005, with flights operated by both Taiwan and P.R.C. carriers flying over,
but not having to land in, Hong Kong or Macau. The two sides agreed on an expanded
series of Lunar New Year charter flights in January-February 2006, and in June
2006 regularized these charter flights to include the other 3 major holidays -
Dragon Boat festival, Mid-Autumn festival and January 1 New Year.
development of semiofficial cross-Strait relations has been halting. Prior to
April 1993, when talks were held in Singapore between the heads of two private
intermediary organizations--Taiwan's Straits Exchange Foundation (SEF) and the
PRC’s Association for Relations Across the Taiwan Strait (ARATS)--there had been
some lower-level exchanges between the two sides of the Strait. The April 1993
SEF-ARATS talks primarily addressed technical issues relating to cross-Strait
interactions. Lower-level talks continued on a fairly regular basis until they
were suspended by Beijing in 1995 after President Lee's U.S. visit. Unofficial
exchanges resumed in 1997 through informal meetings between personnel of the two
sides' unofficial representative organizations. Direct SEF-ARATS contacts resumed
in April 1998, and SEF Chairman Koo Chen-fu visited the mainland in October 1998.
A planned visit by ARATS Chairman Wang Daohan to Taiwan in the fall, however,
was postponed following statements made by then-President Lee Teng-hui that relations
between the PRC and Taiwan should be conducted as "state-to-state" or at least
as "special state-to-state relations." Since his May 20, 2000 inauguration, President
Chen has called for resuming the cross-Strait dialogue without any preconditions.
President Chen has stated that such talks should be conducted in the spirit of
the 1992 Hong Kong talks, a reference to a meeting the two sides held to discuss
how to handle political barriers to cross-Strait interaction. ThePRC has responded
that the Chen administration must acknowledge that the two sides reached a consensus
that there is only "one China" before any dialogue can be restarted. In his May
20, 2004 inaugural address, President Chen recognized the PRC's insistence on
"one China" but stopped short of endorsing the concept. He called for a new "Cross-Strait
Framework for Peace and Stability" and enhanced political, economic, and social
exchanges between the two sides. In the face of the "one China" recognition obstacle
and Taiwan's resentment over the PRC's March 2005 "Anti-Secession Law," Taipei
and Beijing have been cautiously feeling each other out on a series of smaller,
intermediary steps, including cross-Strait cargo and passenger charter flights,
sale of Taiwan agricultural products in the PRC, and PRC tourists visiting Taiwan.
The United States has welcomed and encouraged the cross-Strait dialogue as a process
which contributes to a reduction of tension and to an environment conducive to
the eventual peaceful resolution of the outstanding differences between the two
sides. The United States believes that differences between Taipei and Beijing
should be resolved by the people on both sides of the Strait themselves. The United
States has consistently stated that its abiding interest is that the process be
five decades of hard work and sound economic management, Taiwan has transformed
itself from an underdeveloped, agricultural island to an economic power that is
a leading producer of high-technology goods. In the 1960s, foreign investment
in Taiwan helped introduce modern, labor-intensive technology to the island, and
Taiwan became a major exporter of labor-intensive products. In the 1980s, focus
shifted toward increasingly sophisticated, capital-intensive and technology-intensive
products for export and toward developing the service sector. At the same time,
the appreciation of the New Taiwan dollar (NT$), rising labor costs, and increasing
environmental consciousness in Taiwan caused many labor-intensive industries,
such as shoe manufacturing, to move to the Chinese mainland and Southeast Asia.
Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early
1960s to an aid donor and major foreign investor, especially in Asia. Taiwan is
now a creditor economy, holding the world's third largest stock of foreign exchange
reserves ($261 billion as of August 2006). Although Taiwan enjoyed sustained economic
growth, full employment, and low inflation for many years, in 2001, the combination
of the slowing global economy, weaknesses in parts of the financial sector, and
sagging consumer and business confidence in the government's economic policymaking
resulted in the first recession since 1952. The economy began to recover in 2002,
but the outbreak of severe acute respiratory syndrome (SARS) slowed growth to
3.4% in 2003. The world economic upturn drove growth in 2004 to 6.1%. However,
slower world growth in 2005, higher energy prices and interest rates, and excess
inventory dragged 2005 growth to 4%. Continued expansion of exports will sustain
Taiwan's economic growth above 4% in 2006 and 2007.
Foreign trade has been the engine of Taiwan's rapid growth during
the past 50 years. Taiwan's economy remains export-oriented, so it depends on
an open world trade regime and remains vulnerable to fluctuations in the world
economy. The total value of trade increased more than five-fold in the 1960s,
nearly ten-fold in the 1970s, and doubled again in the 1980s. The 1990s saw a
more modest, slightly less than two-fold, growth. In the first half of the 2000’s,
exports grew 60%. Export composition changed from predominantly agricultural commodities
to industrial goods (now 98%). The electronics sector is Taiwan's most important
industrial export sector and is the largest recipient of U.S. investment. Taiwan
became a member of the World Trade Organization (WTO) as a special customs territory
in January 2002.
Taiwan firms are the
world's largest supplier of computer monitors and leaders in PC manufacturing.
Textile production, though of declining importance as Taiwan loses its competitive
advantage in labor-intensive markets, is another major industrial export sector.
Imports are dominated by raw materials and capital goods, which account for more
than 90% of the total. Taiwan imports coal, oil and gas to meet most of its energy
needs. Reflecting the large Taiwan investment in the mainland, China supplanted
the United States as Taiwan's largest trade partner in 2003. In 2005, China (including
Hong Kong) accounted for over 26% of Taiwan's total trade and almost 40% of Taiwan's
exports. Japan was Taiwan's second-largest trading partner with 16% of total trade,
including 25% of Taiwan's imports. The U.S. is now Taiwan's third-largest trade
partner, taking 15% of Taiwan's exports and supplying 11.6% of its imports. Taiwan
is the United States' eighth-largest trading partner; Taiwan's two-way trade with
the United States amounted to $56 billion in 2004 and rose 1% to $57 billion in
2005. Imports from the United States consist mostly of agricultural and industrial
raw materials as well as machinery and equipment. Exports to the United States
are mainly electronics and consumer goods. The United States, Hong Kong, the PRC,
and Japan account for nearly 61.4% of Taiwan's exports, and the United States,
Japan, and the PRC provide almost 50% of Taiwan's imports. As Taiwan's per capita
income level has risen, demand for imported, high-quality consumer goods has increased.
The U.S. trade deficit with Taiwan in 2003 was $14 billion, fell slightly to $13
billion in 2004, and leveled off to $13 billion in 2005. The lack of formal diplomatic
relations with all but a score of its trading partners appears not to have seriously
hindered Taiwan's rapidly expanding commerce, but has made free trade agreements
extremely difficult to pursue. Taiwan maintains trade offices in nearly 100 countries
with which it does not have official relations. Taiwan is a member of the Asian
Development Bank, the WTO, and the Asia-Pacific Economic Cooperation (APEC) forum.
Taiwan is also an observer at the OECD. These developments reflect Taiwan's economic
importance and its desire to become further integrated into the global economy.
only about one-quarter of Taiwan's land area is arable, virtually all farmland
is intensely cultivated, with some areas suitable for two and even three crops
a year. However, increases in agricultural production have been much slower than
industrial growth. Agriculture only comprises about 1.7% of Taiwan's GDP. Taiwan's
main crops are rice, sugarcane, fruit, and vegetables. While largely self-sufficient
in rice production, Taiwan imports large amounts of wheat, corn, and soybeans,
mostly from the United States. Poultry and pork production are mainstays of the
livestock sector and the major demand drivers for imported corn and soybeans.
Rising standards of living have led to increased demand for a wide variety of
high-quality food products, much of it imported. Overall, U.S. agricultural and
food products account for more than 30% of Taiwan’s agricultural import demand.
U.S. food and agricultural exports total about $2.5 billion annually, making Taiwan
the United States’ sixth-largest agricultural export destination. Taiwan’s agricultural
exports include frozen fish, aquaculture and sea products, canned and frozen vegetables,
and grain products. Taiwan’s imports of agricultural products have increased since
its WTO accession in 2002, and it is slowly liberalizing previously protected
now faces many of the same economic issues as other developed economies. With
the prospect of continued relocation of labor-intensive industries to countries
with cheaper work forces, Taiwan's future development will have to rely on further
transformation to a high technology and service-oriented economy. In recent years,
Taiwan has successfully diversified its trade markets, cutting its share of exports
to the United States from 49% in 1984 to 15% in 2005 and 2006. However, a significant
proportion of Taiwan's rapidly growing exports to the PRC are ultimately dependent
on consumer demand in the U.S. Taiwan firms are increasingly acting as management
centers that take in orders, produce them in Taiwan, the Mainland or South East
Asia and then ship the final products to the U.S. Taiwan's accession to the WTO
and its desire to become an Asia-Pacific "regional operations center" are spurring
further economic liberalization.
proportion to its population, Taiwan still maintains a large military establishment
accounting for 15.3% of the central budget and 2.1% of GDP in FY 2006. However,
the defense budget as a proportion of GDP has shrunk significantly over the past
decade from about 22.5% of the central budget and 4% of GDP in 1994. (Taiwan has
pledged to increase its military spending to 3% of GDP. In the proposed 2007 central
budget proposal, military expenditures would increase to 19% of the total central
budget, or between 2.6% and 2.85% of GDP.) The military's primary mission is the
defense of Taiwan against the PRC, which is seen as the predominant threat and
which has not renounced the use of force against Taiwan. Taiwan's armed forces
were reduced as part of a reform initiative from 1997 to 2001, going from about
450,000 to 385,000, with further reductions since then bringing the total force
level down to just under 300,000. Registered reservists reportedly totaled 3,870,000
in 1997. Conscription remains universal for qualified males reaching age 18.
armed forces are equipped with weapons obtained primarily from the United States.
In recent years, however, Taiwan also has procured some weapons from other Western
nations and has stressed military "self-reliance," which has resulted in the growth
of indigenous military production in certain fields. Taiwan's legislature is currently
debating the approval of defense budget proposals to purchase defensive weapons
systems the U.S. agreed to sell Taiwan in 2001 and earlier. The proposals would
provide funds to purchase the Patriot Advanced Capability (either PAC-3 or PAC-2
upgraded) missile defense system, P-3C maritime patrol aircraft, and diesel-electric
submarines. These systems would give Taiwan key capabilities in missile defense
and anti-submarine warfare to remedy vulnerabilities in countering the PRC's accelerated
military modernization. Taiwan adheres to the principles of the nuclear Non-Proliferation
Treaty and has stated that it does not intend to produce nuclear weapons.
The People's Republic of China replaced Taiwan at the United
Nations in 1971, and Taiwan's diplomatic position has continued to erode, as many
countries changed their official recognition from Taipei to Beijing. As of fall
2006, Taiwan had formal diplomatic ties with 24 countries. At the same time, Taiwan
has cultivated informal ties with most countries to offset its diplomatic isolation
and to expand its economic relations. A number of nations have set up unofficial
organizations to carry out commercial and other relations with Taiwan. Including
its official overseas missions and its unofficial representative and/or trade
offices, Taiwan is represented in 122 countries. Recently, Taiwan has lobbied
strongly for admission into the United Nations and other international organizations,
such as the WHO. The PRC opposes Taiwan's membership in such organizations, most
of which require statehood for membership, because Beijing considers Taiwan to
be a province of China, not a separate sovereign state.
On January 1, 1979, the United States changed its diplomatic
recognition from Taipei to Beijing. In the U.S.-PRC Joint Communiqué that announced
the change, the United States recognized the Government of the People's Republic
of China as the sole legal government of China and acknowledged the Chinese position
that there is but one China and Taiwan is part of China. The Joint Communiqué
also stated that within this context the people of the United States will maintain
cultural, commercial, and other unofficial relations with the people on Taiwan.
On April 10, 1979, President Carter signed into law the Taiwan Relations Act
(TRA), which created domestic legal authority for the conduct of unofficial relations
with Taiwan. U.S. commercial, cultural, and other interaction with the people
on Taiwan is facilitated through the American Institute in Taiwan (AIT), a private
nonprofit corporation. The Institute has its headquarters in the Washington, DC
area and has offices in Taipei and Kaohsiung. It is authorized to issue visas,
accept passport applications, and provide assistance to U.S. citizens in Taiwan.
A counterpart organization, the Taipei Economic and Cultural Representative Office
in the United States (TECRO), has been established by the Taiwan authorities.
It has its headquarters in Taipei, the representative branch office in Washington,
DC, and 11 other Taipei Economic and Cultural Offices (TECO) in the continental
U.S. and Guam. The Taiwan Relations Act (TRA) continues to provide the legal basis
for the unofficial relationship between the U.S. and Taiwan, and enshrines the
U.S. commitment to assisting Taiwan maintain its defensive capability.
de-recognition, the United States terminated its Mutual Defense Treaty with Taiwan.
However, the United States has continued the sale of appropriate defensive military
equipment to Taiwan in accordance with the Taiwan Relations Act, which provides
for such sales and which declares that peace and stability in the area are in
U.S. interests. Sales of defensive military equipment also are consistent with
the 1982 U.S.-PRC Joint Communiqué. In this document, the United States stated
that "it does not seek to carry out a long-term policy of arms sales to Taiwan"
and that U.S. arms sales would "not exceed, either in qualitative or in quantitative
terms, the level of those supplied in recent years," and that the U.S. intends
"gradually to reduce its sale of arms to Taiwan." The PRC, in the 1982 Communiqué,
stated that its policy was to strive for a peaceful resolution of the Taiwan question.
United States position on Taiwan is reflected in the Three Communiqués and the
Taiwan Relations Act (TRA). The U.S. insists on the peaceful resolution of cross-Strait
differences and encourages dialogue to help advance such an outcome. The U.S.
does not support Taiwan independence. President Bush stated y on December 9, 2003
that the United States is opposed to any attempt by either side to unilaterally
alter the status quo in the Taiwan Strait. The United States has endorsed dialogue
and exchanges between the two sides and has encouraged the PRC to engage the democratically
elected leadership of Taiwan, as well as the opposition.
commercial ties with Taiwan have been maintained and have expanded since 1979.
Taiwan continues to enjoy Export-Import Bank financing, Overseas Private Investment
Corporation guarantees, normal trade relations (NTR) status, and ready access
to U.S. markets. In recent years, AIT commercial dealings with Taiwan have focused
on expanding market access for American goods and services. AIT has been engaged
in a series of trade negotiations, which have focused on protection of intellectual
property rights, market access, and issues relating to Taiwan's accession to the
WTO, which occurred in 2002.
diplomatic relations with the PRC has been recognized to be in the long-term interest
of the United States by seven consecutive administrations; however, maintaining
strong, unofficial relations with Taiwan also a major U.S. goal, in line with
our desire to further peace and stability in Asia. In keeping with our one-China
policy, the U.S. does not support Taiwan independence, but it does support Taiwan's
membership in appropriate international organizations, such as the WTO, APEC forum,
and the Asian Development Bank, where statehood is not a requirement for membership.
In addition, the U.S. supports appropriate opportunities for Taiwan's voice to
be heard in organizations where its membership is not possible.
American Institute in Taiwan
1700, 1700 North Moore Street
Arlington, VA 22209
American Institute in
No. 7, Lane 134, Hsin Yi Road
Section 3, Taipei,
Institute in Taiwan
5F, No. 2, Chung Cheng 3rd Road
Kaohsiung, Taiwan 800
Taipei Economic and Cultural Representative Office
4201 Wisconsin Avenue, NW
Washington, DC 20016-2137
AND BUSINESS INFORMATION
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