Taiwan Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economy

Taiwan is considered to be one of the original so-called tiger economies, that is, the Asian states that, in the last century, quickly went from being disadvantaged and poor to strong economies. Taiwan is today a world-leading manufacturer of high-tech goods. However, increased regional competition, growing dependence on China and difficulties in opening up the economy are increasingly threatening Taiwan’s competitiveness.

The economy is very export dependent. The service sector has grown in recent years and accounts for around 70 percent of GDP.

Countryaah.com: Major imports by Taiwan, covering a full list of top products imported by the country and trade value for each product category.

During the first decades of industrialization, Taiwan focused primarily on an export-oriented labor-intensive manufacturing industry. From the 1980s, the focus has been on more capital-intensive high-tech manufacturing, not least of computer components and telecom equipment. In the same vein, the industry began to move a large part of its manufacturing abroad, first to Southeast Asia and later increasingly to China.

The government has actively controlled the economic development. Investments have been made in small companies in front of large industrial conglomerates, while inflation and tax pressure has been kept down. The state has encouraged the industry by building large business parks and assisting with guarantees in new ventures. Some sectors were long protected by, among other things, customs. Trade and investment in China in particular was heavily regulated. But government regulation of investment and trade has gradually decreased. At the same time, many restrictions remain in areas such as agriculture, telecommunications and the financial sector, which discourages foreign investors.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including TWN which represents the country of Taiwan. Check findjobdescriptions to learn more about Taiwan.

President Ma (2008–2016) had the main economic priorities that trade with the outside world would be freer and that more foreign investors would apply to Taiwan. But domestic resistance made such a development difficult. Among Taiwan’s many small businesses, there was a fear that the deregulation and opening up of the economy that the KMT board wanted to achieve would make their own businesses out of competition. The approach to China gave these moods an increased seed base.

The exchange with China has grown sharply: China is Taiwan’s largest export market and receives most of Taiwan’s foreign investment. An insight into the risks of becoming overly dependent on China – especially as growth on the other side began to slow down – has, combined with higher labor costs for Chinese labor, led Taiwanese companies in China to start controlling investment and production to Southeast Asian neighbors. After the 2016 power shift when Tsai Ing-wen from DPP took over the presidential post, there was a concern that political tensions would reflect on trade and other economic cooperation between China and Taiwan. But in 2018, trade exchanges continued to be extensive, although the number of Chinese tourists coming to Taiwan had decreased.

The economic policy under President Tsai has been focused on generating increased growth through investments in research and new entrepreneurship. It is an important objective to reduce the economic dependence on China by strengthening Taiwan’s economic cooperation with other countries and participation in bilateral and multilateral cooperation. Taiwan is not least striving to expand its exchange with countries in South and Southeast Asia.

Among leading Taiwanese experts and politicians, there is concern that Taiwan will fall outside the regional free trade associations that are being formed in Asia (see Foreign Trade). There are also fears from Taiwan’s side that South Korea, a major competitor in telecommunications and computer technology, will drive Taiwan out of the Chinese market. China and South Korea signed a free trade agreement in the mid-2010s.

Thanks to its solid economic fundamentals, especially sound government finances, Taiwan has managed relatively well in the context of the great Asian economic crisis of 1997-1998. However, the growth rate then slowed somewhat compared to the previous one.

By contrast, Taiwan was hit harder than many other countries in the region because of its export dependency when the global financial crisis hit full force in 2008. In order to stimulate the economy, the government decided on tax cuts for new investments, financial support for small and medium-sized businesses, and cash grants to households. A turnaround after the crisis came in 2010, when growth was higher than for a long time. Soon, however, economic problems in EU countries led to a weakening of Taiwanese exports. But a few years into the 2010s, exports regained momentum and gave the economy a push forward. In 2017, the economy grew faster than it has in the past five years, with exports as a continued important engine along with increasing private consumption. However, structural problems in the economy remained. Among other things, the average wages for workers had not risen in several years, while food and house prices soared. Therefore, private consumption remained low.

FACTS – FINANCE

Inflation

0.8 percent (2019)

Government debt’s share of GDP

35.1 percent (2018)

Currency

Taiwanese Dollar

2010

November

Kuomintang receives Taipei’s mayor post

In the local elections in the five largest cities, Kuomintang won the mayor post in Taipei and its suburb Xinbei as well as in Taichung while DPP candidates won in Tainan and Kaohsiung. More people vote for DPP than Kuomintang overall.

Suspicion of corruption is investigated

Trials are initiated against a dozen judges as well as prosecutors and lawyers who are suspected of receiving bribes in exchange for acquitting a corruption-charged politician.

June

Free trade agreement with China

A historic free trade agreement is signed by China and Taiwan.

The president’s penalty is reduced

The Supreme Court cuts the sentence for the president and his wife to 20 years in prison.

May

Official tourist offices are opened

Taiwan and China open official tourist offices in Taipei and Beijing respectively, which is seen as an important milestone in the increasingly intensive cooperation.

January

Arms agreement with the United States

The US government concludes an agreement with Taipei to sell weapons for $ 6.4 billion. The agreement, which included air defense robots and helicopters, had in principle been signed several years before, but was delayed by political resistance in both Taiwan and the United States. China strongly protests against the agreement.