ECONOMY

The Taiwanese have long been traders. Before the first Han settlers arrived, aborigines traded dried deer meat and hides with Chinese and Japanese merchants. When the Dutch arrived at the beginning of the seventeenth century, they developed markets in grain and sugar. In the second half of the nineteenth century, camphor and tea became major exports. The Japanese developed the island's economic infrastructure and agricultural capacity, making Taiwan a major producer and exporter of sugar.

During World War II, the Japanese began to industrialize Taiwan, but this initiative was cut short by the bombing that destroyed a large portion of the island's industry and transportation infrastructure. Significant amounts of U.S. aid were received in the postwar years. The government used that money to develop key industries, especially petrochemicals, which produced human-made raw materials such as plastic. When U.S. aid was phased out in the early 1960s, the government was forced to find other sources of revenue. After a brief period of import substitution that allowed the building of industries, the government encouraged export production, which could utilize the cheap and educated labor force. Japan's large trading companies provided second hand machinery to manufacturers.

The Cold War sharply divided world markets, and both Japan and Taiwan benefited from their close connection to the U.S. market. Real growth in the gross domestic product (GDP) averaged over 9 percent per year between 1952 and 1980. In that period, Taiwan transformed itself from an agrarian economy in which farming constituted 35 percent of GDP in 1952 to an industrial economy in which industry accounted for by 35 percent of GDP and agriculture. Taiwan's 1997 GDP made it the twentieth largest economy in the world. The real motor of expansion has been accounted for by small and mediums size companies, which in 1998 made up over 98 percent of all companies, 75-80 percent of employment, and was responsible for 47 percent of economic production.

• The major agricultural products are pork, rice, betel nuts, sugarcane, poultry, shrimp, and eel. The major industries are electronics, textiles, chemicals, clothing, food processing, plywood, sugar milling, cement, shipbuilding, and petroleum refining. 

• Taiwan has a modern market economy with a large service sector, which comprises two-thirds of GDP. In July 2000, the Taipei Stock Exchange Corporation listed 473 companies with a total capitalization of NT $910 billion (U.S. $30.33 billion). The exchange rate for the New Taiwanese dollar (NT$) on 23 February 2001 was NT $33 to U.S. $1.00 (NT $1.00 = U.S. $0.031).

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