TAIWAN'S ECONOMY

               TAIWAN'S ECONOMY

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Taiwan: economic overview Economic overview of Taiwan.

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Throughout its history Taiwan has experienced periods of economic boom and bust. Several centuries ago the island was a major trading centre in East Asia, and it prospered. Taiwan grew economically under Dutch rule in the mid-1600s and in the late 1800s under Chinese rule. It did well economically as a colony of Japan from 1895 to 1945 but experienced decline in the years immediately after World War II.

In the late 1940s and early 1950s, many economists regarded Taiwan’s economic situation with considerable pessimism. That assessment was based on Taiwan’s unfavourable land-to-population ratio, its lack of natural resources, a shortage of capital, and a discredited government. 

However, that perception did not turn out to be true. Taiwan’s economic growth beginning in the mid-1960s was so spectacular that it acquired the appellation “economic miracle.” In the 1990s Taiwan’s economy slowed, but its growth remained good, even during the East Asian financial crisis of 1997.

 In 2001 Taiwan experienced a recession, mainly caused by political paralysis. Its economy again underwent a downturn, beginning in 2008 with the global recession, from which it recovered only slowly.

Taiwan’s economic boom of the 1960s and for several decades after was preceded by land reform, which generated a marked growth in the agriculture sector. Rural prosperity stimulated industrial development, while more-efficient farming released labour for Taiwan’s industrialization that drove the economy in the 1960s and ’70s. In the 1980s Taiwan moved to capital-intensive and knowledge-based industries. A high rate of savings, rising labour productivity, privatization, astute government planning, considerable foreign investment, and trade all propelled Taiwan’s rapid economic expansion.

Taiwan’s initial industrialization was spurred by the growth of textile factories and companies that produced light manufactures, such as small appliances, footwear, and athletic equipment. Companies subsequently moved to manufacturing semiconductors and electronic equipment, including radios, television sets, and computers. 

By the mid-1980s Taiwan had become one of the world’s largest producers of computers and computer peripherals. It also succeeded in establishing steel and shipbuilding industries, but those were of less significance than the enterprises manufacturing information- and communication-technology (ICT) products. One reason given for that circumstance is that Taiwan’s economy is based primarily on small- and medium-sized companies rather than on large conglomerates—as has been the case in Japan and South Korea.

Early on, Taiwan adopted a policy of import substitution, imposing high tariffs to protect its budding industries. 

However, it soon abandoned that strategy in favour of strongly promoting exports—to the degree that it soon was trading more than Japan and had become a model for development that refuted the dependency theory model that had been applied to developing countries in other parts of the world (e.g., Latin America). 

Of note in Taiwan were the creation of export-processing zones, in which foreign companies were allowed to establish factories that were given significant tax breaks and other advantages but that also trained local labour and generated spin-off enterprises that were also part of the “Taiwan model.” Other components of that model included low taxes, a good infrastructure, a stable society, and a good educational system.

Agriculture, forestry, and fishing
Taiwan has long been known for its productive agriculture, based on its rich volcanic soil, plentiful rainfall, and good climate. In fact, those conditions are what attracted early Chinese migrants. During the Japanese colonial period Taiwan exported large quantities of rice and sugar to Japan. In the early post-World War II years agriculture flourished. Double cropping of rice and some other crops, fertilization, and irrigation enhanced yields considerably, as did the introduction of hybrid and other improved seed stocks.

Taiwan: rice paddies

Rice paddies in rural Taiwan.Photos.com/Jupiterimages
Since the beginning of the 21st century, however, Taiwan’s farmers have been hit hard by foreign competition, in part because individual farms on the island are small but also because after Taiwan joined the World Trade Organization (WTO) in 2002, it became easier to import cheaper foreign agricultural products. Raising livestock has fared little better. Pigs, chickens, and ducks have been preferred over cattle, but all options have met with difficulties in the face of foreign imports. Farmers who raise fruits and vegetables have fared somewhat better, and those growing tea and some specialty crops have done fairly.

Forestry and fishing, which were once important sectors of the economy, have also diminished in importance. Forests have been depleted, and the forestry sector now accounts for only a tiny fraction of Taiwan’s economy. Fishermen have to fish in more-distant waters, and many now engage in aquaculture to remain employed. One area of significant growth has been floriculture, with Taiwan becoming a major exporter of orchids. Organic farming has also become popular in Taiwan.

Overall, the agricultural sector constitutes only a small fraction of Taiwan’s economy, with crops making up the bulk of the value. Rice has remained Taiwan’s most-valuable crop, notwithstanding the difficulties that Taiwan’s membership in the WTO has caused for rice farmers. The main fruits and vegetables grown, by production value, are bamboo shoots, cabbages, watermelons, shiitake mushrooms, leafy vegetables, and green onions (scallions). Tea has a good local market and is also an important export product. Sugarcane has declined markedly in production because of labour costs and competition from other countries.

Resources and power
Mineral exploitation plays almost no role in Taiwan’s economy, although it was once important. In the late 19th century, Taiwan served as a coaling station for steamships, utilizing locally mined coal. Gold, sulfur, marble, and other resources were once mined or quarried in significant quantities, but by the mid-2010s mining’s contribution to Taiwan’s total industrial output was negligible.

Taiwan’s coal reserves were largely exhausted by the beginning of the 21st century.

 Small reserves of petroleum and natural gas have been found on the island and offshore and have been exploited. However, domestic production supplies only a small fraction of Taiwan’s fossil fuel needs, and the great bulk must be imported. Petroleum accounts for about two-fifths of Taiwan’s hydrocarbon use, and coal constitutes about a third more. Imports of natural gas increased dramatically in the early 21st century.

Because Taiwan has such a high dependence on foreign fuel imports, it has diversified its sources of those commodities and has considerable storage capacity.

 Most of its petroleum is imported from the Middle East. It buys coal chiefly from Australia, Indonesia, and South Africa. 

Natural gas is purchased mainly from Qatar, Malaysia, and Indonesia.

In the years before the start of its dramatic economic expansion in the 1960s, Taiwan benefited from cheap power generation, including hydroelectric installations and thermal plants burning domestic coal. However, the situation changed quickly with Taiwan’s rapid industrialization and subsequent rise in prosperity and consumerism. Taiwan now depends almost totally on power generated from imported fossil fuels. Nuclear power became a factor beginning in the late 1970s, and in the 1980s nuclear plants were producing nearly half of Taiwan’s electricity. That proportion has fallen dramatically, however—now constituting only some one-tenth of the total—and nuclear power has faced increased opposition in the wake of the Fukushima accident in Japan. Hydropower, solar and wind generation, and other forms of renewable energy constitute only a small portion of energy use.
Manufacturing
The Japanese began developing industry in Taiwan at the end of the 19th century, shortly after they made Taiwan a colony, and the pace of industrialization increased even more during World War I (1914–18). World War II provided a further stimulus for manufacturing on the island, including establishing some heavy industry—all of which contributed significantly to the island’s economic growth. 

Taiwan’s manufacturing sector really boomed, however, beginning in the late 1950s, when the annual growth rate was about 12 percent. 

Manufacturing grew even faster in the 1960s and ’70s, when it reached rates that were almost unprecedented in world history. During those years Taiwan’s industrialization was increasing at double the pace for the United Kingdom or Japan during those countries’ periods of most-rapid growth.

Taiwan’s industrialization started with light industry—e.g., textiles and small appliances. It soon progressed to more labour-intensive and capital-intensive production—radios and other electronic devices and computers and other ICT products, including integrated circuits.

Meanwhile, Taiwan built a flourishing petrochemical industry utilizing imported petroleum that included spin-off products, including plastics, drugs, and synthetic products, many of which were used in improved textiles. Taiwan also began producing steel and other metals and components that were used to build ships, oil rigs, and automobiles (mostly under coproduction agreements with Japanese and U.S. companies). Tools, auto parts, electrical equipment, optics, and telecommunications became important businesses. Taiwan also produced some state-of-the art weapons, including jet fighter planes and missiles, although it had limited success in competing on the world market for sales.

Finance
The Central Bank of the Republic of China, attached to the Executive Yuan (the executive branch of government), maintains monetary stability, controls banking, and regulates the money supply. It issues the New Taiwan dollar (Taiwan’s currency) and manages Taiwan’s foreign exchange.

 The value of the New Taiwan dollar has been relatively stable for several decades. Taiwan’s foreign-exchange reserves are considerable, ranking it among the world’s top five countries in that category. The banking system was commended during the 1997 Asian financial crisis for preventing problems in neighbouring countries from affecting Taiwan.

Nearly three dozen large domestic banks and nearly as many foreign banks operate in Taiwan, each domestic institution having dozens of local branches. There are also numerous credit cooperatives and scores of farmers’ and fishermen’s associations that provide financial services.

Insurance companies have thrived in Taiwan since the late 20th century after having started at a low point in the 1950s and ’60s. Beginning in the early 1990s, the government revised the insurance laws, which gradually opened the market to foreign interests while easing restrictions on investments by domestic companies in foreign real estate and securities. A clear distinction is made between life and nonlife types of insurance, and the Ministry of Finance controls premiums.

Taiwan now has high levels of insurance coverage. That situation came about as a result of Taiwan’s rapid economic growth in the second half of the 20th century, insurance being a way to save while reflecting some insecurity about future prosperity by purchasers. Taiwan’s insurance industry was hit hard by the global recession in 2008, but it has recovered since then.
The Taiwan Stock Exchange (TWSE) opened in 1962 and has flourished since then as a place for private savings and investments. Originally the TWSE traded almost exclusively in stocks, but it subsequently began to also offer bonds and other forms of investments. The TWSE is among the largest in the world.
Trade
Taiwan was an important trading entity at times during its history, which even included serving as a commercial centre in East Asia. For extensive periods of time pirates operating out of Taiwan carried on illicit foreign trade. During the time when China ruled Taiwan there was considerable commerce between the island and the mainland. Taiwan’s trade was mainly with Japan, however, during the Japanese colonial period.
Taiwan: import sources

Major import sources for Taiwan.

Encyclopædia Britannica, Inc.
Early in the post-World War II period Taiwan’s leaders realized that because of the island’s lack of natural resources—especially fossil fuels—Taiwan had to strongly develop trade in order to survive. Exports were essential to pay for the imports. Taiwan’s cheap labour helped make its exports competitive. Later, the export of its human talent became key.
After the brief period of protecting domestic industries through its import-substitution policy, the government shifted to strongly promoting exports, a strategy that was highly successfully. One of the keys to that policy was producing higher-value goods and then improving their quality. Another key was Taiwan’s small companies’ ability to find foreign partners.
Taiwan’s main exports are electronics, basic metals and metal products, plastics and rubber, chemicals, and machinery. Its principal export trading partners include China (including Hong Kong), countries of the Association of Southeast Asian Nations (ASEAN), the United States, Japan, and South Korea. Taiwan’s major import commodities include electrical machinery and appliances, mineral fuels and mineral products, and chemicals. Its chief import sources are China, Japan, ASEAN countries, the United States, the countries of the European Union, and South Korea.
Taiwan: export destinations

Major export destinations for Taiwan.Encyclopædia Britannica, Inc.
Services
The service sector of Taiwan’s economy is now its most dynamic and fastest growing, accounting for some two-thirds of the annual gross domestic product (GDP). The main components of services (in descending importance in terms of GDP) include wholesale and retail trade, government services, finance and insurance, real estate (including renting and leasing), transport (including storage), health care and social services, professional and high-tech services, accommodations (including food), education, and culture (including sports and recreation).

Taiwan: tourists in TaipeiTourists from Xiamen (Amoy), China, arriving in Taipei, Taiwan, in 2011.Pichi Chuang—Reuters/Landov
While tourism is not a category of services, tourist-related activities account for a meaningful segment of Taiwan’s economy. Tourism was not encouraged in the years just after World War II over concerns of its being a security threat. That policy changed in the mid-1950s, and the number of annual tourist visits increased rapidly after that. In the early 21st century the number of visitors to Taiwan has grown to several million annually. For years most tourists came from Japan, Hong Kong, the United States, and Southeast Asia, but with the improvement in relations between China and Taiwan since 2008, large numbers have arrived from the mainland.

Labour and taxation
Labour has played an important role in Taiwan’s dramatic economic development. Initially, labour was cheap and the work ethic high. Over time, increases in labour costs were compensated for by good education, high skill levels, and a flexible workforce. Because of Taiwan’s high birth rate in the years following World War II, the labour force doubled in size between 1950 and 1970. Some three-fifths of working-age citizens are in the labour force, a high figure by international standards. The number of workers employed in agriculture has diminished to only a tiny fraction of the workforce. About one-fourth of workers are in manufacturing, and roughly three-fifths are in services.

During the period when Taiwan was under martial law (1949–87), strikes were forbidden, and the government formed unions. When martial law ended in 1987, workers organized but did not become as active as had been anticipated. Two attempts to form political parties that represented labour failed, mainly because their socialist agendas did not appeal to workers. The rate of unionization is now relatively high (more than one-third of workers), which is much higher than rates in the United States or Japan—although that is mainly because of laws in Taiwan that require union membership. Safety and other issues are dealt with through a number of labour laws passed in the early 21st century. Strikes and labour protests are infrequent, in large measure because most of Taiwan’s companies are small and family owned.

Unemployment, though in the early years high, subsequently has been low—during the 1980s and ’90s about 2 percent annually, which was among the lowest in the world. As a result, at times Taiwan has experienced labour shortages. Such a situation has spurred companies to adopt automation and other labour-saving devices and to relocate factories to China and other places in Asia. Many companies have also employed foreign workers, which has become a social and political issue in Taiwan. The left-of-centre Democratic Progressive Party has opposed the importation of foreign labour over concerns that the policy might dilute their voter base, which is largely Fukien Taiwanese. As a product of the 2001 recession, unemployment rose above 5 percent; it subsequently came down but rose again with the 2008 recession only to drop again to previous low levels.

Women have increasingly entered the workforce in Taiwan. Before the early 1960s the number was small compared with that for Western countries, but the rate increased after that. By the early 21st century the proportion had exceeded 50 percent and was nearly on par with the rate in the United States.
Personal income taxes in Taiwan are progressive but low, somewhat lower than rates in Japan but higher than those in western Europe or the United States. Business taxes are also low, and there is a strong sentiment in Taiwan that those taxes must be kept down in order to keep Taiwan’s products competitive in the global marketplace.

About three-fourths of the central government’s revenue is derived from taxes. The next largest portion comes from public enterprises and other business profits. Much smaller amounts are obtained from a variety of sources, including fees, fines and indemnities, and property leases and sales. The largest government expenditures, in descending order, are social welfare, education, science and culture (one line item in Taiwan’s budget), national defense, economic development, and general administration. Smaller amounts are earmarked for pensions and humanitarian assistance and debt obligations.

Transportation and telecommunications

Early in its history Taiwan had a dearth of good roads and no railroads. Few people traveled far from their homes, and those who did used rivers or coastal boats. There was no islandwide transportation system. Likewise, there were no developed communications systems.
Hua-lien: railway stationRailway station at Hua-lien, Taiwan.Aude
Improvements in both transportation and communications accompanied economic development. Roads were built or improved from late in the Chinese period and continuing through the Japanese era. Taiwan’s economic boom beginning in the mid-1960s made possible the construction of the present-day systems. One of the first major accomplishments was the Sun Yat-sen Freeway, completed in 1978, which runs north-south in Taiwan and connects Taipei and Chi-lung with Kao-hsiung. Other express highways followed, most of them being toll roads, with tolls adjusted higher or lower to regulate traffic.
Railroads were improved at the same time, and since the late 20th century, lines have been expanded and new ones built as the road system could not handle the dramatic increase in vehicular traffic. In 2007 a high-speed railroad from north to south on the island was finished. Taipei and Kao-hsiung have modern mass-transit systems that are built mostly underground.
Taipei rapid transitElevated segment of the municipal rapid-transit system, central Taipei, Taiwan.© Corbis
Taiwan has four major seaports that can accommodate oceangoing ships and large traffic. The one at Kao-hsiung is the largest, followed by Chi-lung, T’ai-chung, and Taipei. Taiwan has two international airports, one located near Taipei, and the other near Kao-hsiung.

Chi-lung, TaiwanWharf at Chi-lung (Jilong or Keelung), Taiwan.Shostal Associates
The train lines are mainly publicly owned, although the high-speed rail line was a unique government-to-private-enterprise venture. Shipping lines are mainly privately owned. Taiwan has a national airline: China Airlines. Several private air carriers also provide international and local flights. Taiwan’s citizens enjoy a high rate of private automobile and motorcycle ownership.
Taiwan’s traditional means of communications was the post office, which was very efficient. Letters were delivered within hours in the cities. Telephones became common in private homes in the 1970s and ’80s. Chunghwa Telecom, the majority of which was government-owned until 2005, is the largest telecommunications company. It commands a sizeable share of Taiwan’s fixed-line, mobile, and broadband markets. Internet use grew rapidly in Taiwan after its introduction, and broadband became widely available.
Government And Society
Taiwan had no central governing authority until the Dutch colonized the island in the 1620s. The Dutch era lasted only about 40 years, however, and Taiwan became the first place ever to free itself from Western colonial rule. Subsequently, Taiwan was self-governing, but for only a few decades. Taiwan was then made part of China for two centuries, after which it was a colony of Japan from 1895 to 1945.

With the end of World War II, in 1945, Taiwan was again made part of China, but that arrangement lasted for only four years. In 1949, after the Chinese communists had defeated the Nationalist government on the mainland, the Nationalist leader Chiang Kai-shek moved his government, party, and military to Taiwan. Taiwan, as the Republic of China, represented China in the United Nations until 1971, when the People’s Republic (the regime established by the communists on the mainland was called the People’s Republic of China) took the China seat. Subsequently, Chiang’s government quickly lost its international standing.
Chiang’s government—a mix of presidential, parliamentary, and cabinet models—was based on the constitution promulgated in 1947. However, it worked more as a presidential system, since political power resided largely in the Nationalist Party, or Kuomintang (KMT), over which Chiang presided. A set of “Temporary Provisions” (to the 1947 constitution, rescinding some parts of it) and an emergency decree (characterized by some as martial law) were enacted in 1948 and 1949, respectively, while the Nationalists were still at war on the mainland. The result was a political system that was democratic in form but not very much so in operation.

The government, the police system, the education system, and the military (at the top) were staffed mainly by mainland Chinese who had moved to Taiwan from China after World War II. Hakkas, a local minority that had migrated centuries earlier, whom the mainland Chinese trusted more than the Fukien Taiwanese, assumed positions in the police forces and the railroads. Fukien Taiwanese, Taiwan’s largest ethnic group, comprising about two-thirds of the population, gradually assumed positions in business and local government.
Democratization in Taiwan was introduced in local politics first and favoured the Taiwanese, especially the Fukien Taiwanese. By the 1980s, Taiwan had made significant strides toward establishing a working democracy. In 2000 the ruling KMT was defeated in the presidential election by the candidate of the Democratic Progressive Party (DPP), whose base consisted of Fukien Taiwanese. In an election the next year, the DPP won the largest number of seats in Taiwan’s legislature (the Legislative Yuan).

While ethnicity became less of an issue in most respects than it had been in the past—as a result of intermarriage, social change, and urbanization—it continued to play a role in politics, especially during elections. Nevertheless, the KMT regained the presidency and won a majority in the legislature in 2008, on a platform of its being a multiethnic party while advancing better government and ridding politics of the corruption that had plagued the DPP’s Pres. Chen Shui-bian and his party. The DPP rebounded, however, winning both the presidency and a majority of seats in the legislature in 2016.
Constitutional framework
Taiwan’s 1947 constitution, promulgated while the Nationalist government still ruled the mainland as well as Taiwan, created a republican system of government. The document ensured legislative supremacy and granted a considerable degree of autonomy to local governments. The president, originally chosen by the National Assembly until that body was abolished in 2005, is now elected by popular vote and is head of state. The premier, who is appointed by the president, heads the government. Political parties are not mentioned in the document, although it was assumed that they would play a role in politics.
Instead of the three branches of government that are found in most Western governments, the constitution originally provided for five: the executive, legislative, and judicial components plus a Control Yuan (branch of government) and an Examination Yuan. The two additional branches represented organs of government in traditional China that checked on the bureaucracy and that managed functions such as the civil service examinations and promotions. It was thought that a five-branch system would provide better checks and balances than a three-branch system.
The Temporary Provisions of 1948 gave the president emergency powers, banned the formation of new political parties, and suspended the two-term limit for the president. The 1949 emergency decree granted the military, police, and intelligence bodies broad powers. The two measures truncated constitutional rights and effectively prevented the political system from operating democratically. However, local government was not much affected, nor were economic rights curtailed. The emergency decree was terminated in 1987, and the Temporary Provisions were canceled in 1991.
The constitution was amended a number of times during the 1990s. Until then the government, as the Republic of China, effectively had maintained an electoral college with other powers (the National Assembly) that included representatives from each of the mainland provinces. One of the important changes undertaken in the early part of the decade was the start of a process to get rid of those representatives of China in the elected bodies of government, although overseas Chinese (ethnic Chinese living outside Taiwan and China) were allotted special representation. Other measures included reforms of provincial and local government, equal rights for women, safeguards for the handicapped and the aboriginal peoples, changes in the relationship of the branches of government and the role of the premier, and the start of a process to phase out the National Assembly. In 1993 the Control Yuan ceased to be an elected government body, and its functions were truncated. From early 2005 until mid-2008 it did not function at all, because of a deadlock between the president and the legislature over nominees. The branch has since been reinstated, but it is no longer regarded as an important organ of the government. The Examination Yuan likewise is no longer thought of as a major branch of the government, meaning that Taiwan, for all intents and purposes, has a three-branch system.
In 2003 the legislature passed the Referendum Act, which defined that theretofore unused constitutional provision. Referendums were included in subsequent elections, and some caused considerable controversy. In 2005 the constitution was amended to abolish the National Assembly. The process, however, did not resolve the question of the fundamental structure of the government, though other changes and practice have made it more presidential.
Local government
Taiwan’s political system has some of the traits of a federal system, with first or primary jurisdiction belonging to local government in certain realms. In 1992 a constitutional amendment strengthened local government. The way the political system works—in that local politicians can easily make their way to higher positions in the national government—also makes local government more important than it might be otherwise. Finally, many in Taiwan believe that democracy comes from the bottom up and that government reforms more often succeed when starting at the local level. Thus, respect for local government is high.

The administrative units below the national government are special municipalities, counties and provincial municipalities, and county municipalities and townships. Until the late 1990s there was an administratively autonomous Taiwan provincial government, which was headed by a governor and had its own legislature. However, it duplicated most of the national government’s functions. Thus, reforms enacted in the name of efficiency reduced the entity to an agency of the Executive Yuan, and it was progressively diminished in size and function.
Six of Taiwan’s cities are classified as special municipalities and constitute an important segment of local government because of their size and economic importance. Mayors of two of the cities, Taipei and Kao-hsiung (Kaohsiung), have become presidential candidates and presidents, and local elections in the two cities have been important and are thought by some to constitute a bellwether for future national elections. Elections in other cities and in the counties are also considered important.
Justice
Taiwan’s Judicial Yuan (the judicial branch of government) is the highest organ in the administration of justice. It is organized into the Council of Grand Justices, three levels of lower courts, administrative courts, and the Committee on the Discipline of Public Functionaries. The Council of Grand Justices has the power of judicial review and hears other important cases that do not involve an interpretation of the constitution. The Supreme Court, which is below the Council of Grand Justices, decides only issues of law.
The 15 members of the Council of Grand Justices are appointed by the president with the approval of the Legislative Yuan. Justices serve a term of eight years and may not serve a second term consecutively. Terms are staggered so that seven or eight new justices are appointed every four years.

In 1980 an act was passed by the legislature that made the judiciary more independent. It is still criticized, however, as not being free enough and not having sufficient power, though Taiwan’s citizens have expressed concern that a more powerful judiciary could sully Taiwan’s democracy. In 2002 the criminal justice system shifted its operating method from a judge-centred inquisitorial system (as in Germany) to an attorney-based adversarial system (like in the United States).
Lawyers and prosecutors have played a much more important role in the judicial process since the late 1980s, though not through becoming judges. Lawsuits have become much more common in Taiwan, an inordinate number stemming from election campaigns. Still, Taiwan would not be called a litigious society.
Political process
As originally constituted in 1947, the National Assembly was to represent the whole of China. It chose the president, who was the formal leader of the country and had considerable authority in foreign affairs but limited powers elsewhere. The premier headed the executive branch of government and liaised with the Legislative Yuan, which constitutionally was supposed to be the strongest branch of government. Because the country was at war at the time that the constitution was enacted and owing to the vital role of political parties, the country had a strong president.
With political reform enacted in the late 1980s and ’90s, this situation changed dramatically. The legislative and judicial branches, especially the former, became stronger, although it is not accurate to say that the president became weak. Elections came to play a much bigger role in the political process. The media assumed a new and larger place. Opinion polls and protest of various kinds became common.
Taiwan was technically a multiparty system under the 1947 constitution, but in reality it was dominated by one party for many years. (There were two smaller parties, but they did not serve as real opposition parties.) The KMT was dominant, and it was in many ways inseparable from the government. Observers considered the KMT’s leadership to be power brokers and saw the KMT’s Central Standing Committee as the top organ of decision making in politics.
Meanwhile, reforms, beginning in the 1960s, started to change Taiwan’s politics. While new political parties could not be formed, noted politicians began running as independents in opposition to KMT candidates. In the 1970s the independents started to organize and behave like a political party. By 1986 they had formed the DPP, which challenged the KMT in a national election that year. The DPP did not fare well, but it learned quickly from the experience. In 1989 the party was so successful at the polls that it now appeared that Taiwan had a two-party system, and there was growing speculation that in the future the DPP could become the ruling party. Other parties also began forming at that time; hence, it was difficult to say whether Taiwan had a two-party or a multiparty system. Subsequently, Taiwan appeared to have evolved into first a two-bloc and later a two-party system.
In terms of how the political process works, bills often originate in committees in the legislature, as is the case in the United States. They are then introduced before the entire unicameral body. The premier oversees the process and works with the legislature. The Executive Yuan can also propose bills, which are then introduced by the premier. The legislature claims to be more important and, therefore, the protector of democracy in Taiwan, but antics, corruption, and other problems involving its members have engendered doubt. To address corruption, a sunshine law (mandating that official meetings and records of government agencies are open to the public) was passed in 1993. In 2004 the size of the legislature was halved to 113 in order to give legislators more importance, and the members’ terms were lengthened from three to four years so that elections for the legislature and the president would coincide.
The role of the political parties is vital in Taiwan’s political process. They recruit, train, and support (with money and other kinds of help) members who run for office and design campaign and election strategies. Party members also meet with and support elected high officials after they are in office. Both parties, however, are plagued by factionalism and disputes of a divisive and embarrassing nature, the details of which are often exposed to the public.
The DPP is described as a leftist party, whereas the KMT is considered to be right of centre—observations that are generally accurate when comparing the two parties with Western political parties. However, the question of whether Taiwan should be formally independent of China has long been Taiwan’s overriding political issue, with the DPP advocating independence and the KMT opposing it. Since the United States and most other countries have expressed opposition to Taiwan’s declaring formal independence—and China has stated that it would use military force against Taiwan if it took such an action—the independence plank has over time become less defining in terms of political advocacy than it would seem. Because most of Taiwan’s voters lean toward political conservativism, the KMT usually has had an advantage over the DPP in terms of its support base. On the other hand, ethnic voting has been strong, and the Fukien Taiwanese have tended to support the DPP.
Security
A large number of Chiang Kai-shek’s Nationalist soldiers fled with him to Taiwan in 1949. Since Chiang’s stated policy was to counterattack and retake the mainland of China from the communists, he needed to have a large military. He maintained some 600,000 personnel in active duty, though that was still not enough to challenge the mainland’s vastly larger armed forces. Over time, Taiwan’s military was cut considerably. It was also upgraded in terms of better training and weapons, and military strategy was linked to coordinating defense efforts with U.S. forces.

Taiwan signed a defense treaty with the United States in 1954, which was terminated after the United States established formal diplomatic ties with Beijing in 1979. It was said to have been functionally replaced with the Taiwan Relations Act passed that year by the U.S. Congress, which pledged the sale of U.S. weapons to Taiwan and the maintenance of U.S. forces in the region.
Taiwan has but one adversary, China, and its military strategy has been geared toward defending the island in the event of a Chinese attack until U.S. forces can arrive. On the other hand, Taiwan’s leaders sometimes talk of the offensive capabilities they possess, such as to bomb cities or dams in China, and U.S. authorities have at times showed concern over Taiwan’s work toward building nuclear weapons, though that concern has diminished with the improvement of Taiwan-China relations.

Taiwan has continued to need jet fighters to maintain air superiority over and around the island, antisubmarine warfare capabilities, and antimissile defense. The U.S. has provided that to a limited degree. However, China’s capabilities vis-à-vis Taiwan have been growing at a faster rate than has Taiwan’s ability to defend itself. Questions have also been raised about the United States’ resolve to protect Taiwan, given the considerable U.S. economic and financial ties with China. Taiwan’s defense spending in the second decade of the 21st century was low compared with previous levels, prompting some military officials in the United States to question whether Taiwan was contributing enough to its own defense.
Health and welfare
The standards of health in Taiwan are impressive, having been improved considerably since the beginning of the 20th century. Life expectancy is high and is on par with or exceeds the levels for most western European countries.

Taiwan established the National Health Insurance program in 1995, incorporating various insurance plans already in existence and extending coverage to all citizens. The plan became controversial, however, because of rising costs and questions concerning who would pay for it. Finally, many of Taiwan’s best doctors opted out of the program or left Taiwan. The system remained a topic of debate.
The welfare system established by the Japanese in the first half of the 20th century was dismantled after World War II. When Chiang Kai-shek arrived in 1949, he brought with him a social welfare program that was smaller in scope and was intended mainly for the poor and to help cope with economic bad times and disasters. In the 1980s, however, the government increased spending for welfare and expanded the areas of coverage. Welfare programs grew even faster during the 1990s, as the KMT calculated that by taking such actions it could preempt one of the main tenets of the DPP’s agenda at that time. Also, Taiwan could then afford it. In the early 21st century, however, as Taiwan’s economic growth slowed, the government initiated few new social programs.
The scope and nature of social welfare have been widely discussed topics in Taiwan. Many citizens feel that government welfare undermines the family and that it makes Taiwan vulnerable to China’s efforts to economically subdue Taiwan. Others have contended that welfare dependency violates major tenets of Confucianism and Buddhism.
Housing
Housing is of generally good quality in Taiwan, and a high proportion of the population resides in homes or apartments they own. Homelessness is not a problem. However, many citizens have not been able to easily afford an apartment or a house near their employment, prices having increased exponentially with Taiwan’s economic growth. Part of the reason is that most citizens and many speculators have viewed property as a good investment, resulting in prices’ being pushed up precipitously. Rents have been high, and buying an apartment or a house, especially in the cities, has been difficult. The government has tried to alleviate the problem but with limited success. Housing is often an issue during elections.
Education
The Japanese expanded educational opportunities in Taiwan during the first half of the 20th century. The hard sciences and medicine were emphasized, while the social sciences and humanities were not. After 1945 the government made mass education a high priority. The education system was altered to resemble the American model and was tailored to train future workers. In 1968 compulsory education was increased to nine years (six of elementary and three of secondary). Scholarships were provided to poor students. Traditional Confucian learning was de-emphasized.
Textbooks are approved by the government and are standard throughout Taiwan. A national entrance examination screens students who want to attend college. For many years most of Taiwan’s best college students went abroad, especially to the United States, and at one time Taiwan led the world in the number of students studying in the United States. Many of those students returned to Taiwan with higher degrees, where they were influential in many ways, including during Taiwan’s democratization process. Many high KMT and government officials received advanced degrees from top American universities.
The number of institutions of higher education in Taiwan has grown very fast since the late 20th century, but standards at them have fallen. Now almost anyone can go to college. As a result, Taiwan’s best institutions have declined in stature relative to others in the region.National Taiwan University is considered Taiwan’s best. Other noted state institutions are National Cheng Kung University, National Tsing Hua University, National Chiao Tung University, and National Chengchi University. Almost all of Taiwan’s top universities are public and are located in the north in or near Taipei.Cultural Life
Cultural milieu
Taipei 101Overview of Taipei 101, Taiwan, 2009.Contunico © ZDF Enterprises GmbH, MainzSee all videos for this article
Taiwan’s culture may be described as traditional and conservative, like most other Asian cultures but to a greater degree. It is mainly Chinese in origin and is patriarchal and patrilineal, with the family at the centre of cultural activities. The society is hierarchical and class-oriented, though it is egalitarian in the sense that one has the opportunity to advance socially through education. In theory, at the top of the traditional social ladder were the scholars, followed by peasants, workers, merchants, and soldiers. Merchants often bought into the scholarly class. Soldiers rose in class status during times of invasion or war.
Taipei: National Chiang Kai-shek Memorial HallThe main entrance gate to the National Chiang Kai-shek Memorial Hall, Taipei.© Index Open

Taiwan’s culture, however, has also been influenced by traditional Japanese culture, which was more clan-oriented and feudal and gave high status to the military (traditionally, the samurai class). It has also been influenced by the culture of aboriginal peoples, which is tribe-oriented. Because of the less-settled environment in Taiwan, the Chinese who migrated there placed more importance on security and on business and less on education. Also different from the mainland was the lesser degree of importance given to such factors as the control of water and, with it, the need for a strong central government.
The people of Taiwan highly regard their culture and like to advertise it. The government also considers support for cultural activities to be one of its important roles. After 1945 that took the form of eradicating Japanese cultural elements and promoting Chinese ones instead. Notable since the 1990s has been its support for the cultural activities of various ethnic groups. Taiwan is unusual in that its constitution guarantees expenditures for such support.

Family structure
A patriarchal and patrilineal extended family was the traditional pattern for the Chinese population on Taiwan. The aboriginal system was tribal. Both have been influenced by Taiwan’s modernization process, in which the family has been reduced in size and has become more urban and less cohesive. The Hakkas have maintained a more-traditional family structure, having been influenced less by the Japanese. Mainland Chinese have been more affixed to the traditional family, but they have also been more affected by modernization.
By 1980 more than half the families in Taiwan were nuclear and only one-fourth of them extended. Family size continued to shrink as the proportion of the population that was urban grew and became more transient—factors that further weakened the traditional family structure. Also of note were the emergence of a generation gap and a large and increasing number of women entering the workforce, which helped to undermine the family-centred social system.

Although there have been profound changes in the traditional family structure in Taiwan, Taiwan’s society is still more family-oriented than most. Filial piety is still practiced. The family still plays a role in marriages and in many social events, and it remains the focus of its members’ loyalty and identification. In addition, businesses continue to be largely family-owned and family-run.
Daily life and social customs
Daily life in Taiwan is to a considerable extent oriented toward one’s family, job, and education. The degree of each depends on a person’s age, status in the society, and individual circumstances. Women and children are closer to the family, although with a larger number of working women that has become less the case. Children spend much of their time studying, much more than children in the West. Competition to get into the best universities begins early.

squid being grilledSquid being grilled at a street market, Taiwan.Matrixboy84
Stability within the household is of great importance. Ritual and role-playing are stronger than in most other cultures. Respect for elders is considered vital, as is loyalty toward the family.
Eating is a central part of the culture, and people in Taiwan are proud of their cuisine. At home, meals bring the family together and last longer than in many other societies. Citizens also like to dine out and spend more of their time and money at restaurants than in most cultures. Taiwan’s cuisine is considered to be one of the best in the world. Its variety is also notable, as dishes from all parts of China can be found on the island.
As Taiwan modernized, and especially as it became democratized, more people began to take an interest in politics. Many have participated in various ways, including joining campaigns, voting, and protesting. Large numbers of people have also begun spending more time at events in their companies, schools, and social clubs and at national events.
National holidays are widely observed. The Chinese (lunar) New Year is the most important. Citizens return home if they can, spend time with family members, eat, and talk. Traditionally, they are expected to pay their debts and to renew their lives. The Dragon Boat Festival (in the spring), the Mid-Autumn Festival, and National Day on October 10 are other important holidays.
Taipei: National DayWomen marching during National Day festivities, Taipei.Geoff Tompkinson/GTImage.com (A Britannica Publishing Partner)
The arts
The arts or, more broadly, the culture of Taiwan has been influenced by aboriginal peoples, Chinese culture brought by immigrants, the brief period of Western colonial rule, Chinese governance, Japanese rule, and Westernization since World War II. The post-1945 government made special efforts to promote Chinese culture (including provisions for it in the constitution). Special efforts were made to eradicate the Japanese cultural influence. Chiang Kai-shek favoured calligraphy, classical painting, traditional Chinese opera, and the folk arts. Taiwanese art forms included puppet shows, sculpture, and dance.
Taipei: National TheatreActor applying makeup, National Theatre, Taipei.Geoff Tompkinson/GTImage.com (A Britannica Publishing Partner)
The government operates a variety of museums and other cultural and arts centres that advance Chinese culture. The National Palace Museum on the outskirts of Taipei (opened 1965) is considered to have one of the world’s best collections of Chinese antiquities. It contains many valuable historical artifacts, works of art, and books that were taken to Taiwan from China in 1949. The Juming Museum in the Chin-shan (Jinshan) district of New Taipei City provides exhibits of contemporary art. The National Taiwan Museum of Fine Arts in T’ai-chung (Taizhong) houses works from the Ming and Qing (Ch’ing) dynasties. The National Chiang Kai-shek Memorial Hall in central Taipei contains items from more-recent Chinese history. It forms part of a complex that includes an opera house and a concert hall.
National Palace MuseumNational Palace Museum, Taipei.Jiang
Democratization has been accompanied by more eclecticism in the arts and has led to the exploration of new themes, such as pragmatism, realism, and nativism. Japanese cultural elements have had a revival, especially the martial arts, and Japanese movies have become popular in Taiwan. Western culture has grown in influence, especially in movies, music, literature, and fashions. After 1987, when citizens were allowed to visit China, that access spurred a revival of interest in mainland Chinese literature and arts.

Sports and recreation
Mountain climbing, walking, vacationing, watching television and movies, listening to music, dancing, and reading are favorite pastimes in Taiwan. Taiwan has an extensive system of national parks and national scenic areas. Because of traffic congestion, places of entertainment tend to be close to home in the larger cities. However, Taiwan’s citizens often travel abroad, especially to China, Japan, the United States, and Europe.
Taiwan: Yehliu GeoparkChild among rock formations in Yehliu (Yeh-liu) Geopark, New Taipei City, Taiwan.Geoff Tompkinson/GTImage.com (A Britannica Publishing Partner)

Favourite sports include baseball, basketball, football (soccer), tennis, and golf. The martial arts—Chinese, Japanese, and Korean—are avidly practiced. Some of Taiwan’s youth baseball teams have won worldwide acclaim, notably in the Little League World Series in the United States. A professional baseball league was established in 1989. More people play basketball, however, and a semiprofessional league was organized in 2003.
Taiwan, as the Republic of China (ROC), began participating in the Olympic Games in 1956. However, after 1971, when the recognized People’s Republic of China was admitted to the United Nations and recognized by other international organizations, problems arose with the ROC name. In 1989 an agreement was worked out with Beijing whereby Taiwan would be referred to as Chinese Taipei in international competition and would be represented by a special flag rather than its national flag. Although Taiwan opposed those conditions, considering them humiliating, it has regularly sent teams to the Olympics and other international sporting events.

Media and publishing
In the past, mass communication in Taiwan consisted of bulletins pasted on walls or in other public places. Radio broadcasts and newspapers became commonplace during the Japanese era, and television was introduced in the l960s. In the early years after 1945, the media were largely controlled by the KMT and by the government. However, democratization brought with it considerable relaxation of controls over the media.
The Central News Agency is Taiwan’s foremost news service. It sends representatives to many foreign countries and provides information globally on a daily basis. There are hundreds of other news agencies in Taiwan, but none has much influence other than those that provide financial information.

Until the early 21st century, The China Times and The United Daily News were the largest newspapers in Taiwan. The former was said to be slightly more liberal. The United Daily News owns and operates World Journal—the largest Chinese-language newspaper in North America. Both papers support the KMT. The pro-DPP Liberty Times became Taiwan’s largest newspaper. Apple Daily, which is more sensational, claims more sales at the newsstands. English-language dailies are also published in Taiwan. Foreign papers such as The Wall Street Journal (and its Asian version) and The New York Times are found in most newsstands and hotels.
Numerous magazines are published in Taiwan. Many are political, and a large number have appeared and then ceased publication. China Times Weekly, Next, and CommonWealth are among the most popular periodicals. The first two focus on news and political events, and the latter is a business magazine.
Book publishing is a big industry in Taiwan, despite its relatively small population. Chinese-language books published there are sold not only in Taiwan but also in other Chinese-speaking areas of the world. Some publishers have agreements with foreign companies to publish books in English in Taiwan. The movie industry has been less successful, although some locally made films have done well outside Taiwan.
There are scores of radio stations in Taiwan, which broadcast in Mandarin Chinese, Taiwanese, Hakka, and English. Some other languages have also been added. Local television broadcasters include both private and government-operated stations. Cable television is widespread in Taiwan, and satellite television is available but is less common.
History
Early history
There are references to Taiwan in Chinese court records dating to the 3rd century BCE. The first recorded contact between China and Taiwan occurred in 239 CE, when the Chinese emperor sent a 10,000-man mission to Taiwan to explore the island. In 605 China sent another expedition, which brought back to China several aboriginal people from Taiwan, who were taught Chinese. A follow-up mission went to Taiwan to gather more information. During the Yuan dynasty (1206–1368), when the Mongols ruled China, the P’eng-hu (Penghu) Islands in the Taiwan Strait were brought under China’s control. In 1430 the Ming dynasty’s famous explorer Zheng He (Cheng Ho) landed on Taiwan and obtained from the aboriginal peoples herbal medicines that were said to have “miracle powers.”
Meanwhile, perhaps as early as the 7th century, Chinese fishermen visited the P’eng-hu Islands, and probably some farmers settled there and on Taiwan itself. In any event, there were Chinese settlements on the island of Taiwan before the 12th century. Chinese and Japanese pirates also frequently used the island as a base of operations, and some Japanese settlements were established there.
The early Chinese settlers were in imminent danger of raids by aboriginal peoples, who practiced head-hunting and coveted Chinese heads—possession of which demonstrated a sign of manhood and their qualifications for marriage. Early Chinese societies on the island were thus organized to a considerable degree on the basis of a concern with security. However, there was only infrequent contact among the Chinese settlements, and there was no common government or body of laws.
In 1517 a Portuguese ship sailed through the Taiwan Strait, and the ship’s log recorded the words “Ilha Formosa,” meaning “Beautiful Island” in Portuguese. Formosa subsequently became the Western term for Taiwan. But the ship did not stop, and the Portuguese did not lay claim to Taiwan. In 1622, Dutch forces landed in the P’eng-hu Islands (which the Portuguese had called the Pescadores [“Fishermen”] because a large portion of the population there was engaged in fishing) and established a presence there. The next year, a Chinese official gave the Dutch a trading post on Taiwan and other privileges in exchange for leaving the P’eng-hu Islands. In 1626, Spanish forces seized Chi-lung (Jilong or Keelung) and expanded their presence on the island from there. Japanese settlers on the island left shortly after that.
In 1642, Dutch forces expelled the Spanish, put down a rebellion by Chinese inhabitants, and, with the help of aboriginal peoples, established control over the entire island. As a result, Taiwan became a Dutch colony, governed by the Dutch East India Company. The company dug wells, conducted land surveys, and created the basis for expanded commerce, including trade with China and other places in East Asia. It introduced new farm implements and the use of oxen to till the fields. In addition, its representatives developed a written language for the aboriginal peoples and converted many to Christianity.
During the Dutch period the Chinese population in Taiwan was considerably smaller than the aboriginal population. The Dutch encouraged Chinese immigration, though the Chinese did not give their loyalty to the Dutch. At that time Ming-dynasty China was being threatened by the Manchu—inhabitants of Manchuria (now northeastern China). In 1644 they took Beijing (the Ming capital) and established the Qing (Manchu) dynasty. Nevertheless, resistance against the Manchu continued in southeastern China, and the pirate leader Zheng Zhilong (Cheng Chih-lung) took command of the remnant Ming naval forces to battle the Manchu. Zheng, however, soon switched his loyalty to the Qing.
Zheng’s son Zheng Chenggong (Cheng Ch’eng-kung), born in Japan to a Japanese mother, refused to follow after his father and instead launched a prolonged campaign of resistance against the Manchu from bases along the Fujian (Fukien) coast of China. By 1661, however, Zheng had failed in his effort, and he turned his attention to Taiwan. He took a large number of Chinese to Taiwan, many of whom had enlisted in his army. Later that year Zheng (whom the Dutch called Koxinga) launched an attack on the Dutch stronghold of Zeelandia (near present-day T’ai-nan) and laid siege to it. The Dutch surrendered in early 1662 and were evacuated, thus ending the Dutch presence in Taiwan. This was the first instance of the “liberation” of a Western colony.
Zheng established a Ming-style government on the island and promoted Chinese culture. Chinese bureaucratic rule, however, did not work well there, as it was superimposed on a social system that was basically feudal. Zheng did not establish ties with Manchu-ruled China. He did, however, encourage Chinese immigration to Taiwan, and he promoted commerce and foreign trade. Zheng had tried to establish ties with the Chinese communities in the Philippines to build support for his continued efforts to restore Ming rule in China, but he died suddenly in June 1662 before he could act further on any of his plans.
After his death, his son Zheng Jing (Cheng Ching), operating from a power base in Fujian province, vied with his uncle in Taiwan for succession. Zheng won, and, like his father and grandfather, he fought the Manchu. He too failed, however, and retreated to Taiwan. His early death was followed by court intrigue in Taiwan, which gave the Manchu in China an opportunity to invade and take the island, which they did in 1683.
For the next two centuries Taiwan was governed as part of Fujian province. The Qing government sent officials to rule Taiwan who did not regard their assignments highly. They considered Taiwan beyond the pale of Chinese civilization. The period of Chinese governance was thus characterized by frequent rebellions followed by severe punishments meted out by the government to keep order.
The inhabitants of Taiwan were not happy with rule by the Chinese, whose ruthlessness was partly due to the fact that the Qing government was dominated by the “foreign” Manchu, not the Han Chinese, and the Manchu feared the “Chinese-ness” of Taiwan. Meanwhile, China was experiencing increasing encroachments from Western powers, and, after the First Opium War (1839–42)—during which British forces defeated the Chinese—the Qing government came to see Taiwan as strategically important. After the war, the region’s commerce with the West increased rapidly, which gave rise to foreign designs on Taiwan—including those of Japan, especially after it acquired the Ryukyu Islands, just north of Taiwan, in 1879, and, later, those of the United States.
After French forces blockaded Taiwan’s ports during the Sino-French War (1883–85) in Southeast Asia, China focused even more attention on Taiwan. In 1885 the Qing government directed Liu Mingchuan (Liu Ming-ch’uan), the governor of Fujian, to focus his attention on Taiwan, and two years later Taiwan was elevated to the status of a province. Liu undertook reform in Taiwan, built the island’s first railroad, and improved roads and harbours. Taiwan prospered, which engendered friendly feelings toward China. However, Liu met opposition at the Qing court and was recalled prematurely. Historians in both Taiwan and mainland China have regarded both Liu and Zheng Chenggong highly.

Taiwan as part of the Japanese empire
In 1894 China and Japan went to war over their conflicting interests in Korea. Japan won the conflict handily. The Treaty of Shimonoseki (1895), which ended the war, contained a provision that ceded Taiwan and the P’eng-hu Islands to Japan in perpetuity. The Western powers regarded the treaty as legally binding, but China did not, seeing it as an agreement imposed on it under duress.

Taiwan; Ryukyu IslandsMap of Taiwan and the Ryukyu Islands from the 10th edition of Encyclopædia Britannica, 1902.Encyclopædia Britannica, Inc.

When news of the treaty reached Taiwan, local leaders there proclaimed the Republic of Taiwan—Asia’s first republic—but its life was brief, lasting only about 10 days. Taiwan had no central government, was plagued by warlordism (causing many residents of the island to feel that Japanese rule would be an improvement), and had neither a recognized leader nor a real military. Moreover, Japan was determined to make Taiwan a colony, so it dealt firmly with opposing movements on the island.
Japan’s military at first governed the island, but within three years those forces were seen as being no longer necessary. Taiwan, Tokyo’s first attempt at colonialism, was an experiment with which Japan had great success in establishing order, eradicating disease, building infrastructure, and creating a modern economy. Taiwan soon became the most-advanced place in East Asia outside Japan itself.

Nogi Maresuke

Nogi Maresuke, Japanese governor of Taiwan in 1896–98.© Photos.com/Thinkstock

Japan’s policy makers focused on agriculture first and improved rice production with new seeds and farming techniques. Rice and sugar were exported. Taiwan had about 30 miles (50 km) of railroads when Japan took control of the island, but within a decade it had increased the track length to some 300 miles (500 km), and much more construction was planned. Taiwan was soon electrified, which facilitated the growth of new industries such as textiles and chemicals. World War I was a boon for Taiwan’s economy, as new industries were developed and trade expanded. World War II also had a positive impact on the island’s economy.
On the other hand, Japan ruled Taiwan strictly, using harsh punishment to enforce the law. Tokyo, initially at least, showed no interest in making Taiwan a democracy. Moreover, in governing Taiwan, Japan experienced a dilemma over whether to make the colony part of Japan or to allow it to be administratively separate and to some degree self-governing. Ultimately, Tokyo resisted assimilating Taiwan, although it did force the population there to learn Japanese and absorb Japanese culture. That strategy had advantages for the people of Taiwan, as it gained for them access to science and technology, but such advantages came at the cost of suppressing local culture and the Chinese language.

In 1935, after Lin Hsien-t’ang (Lin Xiantang) of Taiwan’s Home Rule Association advocated the transfer of more political power to local officials, Japan announced the establishment of a somewhat autonomous local government. An election was held, and there was some evidence for the beginnings of democratic government in Taiwan. That movement was short-lived, however, as the militarists in Japan rose in power there the following year.
In 1937, after Japan invaded China and touched off the second Sino-Japanese War, Taiwanese (Chinese inhabitants of Taiwan) were given the option of moving back to China, though few did. In the period before the war in the Pacific widened to include the United States and its allies in 1941, Japan came to regard Taiwan as an “unsinkable aircraft carrier” and an important stepping-stone in its military expansion. Japan established military bases there and used them as staging areas for invasions of the Philippines and other areas to the south.
The Taiwanese worked in Japan’s defense and war-related industries in Taiwan and in other ways abetted Japan’s war efforts. Many Taiwanese served in the Japanese military, including units that fought in China. Taiwanese troops even participated in the atrocities against Chinese civilians at Nanjing (Nanking) and other places on the mainland. Of the Taiwanese who served in the Japanese military, more than 30,000 were killed in combat.
During the last months of the war, Allied military strategists discussed a plan to invade Taiwan. They abandoned the plan, however, when they discovered that the U.S. military had few good maps of the island and after they concluded that the Taiwanese would fight alongside Japanese troops. U.S. warplanes bombed oil-storage depots and some other strategic targets in Taiwan, but little damage was done to the island otherwise.
Earlier, in a declaration issued after the first Cairo Conference (1943), the United States and Britain concurred with Chinese Nationalist leader Chiang Kai-shek that Taiwan was territory Japan had taken from China and therefore would be returned to China. That decision was confirmed at the Potsdam Conference (July–August 1945). Hence, U.S. forces present in Taiwan in 1945 to accept the Japanese surrender there turned over control of the island to Chiang. However, an official or legal dispensation regarding Taiwan awaited a peace treaty.
Taiwan’s Chinese population welcomed the end of Japanese rule and the restoration of the island to Chinese control, but they were also apprehensive. The communist forces of Mao Zedong that were at war with Chiang’s Nationalist armies in China had almost no contact with Taiwan. The American public wanted its troops to come home, and the U.S. government was focused more on problems in Europe than on those in Asia.

                              FLAG OF TAIPEH ( TAIWAN)

Early Nationalist rule
Taiwan became part of the Republic of China on October 25, 1945, which has been celebrated since then as Retrocession Day. However, Taiwan was not made a standard province of China at that time, as most people on the island had expected. Moreover, Chiang Kai-shek appointed Ch’en Yi (Ch’en I) governor-general of the island, with powers similar to those that had been exercised by the Japanese military governors. Finally, Japanese officials, administrators, and technicians departed, leaving a vacuum that was not easy to fill. Taiwan’s economy, which had become linked to Japan’s, had to be reorganized. Japanese law, customs, and much more were to be replaced.

GENERAL Chiang Kai-shekChiang Kai-shek, 1953.

Encyclopædia Britannica, Inc.

Ch’en, like many others in his administration and many of the Nationalist Chinese soldiers sent to Taiwan at the time, regarded the Taiwanese as traitors tainted by inferior Japanese culture. Ch’en hailed from Fujian (Fukien) province and could speak both Minnan (Taiwanese) and Japanese. He refused to do so, however, believing that the Taiwanese should learn Mandarin, which many of them found difficult. Ch’en took few Taiwanese into his government, especially in jobs of importance. He hoped that he and his administration could govern by moral example, but many of his subordinates were incompetent or corrupt.
Just as Ch’en and his people espoused condescending views toward the Taiwanese, the latter viewed the newly arrived mainland Chinese as dirty, dishonest, and technologically backward. The Taiwanese could see that the new government lacked the technical expertise to run public services. They did not like the new legal system imposed on them, especially the provision that allowed the forced occupation of property to lead to legal claims on it. Thus, the Taiwanese came to view the government as a carpetbagger to be despised. Meanwhile, Chiang was preoccupied with the civil war against the communists and felt that the residents of Taiwan should understand his situation and be willing to sacrifice. Most Taiwanese did not understand, and they were dismayed by economic deterioration in Taiwan as well as a return of eradicated diseases, falling educational standards, and ill treatment of citizens by the government.

Ill feelings came to a head in February 1947 when a government agent knocked to the ground a woman who was selling black-market cigarettes and agents then fired into the angry crowd that had assembled, killing a bystander. Widespread civil disobedience ensued, creating what seemed to be a rebellion. Mainland Chinese were attacked, beaten, and killed in large numbers. Fukien Taiwanese killed people who could not speak to them in Minnan, including many Hakka. The event became known as er-er-ba, or 2-2-8, for the incident’s date (February 28). A memorial park was established in Taipei in the 1990s to commemorate the incident.
Taipei: park2-28 Peace Memorial Park, Taipei.© richie0703/Fotolia
In March, Chiang sent troops to Taiwan to end the chaos. The soldiers used their weapons at will, often against unarmed civilians and seemingly in revenge. Punitive actions were taken against anyone thought to be organizing trouble. Order was restored, but not before thousands were killed, including the core of Taiwan’s potential local political and social leadership.

Chiang subsequently relieved Ch’en of his post, rescinded military rule, and appointed a number of Taiwanese to top political jobs. Many government monopoly enterprises were sold, and efforts were made to alleviate unemployment. Those actions helped ameliorate a bad situation, but not before considerable damage had been done, including the creation of hostile feelings toward Ch’en, the government, and mainland China.
In late 1949 Mao Zedong’s communist armies defeated Chiang’s forces on the mainland, and Chiang, his government (the Nationalist Party [Kuomintang, or KMT]), the military, and others were compelled to flee. Most went to Taiwan with Chiang. The influx of some 1.5 million people put strains on Taiwan’s struggling economy and further exacerbated ethnic tensions. Chiang had Ch’en executed in public and took measures to root out corruption from the KMT and the government. However, those actions ingratiated him with the Taiwanese only slightly.
The United States abandoned Chiang at that time, but it reversed this policy with the outbreak of the Korean War in June 1950. U.S. Pres. Harry S. Truman sent the U.S. Seventh Fleet to the Taiwan Strait to prevent an invasion of the island by communist armies from the mainland. At that time, due to the divide between the United States and the Soviet Union, the world split into communist and capitalist-democratic blocs. Chiang stood with the latter group, and the United States and other Western countries supported his government’s bid to represent China diplomatically and in the United Nations (UN) and various other international organizations.
Chiang pledged to invade and retake the mainland and used that goal to justify postponing democracy and perpetuating his minority mainland Chinese government. He also used those policies, and the security of U.S. military protection, to focus on Taiwan’s economic development. Chiang thus won the support of the Taiwanese, and, as he succeeded, he also won their political allegiance to a certain extent. Many Taiwanese came to feel that only by working with the mainland Chinese-controlled government could Taiwan become secure and prosperous.
Taiwan’s economy took off in the mid-1960s and grew rapidly in the following decades, causing Taiwan to become known as an “economic miracle.” Chiang and his team of economic planners, including Lee Kuo-ting (Li Guoding), got the credit, as they engineered growth from which everyone benefited. Consumerism and prosperity were the hallmarks of the time. Meanwhile, mainland China languished economically under Mao, with such ill-advised programs as the Great Leap Forward in 1958–60. Economic growth, which had produced a middle class in Taiwan, coupled with relatively free local elections, served as the basis for establishing more democratic governance in Taiwan, though democratic reforms occurred later than they should have, according to Chiang’s critics.
Meanwhile, Chiang’s dream of taking back the mainland and again ruling there dimmed with time. Two crises in the 1950s over Matsu and Quemoy—islands controlled by Taiwan in waters off Fujian province in China—involved intervention by the U.S. Navy and led the United States and Taiwan to conclude a mutual-defense treaty in 1954. The United States thereby offered Taiwan military protection, but it also sought to constrain Chiang from starting a war with mainland China. By the end of the 1960s, however, Washington was viewing better relations with Beijing as a way to help get itself out of the Vietnam War, and the administration of U.S. Pres. Richard Nixon moved accordingly. Beijing replaced Taipei in the UN in 1971, and the following year Nixon visited mainland China, prompting other countries to seek better and more-formal relations with Beijing. Taiwan became diplomatically isolated.
Chiang died in April 1975. He had made Taiwan prosperous and put it on track to become a democracy, but he had failed in his effort to use Taiwan as a base from which to liberate the mainland from communism. Mao died a year later, thus ending a personal feud that had dominated much of China’s 20th-century history.
Successors to Chiang Kai-shek
Upon Chiang Kai-shek’s death in April 1975, his vice president, Yen Chia-kan (Yen Jiagan), became president. Yen, however, was a caretaker president. Chiang’s eldest son, Chiang Ching-kuo (Jiang Jingguo), who headed the KMT and had a base of support in the military, the police, and the intelligence organizations, wielded real political power. Yen understood the political reality, and he and Chiang worked together. When Yen’s term ended in 1978, Chiang was elected president. In the meantime, he made important decisions as premier.

Chiang Ching-kuoChiang Ching-kuo.

J.-Claude Francolon/Gamma Liaison

Chiang Ching-kuo, CCK to his friends, had been sent to the Soviet Union in his youth. He joined the Communist Party there, supported Leon Trotsky, and married a Russian woman. Those credentials hardly constituted an appropriate background for running a country that was on the verge of democratizing, nor were his jobs working with his father or his bases of support. But CCK understood that Taiwan needed to become democratic to survive its diplomatic isolation, to finally heal internal ethnic ill will, and to continue its rapid economic growth.
Chiang was also a man of high standards. He launched an anticorruption campaign that was taken seriously, especially when he jailed some venal top-ranking officials, including his relatives. He forced austerity on the government and set rules that made the government transparent and open to Taiwan’s citizens. At times he used edicts to more quickly push the pace of democratization and good government.

In December 1978 U.S. Pres. Jimmy Carter announced without prior warning that the U.S. would end its formal diplomatic ties with Taiwan and normalize relations with mainland China. His move was a severe shock to Taiwan, and many of its people felt betrayed and angry. Moreover, the move led other countries to rush to sever diplomatic ties with Taiwan in favour of those with the mainland, thus further increasing Taiwan’s political isolation. However, CCK kept Taiwan from overreacting and pursued democratization even more relentlessly. He negotiated with the opposition and arrived at understandings that in 1980 made possible Taiwan’s first competitive national elections. He also supported the Taiwan Relations Act, passed by the U.S. Congress in early 1979, which preserved nondiplomatic relations with the United States.
CCK oversaw another legislative election in 1983 and the formation of a real opposition party, the Democratic Progressive Party (DPP), in 1986, which was followed later that year by Taiwan’s first-ever two-party election—the first in Chinese history. In 1987 he ended martial law and the ban on travel to mainland China, a move that would lead to personal and economic contacts across the Taiwan Strait for the first time since 1949.

Relations with Beijing improved, though CCK rejected an offer by Deng Xiaoping (Teng Hsiao-p’ing) in 1982 to resolve the “Taiwan issue” by using the “one country, two systems” formula that was being devised for the return of Hong Kong to China. He argued that it would make the Republic of China a local government. Chiang also had to contend with a communiqué between the administration of U.S. Pres. Ronald Reagan and Beijing in August of that year in which the United States agreed to reduce arms sales to Taiwan, with the ultimate aim of ending them. Few other countries were willing to sell weapons to Taiwan, so it needed U.S. weapons. As a countermeasure, CCK launched a program to build Taiwan’s own jet fighter plane, called the Indigenous Defense Fighter (IDF). The first plane was completed in 1988 and forthwith went into production. It helped Taiwan maintain air superiority over the island and in the Taiwan Strait. The IDF, however, was extremely expensive to build.
Meanwhile, Chiang put Taiwanese persons into positions of importance in the KMT and the government. One of them was Lee Teng-hui (Li Denghui), a Hakka, whom CCK made his vice presidential running mate in his successful bid for reelection in 1984.
For some time Chiang had been in poor health, and he died in January 1988, before the end of his second term. He was seen to have brought integrity to Taiwan’s politics and to have democratized the country. He had launched what became known as Taiwan’s “political miracle” as he furthered its economic miracle. The respect with which Taiwan’s citizens viewed Chiang lasted into the 21st century, with public opinion polls indicating that most people continued to believe that he had been Taiwan’s best president.
Lee Teng-hui assumed the presidency following Chiang Ching-kuo’s death, according to the constitution. He was also CCK’s chosen successor. However, because Lee was Taiwanese (though Hakka), he was not trusted by the mainland Chinese old guard. They tried to block his accruing too much power by supporting a rotating party leader. James Soong, a young (by Chinese standards) mainland Chinese who was secretary-general of the KMT, took Lee’s side and warned that obstructing Lee’s assumption of political authority would bring chaos and send the wrong signal to Taiwan’s economic partners.

Lee Teng-hui

Lee Teng-hui, 2004.a-giâu
Soong won the day, and in July 1988 Lee was officially elected chairman of the party at its 13th Congress. Lee formed a new cabinet, which for the first time included a Taiwanese majority. Lee also advanced new rules for conducting party business, thereby further democratizing the party. He picked Lee Huan, a mainland Chinese, to be premier.
Meanwhile, in May 1988, farmers took to the streets to protest low prices for their products. More than 500 people were injured in the protests. Subsequently, other groups engaged in street politics, to the tune of 150 public protests a month. Taiwan supported the student movement in Beijing’s Tiananmen Square in the spring of 1989, though not in any tangible way. Students in Taiwan announced support for their counterparts in Beijing. President Lee talked to them in public and listened to their views.
In early 1990 Lee was elected to a second term as president—though he was briefly challenged by Lin Yang-kang (Lin Yanggang) and Chiang Wei-kuo (Jiang Weiguo; Chiang Kai-shek’s second son and CCK’s half brother). In 1991 President Lee terminated the Temporary Provisions. Thus, with the retirement of the “elder parliamentarians” (those representing districts on the mainland or replacements made by appointment) in the National Assembly and the Legislative Yuan, Taiwan held its first nonsupplementary National Assembly election, which helped push democratization another big step forward. Lee’s KMT won the election, though it did not perform as well as it would in legislative elections the following year.
Meanwhile, President Lee had to deal with serious factionalism in the KMT. Some members of the party felt that Lee was promoting Taiwanization too much and disagreed with his policies toward an independent Taiwan. A number left the party to form the Chinese New Party, subsequently renamed the New Party.
Lee also had to cope with an economically booming mainland China. His policy in dealing with Taiwan’s business community, which had been enlarging its investments in and trade with the mainland, was to encourage those businesses to pursue opportunities in Southeast Asia instead—which he called his “go south” policy. After 1990 Lee also had to deal with the mainland’s growing military power. In 1992 Lee was able to improve Taiwan’s military situation when he negotiated offers to purchase advanced fighter planes from the United States (F-16s) and France (Mirage 2000-5s). Taiwan bought aircraft from both countries.
In 1994 Lee supported James Soong when the latter ran for the position of governor of Taiwan, the first direct election for that office. Soong won easily. Lee at the same time pushed through a constitutional amendment providing for a directly elected president. Thereupon Lee decided to run for another term and was reelected in 1996 in what was the first direct election of a top leader in any Chinese entity in history. Lee and his running mate, Lien Chan (Lian Zhan), won a majority of the votes against three other sets of candidates.
In 1995, before the election, Lee traveled to the United States to address a gathering of graduate-school alumni at Cornell University, in Ithaca, New York, where he had received a doctorate in 1968. The trip was a resounding success, although the U.S. Department of State tried to marginalize Lee’s visit in an effort to avoid annoying Beijing. Lee’s visit and his good press in the United States nonetheless angered Beijing, whose leaders saw Lee as trying to legally separate Taiwan from mainland China. Shortly thereafter the People’s Liberation Army conducted threatening missile tests in the Taiwan Strait. More-provocative tests were conducted in 1996, during Lee’s reelection campaign. In reaction, U.S. Pres. Bill Clinton dispatched U.S. warships to the strait, leading to a potentially explosive face-off with mainland China. The conflict-laden situation abated, but not before it drew attention to Taiwan’s status as a serious problem in U.S.-China relations. .
At this time Lee engineered more flexibility in Taiwan’s foreign policy by putting emphasis on informal contacts with other countries and regional and international agencies. He also increased Taiwan’s foreign aid to establish or keep up relations with developing countries. Those efforts yielded results, but they were hardly enough to stem the tide that favoured mainland China over Taiwan in their growing contest for influence in the world.
In 1998 the KMT performed well in local elections, including the Taipei mayoral race, in which the party’s candidate, Ma Ying-jeou, defeated Chen Shui-bian of the DPP with Lee’s help. As Lee’s term in office neared an end in 1999, he angered Beijing again when he called for state-to-state relations, thus suggesting that Taiwan was sovereign and should therefore be independent. Some said that Lee’s action was a response to comments President Clinton had made when he was in mainland China the previous year that appeared to refute Taiwan’s right to seek a separate future. In September 1999, shortly before Lee left office, he had to contend with a severe earthquake, centred in the middle of the island, that killed some 2,400 people, injured thousands more, and caused massive property damage.

Taiwan: earthquakeMap depicting the fault lines running between the Philippine Plate and the Eurasian Plate, the regions of perceived shaking, and the epicentre of the earthquake that devastated Taiwan on September 21, 1999.Encyclopædia Britannica, Inc.
President Lee was known in Taiwan as “Mr. Democracy” for the positive political change he oversaw. He certainly demonstrated that he was a skillful politician and was able to do much for Taiwan while he was in office, even though relations with mainland China were strained during the latter part of his presidency, and the mainland’s rise was increasingly difficult for Taiwan to cope with.

Taiwan since 2000
The Chen Shui-bian presidency
In March 2000 Chen Shui-bian of the opposition DPP won the presidential election. This was a watershed event; the KMT had been in power for more than half a century. Some hailed the election as the final step in Taiwan’s process toward democratizing and establishing majority rule. Others called it a fluke.
Chen Shui-bianChen Shui-bian, 2008.© Fang Chun Che/Dreamstime.com

The latter view was supported by the way Chen won. Pres. Lee Teng-hui had backed his vice president, Lien Chan, for the KMT’s presidential nomination. However, a third candidate, former Taipei governor James Soong, had the best preference-poll numbers—far ahead of Lien’s and Chen’s. Hence, Soong ran as an independent and might well have won the election except that during the campaign Lee and other top members of the KMT accused Soong of having absconded with party funds when he was secretary-general of the KMT. This accusation hurt his reputation badly. Soong was also at a disadvantage by not having a political party and not having sufficient funds to run his campaign. In any case, Soong, running as an independent, ended up splitting the conservative vote.
Chen ran a highly effective campaign, appealing to the Fukien Taiwanese, women, young people, the poor, and those who believed that Taiwan should be legally separate from mainland China. In addition, he was charismatic. Soong, also a consummate politician, won only a small percentage less than Chen in the final vote tally. Soong won more votes from all of Taiwan’s ethnic minorities (mainland Chinese and Hakka and aboriginal peoples) and from women. Hence, Chen was elected with less than half of the popular vote, which was not considered a mandate by many observers. The DPP also lacked a majority in the legislature, which meant a divided government and a difficult job ahead for Chen.

Chen nevertheless started out his term well, with his approval poll numbers ranging upward to 70 percent. However, his efforts to build an effective ruling coalition failed, and he resorted to playing ethnic politics. One of the president’s tactics was to create a political crisis by canceling work on a nuclear power plant that the previous legislature had authorized. Concern about electricity shortages, a general paralysis in government, and a loss of confidence in the business community contributed to the economy’s fall into recession in 2001.
In 2001 Lee Teng-hui left the KMT and formed the Taiwan Solidarity Union, which aligned itself with Chen. James Soong set up the People First Party and aligned it with Lien, who by then was heading the KMT. In legislative elections held that year, the DPP won a plurality but not a majority of seats in the legislature, while Soong’s party made bigger gains (though from a smaller base). Thus, President Chen still did not command a majority in the legislature, and political gridlock became worse.

In 2004 President Chen and his vice president, Annette Lu, were reelected in a highly controversial election. Lien and Soong had teamed up to run against them, and the polls leading up to ballot day showed the opposition duo winning. However, less than 24 hours before the polls were to open, both Chen and Lu were shot while campaigning near Chen’s hometown. The wounds were minor, but Chen ordered the police and the military to remain at their posts, which kept them from voting (it was assumed that most would have voted for Lien and Soong). Chen and Lu were also helped by the sympathy vote, and the pair won by a razor-thin margin.
The opposition charged that the election had been stolen. Political paralysis got even worse. Meanwhile, Chen’s people, who had perceived that they would be out of power soon, increased their efforts to cash in on their positions, and corruption, already bad, worsened dramatically.
During his first term in office, Chen had antagonized Beijing with calls for Taiwan’s independence in order to solidify his support base, the Fukien Taiwanese. After the September 11, 2001, attacks, the United States, engaged in war in the Middle East, did not welcome Chen’s provocation. U.S. Pres. George W. Bush, who until then had been a close friend of Taiwan, now made caustic comments about the Chen administration and regarded Chen as a loose cannon and Taiwan as no longer a loyal ally. Because of domestic political gridlock, purchases of American arms were held up by Taiwan’s legislature at a time when mainland China continued to put more missiles in place in an attempt to intimidate Taiwan. Moreover, the mainland attracted Taiwan’s businessmen with investment and trade opportunities. The cumulative effect of these developments was to discredit the Chen presidency.
Late in Chen’s second term, Shih Ming-teh—a former DPP chairman known as “Taiwan’s Nelson Mandela” for having served longer in prison than any other DPP member during KMT rule (1966–77 and 1980–90)—organized mass public protests against Chen, citing his poor governance and massive corruption. Indictments of a large number of Chen administration officials, including Chen’s wife, made the situation worse for the president. Chen’s public approval poll numbers fell into single digits.
Chen ended his presidency in disgrace. The hallmarks of his administration were extreme corruption, worsening ethnic relations, and deteriorating relations with mainland China and the United States. He also did serious damage to his party, the DPP, and its leadership. Some even feared for the future of the party.
After Chen left the presidency, he was not allowed to leave Taiwan. In late 2009 he was sentenced to life in prison and fined $6.13 million after he and his wife were convicted of embezzlement, receiving bribes, and money laundering involving a total of some $15 million. Chen’s friends and relatives provided evidence against him in court, as did legal authorities from the United States and several other countries. Taiwan’s High Court subsequently reviewed the case and reduced the sentence, but Chen remained in prison. Though Chen still had a significant following, the conviction signaled that Chen’s influence in the KMT had ended.
By going on hunger strikes, complaining of ill treatment in prison, and appealing his sentence, Chen remained under media scrutiny in ensuing years. This worked to the advantage of the KMT and hurt the DPP.

The Ma Ying-jeou presidency
In 2008 the KMT won both the presidential and legislative elections by big margins. Ma Ying-jeou, a former mayor of Taipei and once the minister of justice, was elected president. Ma, who had a law degree from Harvard University and a reputation for being the cleanest of Taiwan’s political elite, was respected and popular. During the campaign he had pledged good economic growth, better ethnic relations, clean government, and cordial relations with mainland China and the United States.

The U.S. government was indeed very pleased with Ma as president, principally because he reduced tensions in the Taiwan Strait by pursuing cordial relations with Beijing rather than provoking its leaders. In the process, the Taiwan Strait was downgraded from its former status as the foremost flash point in the world (defined as the place where a conflict between two powers—in this case the United States and mainland China—might involve the use of weapons of mass destruction). Beijing was also pleased, and it set in motion policies to dramatically improve relations with Taiwan.
However, in 2009 Taiwan fell victim to the worldwide recession, which caused negative economic growth on the island. Also that year a devastating tropical cyclone, Typhoon Morakot, hit Taiwan, and nearly 500 people were killed or listed as missing. Ma espoused the position that responding to the tragedy was largely local governments’ responsibility. The public, however, was ultimately dissatisfied with the response of Ma’s government, and Ma’s popularity plummeted as a result.

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