Economy of Taiwan

From Wikinfo

Taiwan (offical name "Republic of China", abbreviated "ROC") has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by the government. Most large government-owned banks and industrial firms have been privatized.^[1] Real growth in GDP has averaged about 8% during the past three decades. Exports 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.^[2] The Republic of China has its own currency, the New Taiwan dollar.

The quick industrialization and rapid growth of Taiwan during the latter half of the twentieth century has been called the "Taiwan Miracle". Taiwan along with Singapore, South Korea, and Hong Kong are known as the "Four Asian Tigers".

Since the 1990's economic ties between the Republic of China and the People's Republic of China have grown. As of 2005, $50 billion have been invested in China by Taiwanese companies;^[3] total private Taiwanese investment is estimated to exceed $150 billion.^[4]

Growth averaged more than 4% in the 2002-2006 period and the unemployment rate fell below 4%.^[5]

The service sector comprises 73% of the economy. Traditional labor-intensive industries are steadily being moved offshore and replaced with more capital and technology-intensive industries.

The ROC often joins international organizations under a politically neutral name. The ROC is a member of the World Trade Organization under the name "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)".^[6]

Contents 1 Foreign trade 2 Agriculture 3 Natural resources 3.1 Energy resources 4 References 5 See also 6 External links

Foreign trade

Foreign trade has driven Taiwan's rapid growth for forty years. Taiwan's economy remains export-oriented, and so depends on an open world trade regime and is vulnerable to downturns in the world economy. The total value of trade increased more than fivefold in the 1960s, nearly tenfold in the 1970s, and doubled again in the 1980s. The 1990s saw a more modest, slightly less than twofold, 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 WTO in January 2002.

Taiwan is the world's largest supplier of contract computer chip manufacturing (foundry services) and is a leading LCD panel manufacturer, DRAM computer memory, networking equipment, and consumer electronics designer and manufacturer. Textile production is another major but declining 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 third largest trading partner, taking 15% of Taiwanese exports and supplying 10.9% of its imports. China has recently become Taiwan's largest import and export partner. In 2006, the PRC accounted for 22.5% and 11.9% of Taiwan's exports and imports respectively (excluding Hong Kong) (According to the CIA World Factbook). This figure is growing rapidly as the economies become more interdependent. Imports from China consist mostly of agricultural and industrial raw materials. Exports to the United States are mainly electronics and consumer goods. As Taiwanese 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 between the ROC and its trading partners appears not to have seriously hindered commerce. Taiwan maintains cultural and trade offices representing its interests in more than sixty countries with which it does not have official relations. In addition to the WTO, Taiwan is a member of the Asian Development Bank and the Asia-Pacific Economic Cooperation (APEC). Taiwan has been negotiating with the U.S. for a Free Trade Agreement, but this has become difficult due to the expiration of presidential fast track authority.

Agriculture

In 2001, agriculture constituted only 2% of GDP, down from 35% in 1952.^[7] Only one-quarter of Taiwan's land area is arable and virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. Taiwan's main crops are rice, sugar cane, fruits, and vegetables.

Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption has risen sharply, reflecting a high standard of living. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products.

Natural resources

Natural resources on the islands include small deposits of gold, copper, coal, natural gas, limestone, marble, and asbestos. The island is 55% forests and woodland (mostly on the mountains) and 24% arable land (mostly on the plains), with 15% going to other purposes. 5% is permanent pastures and 1% is permanent crops.

Because of the intensive exploitation throughout Taiwan's pre-modern and modern history, the island's mineral resources (eg. coal, gold, marble), as well as wild animal reserves (eg. deer), have been virtually exhausted. Moreover, much of its forestry resources, especially firs were harvested during Japanese rule for the construction of shrines and have only recovered slightly since then. The remaining forests nowadays do not contribute to significant timber production mainly because of concerns about production costs and environmental regulations.

Camphor oil extraction and cane sugar production played an important role in Taiwan's exportation from the late nineteenth century through the first half of the twentieth century. The importance of the above industries subsequently declined not because of the exhaustion of related natural resources but mainly of the decline of international market demands.

Nowadays, few natural resources with significant economic value are retained in Taiwan, which are essentially agriculture-associated. Domestic agriculture (rice being the dominant kind of crop) and fisheries retain importance to a certain degree, but they have been greatly challenged by foreign imports since Taiwan's accession to the World Trade Organization in 2001. Consequently, upon the decline of subsistent importance, Taiwan's agriculture now relies heavily on the marketing and exportation of certain kinds of specialty fruits, such as banana, guava, lychee, wax apple, and high-mountain tea.

Energy resources

Taiwan has significant coal deposits and some insignificant petroleum and natural gas deposits. Electrical power generation is nearly 55% coal-based, 18% nuclear power, 17% natural gas, 5% oil, and 5% from renewable energy sources. Nearly all oil and gas for transportation and power needs must be imported, making Taiwan particularly sensitive to fluctuations in energy prices. Because of this, Taiwan's Executive Yuan is pushing for 10% of energy generation to come from renewable energy by 2010, double from the current figure of approximately 5%. In fact, several wind farms built by American and German companies have come online or will in the near future. Taiwan is rich in wind energy resources, both onshore and offshore, though limited land area favors offshore wind resources. Solar energy is also a potential resource to some extent. By promoting renewable energy, Taiwan's government hopes to also aid the nascent renewable energy manufacturing industry, and develop it into an export market.

References

See also

• Economic history of Taiwan

External links

• Chung-Hua Institute of Economic Research
• Institute of Economics, Academia Sinica
• Taiwan Institute of Economic Research
• Taiwan: The Other China Nicholas Vardy February 27, 2007
• Why Taiwan Matters BusinessWeek