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Economy of Taiwan

Through decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (NTD), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to China and Southeast Asia. Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Taiwan is now a creditor economy, holding the world's fourth-largest stock of foreign exchange reserves ($399.5 billion as of April 2011). Although Taiwan enjoyed sustained economic growth, full employment, and low inflation for many years, in 2001, Taiwan joined other regional economies in its first recession since 1949. From 2002-2007, Taiwan's economic growth ranged from 3.5% to 6.2% per year. With the global economic downturn, Taiwan's economy slumped into recession in the second half of 2008. Its real GDP, following growth of 5.7% in 2007, rose 0.73% in 2008 and contracted 1.93% in 2009. The economy saw a robust recovery in 2010, growing by 10.88%, the highest rate in 28 years. Foreign Trade Foreign trade has been the engine of Taiwan's rapid growth during the past 50 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to fluctuations in the world economy. The total value of trade increased more than five-fold in the 1960s, nearly ten-fold in the 1970s, doubled in the 1980s, nearly doubled again in the 1990s, and grew more than 85% in the past decade. Export composition changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector. Taiwan became a member of the World Trade Organization (WTO) as a special customs territory in January 2002. Taiwan firms are the world's largest suppliers of computer monitors and leaders in PC manufacturing, although now much of the final assembly of these products occurs overseas, typically in China. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports coal, crude oil, and gas to meet most of its energy needs. Reflecting the large Taiwan investment in China, the P.R.C. supplanted the United States as Taiwan's largest trade partner in 2003. In 2010, China (including Hong Kong) accounted for over 29.0% of Taiwan's total trade and 41.8% of Taiwan's exports. Japan was Taiwan's second-largest trading partner with 13.3% of total trade, including 20.7% of Taiwan's imports. The United States is now Taiwan's third-largest trade partner, taking 11.5% of Taiwan's exports and supplying 10.1% of its imports. In 2010, Taiwan was the United States' 9th-largest trading partner; Taiwan's two-way trade with the United States amounted to $61.9 billion in 2010. Imports from the United States consist mostly of machinery and equipment as well as agricultural and industrial raw materials. Exports to the United States are mainly electronics and consumer goods. The United States, Hong Kong, China, and Japan account for 60% of Taiwan's exports, and the United States, Japan, and China provide almost 46% of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. The U.S. trade deficit with Taiwan in 2010 was $9.88 billion, up $3 million from 2009. Even though Taiwan maintains formal diplomatic relations with about a score of its trading partners, Taiwan maintains trade offices in nearly 100 countries. Taiwan is a member of the Asian Development Bank, the WTO, and the Asia-Pacific Economic Cooperation (APEC) forum. Taiwan is also an observer at the Organization for Economic Cooperation and Development (OECD). In 2009, Taiwan acceded to the WTO Government Procurement Agreement. These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy. Agriculture Although less than one-quarter of Taiwan's land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. Agriculture comprises only about 1.7% of Taiwan's GDP. Taiwan's main crops are rice, fruit, and vegetables. While largely self-sufficient in rice production, Taiwan imports large amounts of wheat, corn, and soybeans, mostly from the United States. Poultry and pork production are mainstays of the livestock sector and the major demand drivers for imported corn and soybeans. Rising standards of living have led to increased demand for a wide variety of high-quality food products, much of it imported. Overall, U.S. agricultural and food products account for over 30% of Taiwan's agricultural import demand. U.S. food and agricultural exports total about $3.0 billion annually, making Taiwan the United States' sixth-largest agricultural export destination. Taiwan's agricultural exports include frozen fish, aquaculture and sea products, canned and frozen vegetables, and nursery products such as orchids. Taiwan's imports of agricultural products and the range of countries supplying the market have increased since its WTO accession in 2002, and it is slowly liberalizing previously protected agricultural markets. Economic Outlook Taiwan faces many of the same economic issues as other developed economies. As labor-intensive industries have relocated to countries with low-cost labor, Taiwan's future development will rely on further transformation to a high technology and service-oriented economy and carving out its niche in the global supply chain. Taiwan's economy has become increasingly linked with China, and the Ma administration is expected to further develop these links and liberalize cross-Strait economic relations, particularly through negotiations under the Economic Cooperation Framework Agreement (ECFA). Taiwan official statistics indicate that Taiwan firms had invested about U.S. $102.1 billion in China as of the end of April 2011, which is more than 60% of Taiwan's stock of direct foreign investment. Many unofficial estimates put the actual number at between U.S. $150 and over $300 billion. Exact figures are difficult to obtain, as much Taiwan investment in the P.R.C. is via Hong Kong and other third-party jurisdictions. More than one million Taiwan people are estimated to be residing in China, and more than 70,000 Taiwan companies have operations there. Taiwan firms are increasingly acting as management centers that take in orders, produce them in Taiwan, the mainland, or Southeast Asia and then ship the final products to the U.S. and other markets. GDP (2010): $430 billion. Real annual growth rate (2010): 10.88%. Per capita GDP (2010): $18,588. Unemployment (April 2011): 4.29%. Natural resources: Small deposits of coal, natural gas, limestone, marble, and asbestos. Agriculture (1.6% of GDP): Major products --pork, rice, fruit and vegetables, flowers, sugarcane, poultry, shrimp, eel. Services: (67.1% of GDP). Industry (31.3% of GDP): Types --electronics and flat panel products, chemicals and petrochemicals, basic metals, machinery, textiles, transport equipment, plastics, machinery. Trade (2010): Exports --$274.6 billion: electronics, optical and precision instruments, information and communications products, textile products, basic metals, plastic and rubber products. Major markets --P.R.C. and Hong Kong $114.8 billion, U.S. $31.5 billion, Japan $14.5 billion. Imports --$251.4 billion: electronics, optical and precision instruments, information and communications products, machinery and electrical products, chemicals, basic metals, transport equipment, crude oil. Major suppliers --Japan $36.2 billion, P.R.C. and Hong Kong $37.6 billion, U.S. $25.4 billion.

Geography of Taiwan

Location: Eastern Asia, islands bordering the East China Sea, Philippine Sea, South China Sea, and Taiwan Strait, north of the Philippines, off the southeastern coast of China Map references: Southeast Asia Area: area: 35,980 sq km (14,000 sq.mi.) comparative area: about the size of West Virginia note: includes the Pescadores, Matsu, and Quemoy Land boundaries: 0 km Coastline: 1,448 km Maritime claims: exclusive economic zone: 200 nm territorial sea: 12 nm International disputes: involved in complex dispute over the Spratly Islands with China, Malaysia, Philippines, Vietnam, and possibly Brunei; Paracel Islands occupied by China, but claimed by Vietnam and Taiwan; Japanese-administered Senkaku-shoto (Senkaku Islands/Diaoyu Tai) claimed by China and Taiwan Climate: tropical; marine; rainy season during southwest monsoon (June to August); cloudiness is persistent and extensive all year Terrain: eastern two-thirds mostly rugged mountains; flat to gently rolling plains in west Cities (1997): Capital--Taipei (pop. 2.6 million). Other Cities--(Kaohsiung 1.4 million), Taichung (892,000) Natural resources: small deposits of coal, natural gas, limestone, marble, and asbestos
Environment:
current issues: water pollution from industrial emissions, raw sewage; air pollution; contamination of drinking water supplies; trade in endangered species natural hazards: earthquakes and typhoons

Government of Taiwan

ADMINISTRATION
The authorities in Taipei exercise control over Taiwan, Kinmen, Matsu, Penghu (Pescadores) and several other smaller islands. Taiwan is divided into counties, provincial municipalities, and two special municipalities, Taipei and Kaohsiung. At the end of 1998, the Constitution was amended to make all counties and cities directly administered by the Executive Yuan. From 1949 until 1991, the authorities on Taiwan claimed to be the sole legitimate government of all of China, including the mainland. In keeping with that claim, when the Kuomintang retreated to Taiwan in 1949, they re-established the full array of central political bodies, which had existed on the mainland. While much of this structure remains in place, the authorities on Taiwan in 1991 abandoned their claim of governing mainland China, stating that they do not "dispute the fact that the P.R.C. controls mainland China."

The first National Assembly, elected on the mainland in 1947 to carry out the duties of choosing the President and amending the constitution, was re-established on Taiwan when the KMT moved. Because it was impossible to hold subsequent elections to represent constituencies on the mainland, representatives elected in 1947-48 held these seats "indefinitely." In June 1990, however, the Council of Grand Justices mandated the retirement, effective December 1991, of all remaining "indefinitely" elected members of the National Assembly and other bodies.

The second National Assembly, elected in 1991, was composed of 325 members. The majority were elected directly, while 100 were chosen from party slates in proportion to the popular vote. This National Assembly amended the Constitution in 1994, paving the way for the direct election of the President and Vice President the first of which was held in March 1996. In April 2000, the members of the National Assembly voted to permit their terms of office to expire without holding new elections. The National Assembly elected in May 2005 voted to abolish itself the following month, leaving Taiwan with a unicameral legislature. The President is both leader of Taiwan and Commander-in-Chief of its armed forces. The President has authority over four of the five administrative branches (Yuan): Executive, Control, Judicial, and Examination. The President appoints the President of the Executive Yuan, who also serves as the Premier. The Premier and the cabinet members are responsible for government policy and administration.

The main lawmaking body, the Legislative Yuan (LY), was originally elected in the late 1940s in parallel with the National Assembly. The first LY had 773 seats and was viewed as a "rubber stamp" institution. The second LY was not elected until 1992. The third LY, elected in 1995, had 157 members serving 3-year terms, while the fourth LY, elected in 1998, was enlarged to 225 members. The LY has greatly enhanced its standing in relation to the Executive Yuan and has established itself as a major player on the central level. With increasing strength, size, and complexity, the LY now mirrors Taiwan's recently liberalized political system. In the 1992 and 1995 elections, the main opposition party--the Democratic Progressive Party (DPP)--challenged the half-century of Kuomintang (KMT) dominance of the Legislature. In both elections, the DPP won a significant share of the LY seats, leaving only half of the LY seats in the hands of the KMT. In 2001, the DPP won a plurality of LY seats--88 to the KMT's 66, the People First Party's 45, the Taiwan Solidarity Union's 13, and 13 won by other parties and independents. In the December 2004 LY election, the Pan-Blue coalition won a slender majority of 114 of the 225 seats compared to the Pan-Green coalition's 101. The LY was halved in size from 225 to 113 seats by constitutional amendments in 2005. In the January 2008 LY election, the first to be held under this new structure, the KMT won an absolute majority of 81 seats to the DPP's 27 seats, with the remaining five seats going to independent and small party candidates.

In 1994, when the National Assembly voted to allow direct popular election of the President, the LY passed legislation allowing for the direct election of the Governor of Taiwan Province and the mayors of Taipei and Kaohsiung Special Municipalities. These elections were first held in December 1994. In a move to streamline administration, the position of elected Governor was abolished at the end of 1998, and most other elements of the Taiwan Provincial Government have been eliminated.

The Control Yuan (CY) monitors the efficiency of public service and investigates instances of corruption. The 29 Control Yuan members are appointed by the President and approved by the Legislative Yuan; they serve 6-year terms. In recent years, the Control Yuan has become more activist, and it has conducted several major investigations and impeachments. From January 2005 to August 2008 the Control Yuan was inactive because the Pan-Blue dominated LY has refused to approve the new slate of CY members proposed by President Chen. The new Control Yuan members appointed by President Ma took office on August 1, 2008.

The Judicial Yuan (JY) administers Taiwan's court system. It includes a 16-member Council of Grand Justices (COGJ) that interprets the constitution. Grand Justices are appointed by the President, with the consent of the National Assembly, to 9-year terms.

The Examination Yuan (EY) functions as a civil service commission and includes two ministries: the Ministry of Examination, which recruits officials through competitive examination, and the Ministry of Personnel, which manages the civil service. The President appoints the President and members of the Examination Yuan.

Principal Leaders
President--Ma Ying-jeou
Vice President--Vincent Siew (Siew Wan-chang)
Premier--Wu Den-yih
Vice Premier--Sean Chen (Chen Chung)
Legislative Yuan President--Wang Jin-pyng
Judicial Yuan President--Rai Hau-min
Defense Minister--Kao Hua-chu
Foreign Minister--Timothy Yang (Yang Chin-tien)
Minister of Justice--Tseng Yung-fu
Mainland Affairs Council Chairman--Lai Shin-yuan
Government Information Office Minister--Phillip Yang (Yang Yung-ming)
Cabinet Spokesperson--Phillip Yang (Yang Yung-ming)

POLITICAL CONDITIONS
Until 1986, Taiwan's political system was controlled by one party, the Kuomintang (KMT), the chairman of which was also Taiwan's top leader. As the ruling party, the KMT was able to fill appointed positions with its members and maintain political control of the island.

Before the 1986 island-wide elections, many "nonpartisans" grouped together to create Taiwan's first new opposition political party, the Democratic Progressive Party (DPP). Despite an official ban on forming new political parties, Taiwan authorities did not prohibit the DPP from operating, and DPP and independent candidates captured more than 20% of the vote in the 1986 elections. In 1987, President Chiang Ching-kuo ended the nearly 4 decades of martial law under which dissent had been suppressed. Since then, Taiwan has taken dramatic steps to improve respect for human rights and create a democratic political system, including ending almost all restrictions on the press. Vice President Lee Teng-hui succeeded Chiang Ching-kuo as president upon Chiang's death in 1988, and in 1990 the National Assembly (NA) elected Lee to a 6-year term as President, the final indirect presidential election conducted by the NA. Under President Lee, the Legislative Yuan (LY) passed the Civic Organizations Law in 1989, which allowed for the formation of new political parties, thereby legalizing the DPP. In 1992, the DPP won 51 seats in the 161-seat LY, increasing the DPP's influence on legislative decisions. Chen Shui-bian's victory in the Taipei mayoral election in December 1994 further enhanced the profile of the DPP, which won 45 of the 157 seats in the 1995 LY elections.

In 1996, the KMT's Lee Teng-hui was elected President and Lien Chan Vice President in the first direct presidential election by Taiwan's voters. In the November 1997 local elections, the DPP won 12 of the 23 county magistrate and city mayor contests to the KMT's 8, outpolling the KMT for the first time in a major election. In a three-way contest in March 2000, DPP candidate Chen Shui-bian became the first opposition party candidate to win the presidency. His victory resulted in the first-ever transition of the presidency from one political party to another, validating Taiwan's democratic political system. President Chen was re-elected by 50.1% of the popular vote to a second term in a very tight contest on March 20, 2004. The election was marred by a shooting incident the day before the election during which President Chen and his running mate Vice President Annette Lu were slightly wounded. While the opposition contested the results, it was the first time that the DPP had won an outright majority in an island-wide election. Taiwan's second democratic transition of ruling party followed the March 22, 2008, presidential election, which went decisively (58%) to KMT candidate Ma Ying-jeou. Together with the KMT legislative victory 2 months earlier, Taiwan now had a unified government under KMT control.

The March 2004 election also included two "defensive referenda." Historically, referenda have been closely tied to the question of Taiwan independence, and thus a highly sensitive issue in cross-Strait relations. Both referenda in 2004 failed to meet the required participation threshold of 50% of eligible voters, as did four more referenda held in conjunction with the 2008 legislative and presidential elections. The 2008 DPP referendum on joining the UN under the name Taiwan was especially controversial.

The final National Assembly passed a set of constitutional amendments in June 2005 that halved the number of LY seats from 225 to 113 and created single-member legislative election districts beginning with the January 2008 legislative election. The constitutional revisions also abolished the National Assembly and provided for the public to confirm or reject future constitutional amendments passed by the Legislative Yuan. President Chen's controversial efforts to promote a second round of constitutional revisions focused on changing the government structure were unsuccessful. The P.R.C. accused him of using the constitution issue to move Taiwan toward independence. While not entirely ruling out future constitutional changes, President Ma has stressed the need to implement rather than revise the constitution.

In the December 2004 legislative elections, the ruling DPP won a plurality with 89 of the 225 seats, gaining 2 seats more than it did in 2001, but the opposition KMT and its Pan-Blue allies continued to hold a narrow majority in the Legislative Yuan. The ruling DPP's inability to form a majority coalition led to gridlock in the LY until 2008. Following a landslide victory in December 2005 local elections, the KMT won the 2006 mayoral election in Taipei City, while the DPP won in Kaohsiung City. In the January 2008 elections for the downsized 113-seat LY, the KMT won 81 seats and KMT allies won a further five seats, giving them a three-quarters majority over the DPP, which won just 27 seats. The DPP subsequently won several by-elections, and by April 2010 it had added six more seats, enough to prevent the ruling KMT from acting on its own to send proposed constitutional amendments to a referendum vote. As of June 2011, the KMT held 72 seats, the DPP 33 seats, the NSU 3 seats, and there were two independents.

Political Parties
In addition to the Kuomintang (KMT) (described above in 'History' and 'Political Conditions'), the other major political party is the DPP, whose membership is made up largely of native Taiwanese, and whose platform includes outspoken positions on some of the most sensitive issues in Taiwan politics. For example, the DPP maintains that Taiwan is an entity separate from mainland China, in contrast to the KMT position that Taiwan and the mainland, though currently divided, are both part of "one China." In sharp contrast to the tenets of both KMT and P.R.C. policy, a number of prominent DPP politicians openly advocate independence for Taiwan.

There are a number of small political parties, including the Taiwan Solidarity Union (TSU), the People First Party (PFP), and the New Party (NP). After the 2000 presidential election, former KMT President Lee Teng-hui broke with the KMT and in 2001 formed the pro-independence Taiwan Solidarity Union (TSU), which allied itself with the DPP, an alliance that largely fell apart over time. The TSU failed to elect any members to the LY in January 2008. The People First Party (PFP) was formed in the wake of the March 2000 presidential election by disgruntled KMT members who supported the presidential bid of former KMT Taiwan Provincial Governor James Soong, who did not receive the KMT nomination. The PFP and KMT subsequently formed the "Pan-Blue" Alliance to oppose the DPP government. The PFP, however, gradually shrank and it largely merged with the KMT in the runup to the January 2008 LY elections, although one PFP candidate did win election to the LY under the name PFP. The New Party, which also split from the KMT, holds several seats on the Taipei City Council, but has no legislators at this point. In addition, there are more than 100 other registered small political parties, such as the Hakka Party, the Green Party, and the Constitution Party. None of these small parties received more than 1% or 2% of votes in the January 2008 LY election.

Taiwan and the Mainland
Over the past several years, Taiwan has relaxed restrictions on unofficial contacts with the P.R.C., and cross-Strait interaction has mushroomed. In January 2001, Taiwan formally allowed the "three mini-links" (direct trade, travel, and postal links) from Kinmen (Quemoy) and Matsu Islands to Fujian Province and permitted direct cross-Strait trade in February 2002. Cross-Strait trade has grown rapidly over the past 10 years. China is Taiwan's largest trading partner, and Taiwan is China's seventh-largest. Estimates of Taiwan investment on the mainland, both officially approved by Taiwan authorities and investment made by Taiwan firms through third parties, range from $150 billion to over $300 billion, making Taiwan and Hong Kong by some measures the two largest investors in the P.R.C. This trade generally runs in Taiwan's favor and continues to grow, providing another engine for the island's economy. On June 29, 2010, following 6 months of negotiations, Taiwan and the P.R.C. signed the Economic Cooperation Framework Agreement (ECFA), aimed at bringing about liberalization of cross-Strait trade in products and services, and eventually creating an essentially free-trade regime. ECFA came into force on September 12, and reduced tariff treatment for the bilateral trade of more than 500 products began on January 1, 2011. Ma administration officials see ECFA as a critical first step in avoiding Taiwan's regional economic marginalization and paving the way for expanded trade relations with the Association of Southeast Asian Nations (ASEAN), the United States, and other major trading partners.

In February 2003, Taiwan and the P.R.C. agreed to allow Taiwan carriers to fly non-stop (although routed via Hong Kong or Macau airspace) to bring Taiwan residents on the mainland home for the Lunar New Year holiday. The two sides agreed to conduct Lunar New Year charter flights again in 2005, with flights operated by both Taiwan and P.R.C. carriers flying over, but not having to land in, Hong Kong or Macau. Over time these flights were expanded to cover three other major holidays. In July 2008, Taiwan and P.R.C. carriers began operating cross-Strait charter flights every weekend. These flights are open to mainland tourists, as well as Taiwan and foreign travelers. Daily direct cross-Strait charter flight service began in December 2008, and the two sides have also begun cargo charter flights, direct shipping, direct postal service, and cooperation on food safety issues. To meet rapidly increasing air transport demand, both parties agreed to increase the number of passenger and cargo flights to 270 per week in 2009; carriers from each side operate 135 flights per week. Following an agreement in May 2010 to eventually increase cross-Strait flights to a total of 370 per week, both sides on June 14, 2010 added 14 flights between Shanghai and Taipei. As of November 1, 2010 298 weekly cross-Strait flights were in operation. More than 1.5 million P.R.C. tourists were expected to go to Taiwan in 2010. Many senior P.R.C. officials--including the culture minister, a vice minister of public security, the mayor of Shanghai, and numerous provincial governors and Communist Party leaders--have visited as part of an effort to improve mainland China's image among a generally wary Taiwan population.

The development of semiofficial cross-Strait relations has had ups and downs. In April 1993, the first round of high-level cross-Strait talks was held in Singapore between the heads of two private intermediary organizations--Taiwan's Straits Exchange Foundation (SEF) and the P.R.C.'s Association for Relations Across the Taiwan Strait (ARATS). These talks primarily addressed technical issues relating to cross-Strait interactions. Beijing suspended lower-level talks from 1995-97 following President Lee's U.S. visit. SEF Chairman Koo Chen-fu visited the mainland in October 1998 for the second round of high-level talks. In 1999 Beijing once again suspended the cross-Strait dialogue, canceling plans for a visit by ARATS Chairman Wang Daohan to Taiwan, because of statements by President Lee that relations between the P.R.C. and Taiwan should be conducted as "state-to-state" or at least as "special state-to-state relations." Following his May 20, 2000 inauguration, President Chen called for resuming the cross-Strait dialogue without any preconditions, but the P.R.C. insisted President Chen first acknowledge what it claimed was the "1992 consensus" on one China reached by the two sides. The cross-Strait dialogue remained suspended for the following 8 years of President Chen's two-term administration. Nonetheless, economic and social ties continued to develop rapidly despite the "one China" obstacle and Taiwan's resentment over the P.R.C.'s March 2005 "Anti-Secession Law," and the two sides were able through intermediary organizations to reach agreements on holiday cross-Strait charter flights. The KMT began its own dialogue with Beijing in 2005.

President Ma has moved quickly to resume the SEF-ARATS dialogue, expand flights, and, in a major step to enhance cross-Strait relations, signed an Economic Cooperation Framework Agreement (ECFA) with Beijing. The United States has welcomed and encouraged the regular cross-Strait dialogue as a process which contributes to a reduction of tension and to an environment conducive to the eventual peaceful resolution of the outstanding differences between the two sides. The United States believes that differences between Taipei and Beijing should be resolved peacefully in a manner acceptable to people on both sides of the Taiwan Strait. Over the past 2 years, SEF and ARATS have held six rounds of talks and signed 15 agreements, including the ECFA. President Ma has stressed the importance of people-to-people contact, and in 2010 the Legislative Yuan revised the University Law, the Junior College Law, and the Cross-strait Relations Act that would allow P.R.C. college students to come to Taiwan for graduate and undergraduate degree studies.

Political Establishment
Type: Multi-party democracy.
Constitution: December 25, 1946; last amended 2005.
Branches (Yuan): Executive, Legislative, Judicial, Control, Examination.
Major political parties: Kuomintang (KMT or Nationalist Party); Democratic Progressive Party (DPP); several small parties.
Suffrage: Universal over 20 years of age.
Central budget proposed (FY 2009): $56.8 billion.
Defense proposed (2009): 17.2% of entire budget.

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History of Taiwan

Taiwan's aboriginal peoples, who originated in Austronesia and southern China, have lived on Taiwan for 12,000 to 15,000 years. Significant migration to Taiwan from the Chinese mainland began as early as A.D. 500. Dutch traders first claimed the island in 1624 as a base for Dutch commerce with Japan and the China coast. Two years later, the Spanish established a settlement on the northwest coast of Taiwan which they occupied until 1642 when they were driven out by the Dutch. Dutch colonists administered the island and its predominantly aboriginal population until 1661. The first major influx of migrants from the Chinese mainland came during the Dutch period, sparked by the political and economic chaos on the China coast during the Manchu invasion and the end of the Ming Dynasty. In 1664, a Chinese fleet led by the Ming loyalist Cheng Ch'eng-kung (Zheng Chenggong, known in the West as Koxinga) retreated from the mainland and occupied Taiwan. Cheng expelled the Dutch and established Taiwan as a base in his attempt to restore the Ming Dynasty. He died shortly thereafter, and in 1683 his successors submitted to Manchu (Qing Dynasty) control. From 1680 the Qing Dynasty ruled Taiwan as a prefecture and in 1875 divided the island into two prefectures, north and south. In 1887 the island was made into a separate Chinese province. During the 18th and 19th centuries, migration from Fujian and Guangdong provinces steadily increased, and Chinese supplanted aborigines as the dominant population group. In 1895, a weakened Imperial China ceded Taiwan to Japan in the Treaty of Shimonoseki following the first Sino-Japanese war. During its 50 years (1895-1945) of colonial rule, Japan expended considerable effort in developing Taiwan's economy. At the same time, Japanese rule led to the "Japanization" of the island including compulsory Japanese education and forcing residents of Taiwan to adopt Japanese names. At the end of World War II in 1945, Taiwan reverted to Chinese rule. During the immediate postwar period, the Nationalist Chinese (KMT) administration on Taiwan was repressive and corrupt, leading to local discontent. Anti-mainlander violence flared on February 28, 1947, prompted by an incident in which a cigarette seller was injured and a passerby was shot to death by Nationalist authorities. The island-wide rioting was brutally put down by Nationalist Chinese troops, who killed thousands of people. As a result of the February 28 Incident, the native Taiwanese felt a deep-seated bitterness to the mainlanders. Until 1995, the KMT authorities suppressed accounts of this episode in Taiwan history. In 1995 a monument was dedicated to the victims of the "2-28 Incident," and for the first time Taiwan's leader, President Lee Teng-hui, publicly apologized for the Nationalists' brutality. Starting before World War II and continuing afterwards, a civil war was fought on the mainland between Chiang Kai-shek's KMT government and the Chinese Communist Party led by Mao Zedong. When the civil war ended in 1949, 2 million refugees, predominately from the Nationalist government, military, and business community, fled to Taiwan. In October 1949 the People's Republic of China (P.R.C.) was founded on the mainland by the victorious communists. Chiang Kai-shek established a "provisional" KMT capital in Taipei in December 1949. During the 1950s, the KMT authorities implemented a far-reaching and highly successful land reform program on Taiwan. They redistributed land among small farmers and compensated large landowners with commodities certificates and stock in state-owned industries. Although this left some large landowners impoverished, others turned their compensation into capital and started commercial and industrial enterprises. These entrepreneurs were to become Taiwan's first industrial capitalists. Together with refugee businessmen from the mainland, they managed Taiwan's transition from an agricultural to a commercial, industrial economy. Taiwan has developed steadily into a major international trading power with $466 billion in two-way trade (2007). Taiwan's accession to the World Trade Organization in 2002 has expanded its trade opportunities and further strengthened its standing in the global economy. Tremendous prosperity on the island has been accompanied by economic and social stability. Chiang Kai-shek's successor, his son Chiang Ching-kuo, began to liberalize Taiwan's political system, a process that continued when President Lee Teng-hui took office in 1988. The direct election of Lee Teng-hui as president in 1996 was followed by opposition Democratic Progressive Party (DPP) candidate Chen Shui-bian's election victory in March 2000. Chen was re-elected in March 2004 in a tightly contested election. KMT's Ma Ying-jeou won the March 2008 presidential election by a substantial majority and is scheduled to take office on May 20, 2008.

People of Taiwan

Taiwan has a population of 23 million. More than 18 million, the "native" Taiwanese, are descendants of Chinese who migrated from Fujian and Guangdong Provinces on the mainland, primarily in the 18th and 19th centuries. The "mainlanders," who arrived in Taiwan after 1945, came from all parts of mainland China. About half a million indigenous peoples inhabit the mountainous central and eastern parts of the island and are believed to be of Malayo-Polynesian origin. Of Taiwan's total population, approximately one million, or 4.4%, currently reside in mainland China. Education Since 1979, 6 years of elementary school and 3 years of junior high have been compulsory for all children. About 95% of junior high graduates continue their studies in either a senior high or vocational school. Taiwan has an extensive higher education system with 162 institutions of higher learning. In 2010, about 147,500 students took the entrance examinations to enter universities and colleges; about 76% of the candidates were accepted by a college or university. Opportunities for graduate education are expanding in Taiwan, but many students travel abroad for advanced education. In FY 2010, over 10,700 U.S. student visas were issued to Taiwan passport holders. Languages A large majority of people in Taiwan speak Mandarin Chinese, which has been the medium of instruction in the schools for more than 5 decades. Native Taiwanese and many others also speak one of the Southern Fujianese dialects, Min-nan, also known as Taiwanese. Recently there has been a growing use of Taiwanese in the broadcast media. The Hakka, who are concentrated in several counties throughout Taiwan, have their own distinct dialect. As a result of the half-century of Japanese rule, many older people also can speak Japanese. The method of Chinese romanization most commonly used in Taiwan is the Wade-Giles system. In 2002, Taiwan authorities announced adoption of the pinyin system used on the mainland to replace the Wade-Giles system, but its use is not consistent throughout society, often resulting in two or more romanizations for the same place or person. Religions According to Taiwan's Interior Ministry figures, there are about 11.2 million religious believers in Taiwan, with more than 75% identifying themselves as Buddhists or Taoists. At the same time, there is also a strong belief in traditional folk religion throughout the island. These are not mutually exclusive, and many people practice a combination of the three. Confucianism also is an honored school of thought and ethical code. Christian churches have been active on Taiwan for many years, and today, the population includes a small but significant percentage of Christians. Culture Taiwan's culture is a blend of its distinctive Chinese, Japanese, and Western influences. Fine arts, folk traditions, and popular culture embody traditional and modern, Asian, and Western motifs. One of Taiwan's greatest attractions is the Palace Museum, which houses over 650,000 pieces of Chinese bronze, jade, calligraphy, painting, and porcelain. This collection was moved from the mainland in 1949 when Chiang Kai-shek's Nationalist Party (KMT) fled to Taiwan. The collection is so extensive that only 1% is on display at any one time. People Population (February 2009): 23.0 million. Annual population growth rate (2009): 0.23%. Languages: Mandarin Chinese (official), Taiwanese, Hakka. Education: Years compulsory --9. Attendance (2007)--99.30%. Literacy (2008)--97.78%. Health: Infant mortality rate (2007)--0.47%. Life expectancy (2008)--78.57 yrs; male 75.59 yrs.; female 81.94 yrs. Work force (August 2009): 10.96 million.
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