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Taiwan is the most financially robust of the Asian tigers, but its relationship with China remains precarious

The eastern part of the island of Taiwan, around two-thirds of the territory, consists mostly of a series of mountain ranges running north to south that descend steeply to the eastern coast. To the west, they descend more gently to a broad coastal plain that is home to most of the population. The island is geologically active: in 1999 an earthquake killed 2,448 people.

Taiwan's original inhabitants were a diverse collection of Malayo-Polynesian groups. Subsequent waves of emigration from China, however, displaced most of these groups to the mountains and they now account for only around 2% of the population.

Most people are descendants of the Chinese who had been arriving since the 17th century. A later addition, and the most powerful, however, are the descendants of the two million people who arrived following the 1949 communist revolution. These were largely the élite of the former regime: the industrialists and the professionals. More recent arrivals, but very much at the bottom of the social ladder, are the 300,000 or so immigrant workers. In recent years, however, there has also been an increase in labour emigration to China: at least 2% of Taiwanese now live and work there.

The population is highly educated and government spending on education is around 4% of GDP.

The basis for Taiwan's fairly equitable pattern of development was an extensive land reform over the period 1949–53. Most of the land on the fertile plains is still worked by small and very productive family farms that ensure the country remains self-sufficient in rice. Nowadays, however, agriculture employs only 5% of the workforce.

Taiwan's industrial development after 1949 benefited from considerable US aid. From the 1960s the USA obliged the Taiwanese to open their economy and produce goods for export. This initiated a steady upward progression: in the 1960s, light assembly work and garments; in the 1970s, heavy industry; in the 1980s, TVs; and in the 1990s, computers. Manufacturing still accounts for around one-fifth of GDP.

Taiwan is now the world's third largest producer of information technology goods, mostly subcontracting for foreign brands—90% of the circuit boards for the world's personal computers, as well as 80% of the notebook computers, are made by Taiwanese companies, many based in the Science Industrial Park at Hsinchu. However most have shifted many production operations to other countries; around two-thirds of IT hardware is now made in China.

Taiwan has a company for every 18 people

Taiwan's industrial development is largely based on small producers—which account for around 80% of employment, and roughly half the economy. There is one company for every 18 people—the highest ratio in the world. Their effectiveness is based on extensive networking. Elsewhere, this might lead to corruption but this seems to have been less of a problem here. Taiwan tends to suffer less from financial crises partly because its financial system is based on family loans and other unofficial sources, and because Taiwan has tight capital controls. It could not in any case turn to the IMF, since it is not a member.


Subjects: History

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