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The Republic of China on the island of Taiwan has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by the government. In keeping with this trend, some large government-owned banks and industrial firms are being privatized. Real growth in GDP has averaged about 8% during the past three decades. Exports have grown even faster and have provided the primary impetus for industrialization. Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world's third largest. Agriculture contributes 3% to GDP, down from 35% in 1952. Traditional labor-intensive industries are steadily being moved off-shore and replaced with more capital- and technology-intensive industries. Taiwan has become a major investor in mainland China, Thailand, Indonesia, the Philippines, Malaysia, and Vietnam. The tightening of labor markets has led to an influx of foreign workers, both legal and illegal. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1998-1999. Growth in 2000 should pick up a bit from 1999, backed by expansion in domestic consumption, exports, and private investment.
Economic Development
Through nearly five decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. Taiwan is now a creditor economy, holding one of the world's largest foreign exchange reserves of more than $100 billion (100 G$) in 1999. Despite the Asian financial crisis, the economy continues to expand at about 5% per year, with virtually full employment and low inflation. The population also enjoys an annual average income equal to U.S. $13,152 (1999).
In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (NT$), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to the Chinese mainland and Southeast Asia.
Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Private Taiwan investment in the P.R.C. is estimated to total more than $30 billion, and Taiwan has invested a comparable amount in Southeast Asia.
Foreign Trade Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased more than five-fold in the 1960s, nearly 10-fold in the 1970s, and doubled again in the 1980s. The 1990s saw a more modest, slightly less than two-fold, growth. Export composition changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment. Taiwan became a member of the World Trade Organization (WTO) as a special customs territory in January 2002.
Taiwan is the world's largest supplier of computer monitors and is a leading PC manufacturer. Textile production, though of declining importance as Taiwan loses its competitive advantage in labor-intensive markets, is another major industrial export sector. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports most of its energy needs. The United States is Taiwan's second largest trading partner, taking 20% of Taiwan's exports and supplying 16% of its imports. Taiwan is the United States' eighth-largest trading partner; Taiwan's two-way trade with the United States amounted to about $45 billion in 2002. Imports from the United States consist mostly of agricultural and industrial raw materials. Exports to the United States are mainly electronics and consumer goods. The United States, Hong Kong (including indirect trade with mainland China), and Japan account for nearly 56% of Taiwan's exports, and the United States and Japan provide over 40% of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. Taiwan's 2002 trade surplus with the United States was $8.7 billion.
The lack of formal diplomatic relations with all but 26 of its trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce. Taiwan maintains trade offices in more than 60 countries with which it does not have official relations. In addition to the WTO, Taiwan is a member of the Asian Development Bank as "Taipei, China" and the Asia-Pacific Economic Cooperation (APEC) forum as "Chinese Taipei". These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.
Agriculture Although only about one-quarter of Taiwan's land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agriculture only comprises about 269% of Taiwan's GDP. Taiwan's main crops are rice, sugar cane, fruit, and vegetables.
Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption are rising sharply, reflecting a rising standard of living. Taiwan has exported large amounts of frozen pork, although this was affected by an outbreak of hoof and mouth disease in 1997. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Imports of agriculture products are expected to increase due to the WTO accession, which is opening previously protected agricultural markets.
Economic Outlook Taiwan now faces many of the same economic issues as other developed economies. With the prospect of continued relocation of labor-intensive industries to countries with cheaper work forces, Taiwan's future development will have to rely on further transformation to a high technology and service-oriented economy. In recent years, Taiwan has successfully diversified its trade markets, cutting its share of exports to the United States from 49% in 1984 to 20% in 2002. Taiwan's dependence on the U.S. market should continue to decrease as its exports to Southeast Asia and mainland China grow and its efforts to develop European markets produce results. Taiwan's accession to the WTO and its desire to become an Asia-Pacific "regional operations center" are spurring further economic liberalization.
GDP: purchasing power parity - $528.6 billion (2003 est.)
GDP - real growth rate: 3.2% (2003 est.)
GDP - per capita: purchasing power parity - $23,400 (2003 est.)
GDP - composition by sector:
agriculture: 1.8%
industry: 30.3%
services: 67.9% (2003 est.)
Population below poverty line: 1% (2000 est.)
Household income or consumption by percentage share:
lowest 10%: 6.7%
highest 10%: 41.1% (2002 est.)
Inflation rate (consumer prices): -0.3% (2003 est.)
Labor force: 10.08 million (2003)
Labor force - by occupation: services 57%, industry 35%, agriculture 7.5% (2001 est.)
Unemployment rate: 5% (2003 est.)
Budget:
revenues: $56.58 billion
expenditures: $69.21 billion, including capital expenditures of $14.4 billion (2003 est.)
Industries: electronics, petroleum refining, chemicals, textiles, iron and steel, machinery, cement, food processing
Industrial production growth rate: 8.4% (2003 est.)
Electricity - production: 151.1 billion kWh (2001)
Electricity - production by source:
fossil fuel: 65.91%
hydro: 7.84%
nuclear: 26.25%
other: 0% (1998)
Electricity - consumption: 140.5 billion kWh (2001)
Electricity - exports: 0 kWh (1998)
Electricity - imports: 0 kWh (1998)
Agriculture - products: rice, corn, vegetables, fruit, tea; pigs, poultry, beef, milk; fish
Exports: $143 billion f.o.b. (2003 est.)
Exports - commodities: computer products and electrical equipment, metals, textiles, plastics and rubber products, chemicals (2002)
Exports - partners: China 25.3%, US 20.5%, Japan 9.2% (2002 est.)
Imports: $119.6 billion f.o.b. (2003 est.)
Imports - commodities: machinery and electrical equipment 44.5%, minerals, precision instruments (2002)
Imports - partners: Japan 24.2%, US 16.1%, China 7.1%, South Korea 6.9% (2002 est.)
Debt - external: $53.44 billion (2003)
Currency: 1 New Taiwan dollar (NT$) = 100 cents
Exchange rates: New Taiwan dollars per US$1 - 34.418 (2003), 34.575 (2002), 33.8 (2001), 33.09 (2000), 31.6 (1999)
Fiscal year: 1 July - 30 June (up to FY98/99); 1 July 1999 - 31 December 2000 for FY00; calendar year (after FY00)
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