If one asks the question "what are the reasons for Taiwan's economic success," a person will most likely receive the answer that it is the Chinese people itself. Being born in America of a Chinese ethnic background, I have been able to summarize the Chinese Identity. This identity is one that puts the family and work first, which in turn, calls for twice the amount of work due to the family. There is modesty in the mind of one, but in the spirit lies a sense of pride. This identity, I believe, is one of the main underlying reasons of Taiwan's success. Above this hearth, lies the factors that have helped Taiwan to become one of the fastest growing and economically developed countries in the world. Many things go in to play when discussing this transformation of Taiwan, but of most important are its structural, industrial, import and export, and agricultural changes.
To fully appreciate the progress of the economic development of Taiwan, one must first understand its conditions at the end of the nineteenth century. In the early 1600's, Taiwan was a place inhabited only of small bands of Chinese and Japanese pirates. To try to gain hold of China's market, the Dutch stepped in and occupied Taiwan from 1624 to 1662. Managed by the Dutch East India Company, this island became a meeting ground for Dutch, Chinese and Japanese merchants. Because the Dutch valued Taiwan only for its strategic position, little progress was made to develop the island's resources. In 1624, when the Dutch had arrived, they had reported a Chinese population of 25,000. Nearly forty years of Dutch rule came to an end in 1662 when the Dutch were driven out of Taiwan by Cheng Ch'eng-kung of the Ming dynasty and his army of 25,000 men (Ho, 9). In 1887, in response from a French threat to Taiwan, they changed the idea of their island from a prefecture to a province. Liu Ming-ch-uan was appointed governor. During his session ge encouraged immigration. From 1884 to 1891 the government subsidized immigrant's travel expenses across the Taiwan strait (Ho, 11). The population of Taiwan in 1887 was recorded at 3,200,000 Chinese.
The economy, under Liu, contained exports mainly of sugar and tea. Looking at the imports of their time are that of an underdeveloped country, mostly of consumer goods. Opium was the largest import accounting for almost 45 to 75 percent of all total imports. Almost all imports and about 80 percent of exports came from Hong Kong and other Chinese ports. Statistics show that once Taiwan opened itself to other foreign merchants, the volume of trade was greatly improved. "The total volume of trade in the early 1870's was around 2,000,000 custom taels; by the early 1880's it had increased to about 4,000,000 custom taels (Ho, 16).
Looking at production, it is seen that Taiwan's agriculture was much like that in south China. Although their agricultural techniques were traditional, Taiwan's section in the late eighteenth and nineteenth century was a major development in their economic history. By the end of the nineteenth century, Taiwan planted nearly 1,700 varieties of rice seeds.
During the 200 years of Taiwan governed by the Ch'ing government, little interest was taken in developing the economy. Modernization, started to take place at the end of the nineteenth century when Liu Ming-ch'uan took over. The seven years of his administration from 1884 to 1891 was the only serious effort by a Ch'ing official to improve the island. Even though Taiwan became more sophisticated, they still did have much more institutional and structural changes to take on.
GROWTH UNDER JAPANESE RULE
From 1895-1945, Taiwan's economy was held under colonial rule, with government focusing mainly on increasing agricultural productivity. Japan demanded sugar and rice from Taiwan; in turn, Taiwan was expected to accept Japanese industrial goods. Around 1911 things started to change when fiscal incentives and tariff protection were enforced to encourage growth of Japanese privately owned sugar mills on the island. Ho states that By 1930, it is estimated that close to 20 percent of national income on the island was generated within industry, with food processing responsible for the lion s share, accounting for 67 percent of all registered factories, 54 percent of total industrial product, and 55 percent of industrial employment.
As tensions grew in the Pacific areas during the 1930 s Japan started to realize the importance of Taiwan s location. Upon this realization, they began to invest more heavily in nonagricultural infrastructure such as power and transport; and also in basic industries such as cement, paper, fertilizer, and oil refining. This investment helped the manufacturing output to grow at 6 percent annually during the 1930 s.
A key factor in creating the pathway for later industrialization was the transport network. This system contained road, narrow-gauge rail, and electrification works. The purpose of this was not just for exportation of primary raw materials but also to open up agriculture on the west coast of Taiwan. Japanese attention to this layout helped the farmers association s structure and land reforms in later years to come.
Taiwan entreprenuers did not have much participation in industry, especially in the larger scale activities such as food processing and the intermediate goods, because policy forbade the Taiwanese to engage in this activity. Japanese residents in Taiwan had risen from 180,000 in 1925 to 310,000 in 1940. Although the Taiwanese were not able to learn by the act of doing, those years did have an impact on health and education. Between 1905 and 1936, the death rate fell from 40 to 20 percent per 1,000 people and the percentage of children attending school increased from 10 to 70 percent. Just when Taiwan seems to be on the verge of becoming developed, a few crises land upon them.
The aftermath of World War 2 held major shocks for Taiwan. The interruption of shipping left the Taiwanese reliant on the Japanese for shipbuilding, machinery, and additional oil refining. Allied bombings, by 1945, had put out + of industrial capacity, 2/3 power, and + of the transport network.