Taiwan’s economy is considered one of the most advanced and competitive in Asia. It is an export-oriented economy with a highly diversified industrial base. The country has a well-developed financial sector, with some of the world’s largest banks and insurance companies. The government promotes foreign investment and technology transfer, and encourages international trade. Taiwan has developed strong ties with China, and the two economies are closely intertwined. In fact, Taiwan’s economy is heavily dependent on China for imports and exports.
According to cheeroutdoor, Taiwan has also made great strides in developing its high-tech industry. The country has become a major source of IT products such as semiconductors, computers, mobile phones, displays, and communications equipment. It is also a leader in research and development of new technologies such as artificial intelligence (AI) and robotics. In addition to this sector, Taiwan also has a well-developed manufacturing industry that produces electronics components for global markets. This industry has been growing steadily for years due to the country’s proximity to China’s massive market potential.
In recent years, there have been efforts to diversify the economy away from its reliance on exports by encouraging domestic consumption through tax cuts and other measures designed to increase purchasing power among citizens. These efforts have been largely successful: since 2008, overall real GDP growth in Taiwan has averaged 4% annually while its unemployment rate remained low at 3%. Moreover, Taiwan boasts one of the highest per capita incomes among Asian countries at over $25000 USD per person per year in 2018 according to World Bank data.
According to COUNTRYAAH, Taiwan is largely devoid of domestic mineral and energy raw materials, and the basis for business expansion has been the export of increasingly advanced industrial goods. The development has been fostered by good access to skilled labor and a flexible corporate structure, with an interest in efficiency, profits and investments. As early as the 1960s, Taiwan began to emerge as one of Asia’s “economic tigers” (along with South Korea, Singapore and Hong Kong), and over the next three decades, its economy grew at an unprecedented rate in the world. The state encouraged private investment, including from former large property owners, and provided special support to industries that seemed to promise much for the future. Early saw e.g. electronics manufacturing as such. Industrial zones were established with favorable conditions for export companies, as well as research and industrial parks, which became a very good breeding ground for new SMEs. These have since characterized the corporate structure, contrary to how it has been in Japan and South Korea.
Until the beginning of the 1980s, Taiwan’s exports focused on textile products and simpler household electronics. Then came a rapid expansion in the IT field, mainly in the case of computers and semiconductors. The state played a significant role in technology transfer, as did young Taiwanese returning home after training in Silicon Valley, USA. After 1987, restrictions on trade and investment in China were removed, although contacts had to go beyond third countries (usually Hong Kong). Between 1981 and 2000, Taiwan’s GDP grew by just over 7 percent per year. The country’s sound economy caused it to only to a small extent be affected by the Southeast and East Asian financial crisis during the latter part of the 1990s.
During the 1990s and the first decade of the 2000s, the production of IT goods grew by almost 15 percent annually. In 2000, Taiwan accounted for 71 percent of all semiconductor manufacturing in the world, and in 2005, the country was the world’s largest producer of a range of high-tech IT goods. As a result, Taiwan’s economy has also become more sensitive to fluctuations in the world market. Growth rates have also varied greatly during the 00s. 2001 saw a decline for the first time since 1949, but then growth has returned, though not at the same rate as before.
Note: the capital city of Taiwan is Taipei with a population of 2,700,000 (2013 estimate). Other major cities include New Taipei City 3.9 million, Kaohsiung with a population of 2.7 million, Taichung with a population of 2.7 million, Tainan with a population of 1.8 million (2013 estimate).
Increasing production has been moved to China. There, production conditions are more favorable than in Taiwan, and there is the world’s largest market. In the latter part of the 00s, Taiwan has been the second largest foreign investor in China, and more than half of Taiwan’s foreign investment goes there. China has also been Taiwan’s most important trading partner since 2004. The increasing integration has so far had benefits for both sides, which speak of the “three links” across the Formosa Strait, ie direct trade and direct transport and postal connections, but, as before, a detour over Hong Kong. However, the Taiwan regime faces a long-term dilemma: should relations with the mainland be further strengthened, thereby perhaps increasing political dependence or should such a development be halted and thus likely to dampen growth in Taiwan?
Taiwan has become a post-industrial country and in 2017, service industries accounted for 62 percent of GDP. The strongest growth is found in finance and insurance and trade, and Taiwan’s management has as a guideline that the country should become a center for trade, IT services and financial services in East Asia. With its strong export-oriented economy, Taiwan was affected by the global economic downturn, so that GDP growth was insignificant in 2008 and −2 percent in 2009. After that, growth has increased and in 2015 it was 2.2 percent.
Agriculture and fishing
Almost 23 percent of Taiwan is cultivated, while forest covers 58 percent. The woodland is very hilly and cannot be used for productive forestry or cultivation. The land is mostly on the coastal plain to the west. The farms are small, but agriculture is highly mechanized and run by self-sufficient farmers. More than half the area is irrigated, and it is common with several crops annually. The most common products are rice, sugar cane, vegetables, citrus fruits and tropical fruits such as pineapple and bananas. However, agricultural production declines every year. A quarter of these are animals and mainly pigs, chickens and ducks are raised. Fishing is conducted almost exclusively at sea, and the most important catches are tuna and octopus
Energy and minerals
Abbreviated as TWN by abbreviationfinder.org, Taiwan has extremely small resources of minerals and energy resources. Significant extraction exists only of sulfur and marble as well as limestone used in the cement industry. The coal quitting ceased in 2001 after it became more expensive to mine domestic coal than to import coal. Oil and natural gas are extracted to a small and shrinking extent. Half of the energy demand was covered in 2007 by imported oil and an additional 32 percent of imported coal, while natural gas and nuclear energy accounted for just over 8 percent and hydropower for less than half a percent. Nuclear power has been controversial in Taiwan, and its importance for energy supply has declined significantly since the early 1990s. Construction of a fourth nuclear power plant (Lungmen) was postponed in the early 2000s, but now two advanced boiling water reactors are being built there.
In 2017, the manufacturing and construction industries accounted for 36 percent of GDP and 37 percent of employment. For the manufacturing industry alone, the figures were 24 percent and 27 percent, respectively. Taiwan’s “new industrialized country” character was most evident in the mid-1980s, when just over 37 percent of the employed were in the manufacturing industry. In recent years, more and more of labor-intensive industry has been abroad. Small and medium-sized enterprises play an important role in Taiwan, and they provide work for more than 3/4 of the industrial employees. Many of these companies are subcontractors, and almost 2/3 of their production is exported.
Since the late 1990s, Taiwan has been one of the world’s largest manufacturers of IT products and now has a very large market share in terms of small laptops, GPS equipment, mobile phones, motherboards, wireless networks, modems and flat screens. Five of Taiwan’s leading companies are in this industry, such as Acer and Asus. The components of the products are now largely manufactured in China, in factories owned by Taiwanese. Taiwanese companies also account for 2/3 of global silicon circuit manufacturing on behalf of other companies, and the world’s two largest semiconductor manufacturers, TSMC and UMS, are located in the huge Hsinchu industrial and research park on the northwestern part of the island. Taiwan is also in fourth place in the world in terms of manufacturing advanced high-precision tools.
The motor vehicle industry grew sharply until the early 1990s, but since then production has fluctuated. Cars are mainly produced for the domestic market, while half of the production of motorcycles is exported. Heavy industry, based on imported raw materials, expanded greatly with state aid in the 1970s, primarily oil refining and petrochemicals, as well as the steel and shipbuilding industries. These industries are still of great importance and are mainly found in port cities such as Gaoxiong. Up until the 1980s, the tech industry was the largest industrial industry. During the past two decades, the manufacture of low-cost textile products has been outsourced to low-wage regions, mainly to Guangdong in southern China. The tech industry now accounts for a small part of Taiwan’s employment, and it mainly produces goods made of new synthetic materials.
Taiwan is heavily dependent on foreign trade, which is the engine of economic growth. For decades, Taiwan has had surpluses in both the current account and trade balance, and in 2009 the country had the third largest foreign exchange reserve in the world.
Industrial goods account for more than 99 percent of the export value. Half of this consists of machinery and electrical and electronic equipment. Metals and metal products accounted for just over 11 percent, plastic and rubber products for close to 8 percent, clothing and textiles for close to 5 percent, and transportation for just over 3 percent. The United States has traditionally been the most important export target. In the 1990s, Hong Kong’s importance also increased with indirect exports going on to China. A new pattern of trade emerged in 2004, when exports to China for the first time were greater than exports to the US, and this has been strengthened.
The largest exporting countries are China, the USA and Japan. The EU27 was then Taiwan’s fourth largest trading partner. Imports are mainly oil, machinery and electrical and electronic products. In addition came crude oil and other mineral raw materials, metals and metal products as well as chemicals. The largest importing countries are Japan, China and the United States. Other importing countries are South Korea and Saudi Arabia. Taiwan joined the World Trade Organization in 2002, right after China joined it.