The ROC on Taiwan

As introduced by the Yearbook of the Republic of China:

In 1949, the central government of the Republic of China, on the Chinese mainland, lost its battle against the Chinese Communist, and relocated to Taiwan. The history of Taiwan after 1949 is one of rapid and sweeping change over a short period. Following 50 years of Japanese colonization, an influx of around one and a half million soldiers and civilians from the Chinese mainland turned the island into a frontline of the cold war. Over the last five decades, rapid economic development made the island one of the world's most vigorous economies; and rapid industrialization, urbanization, and modernization over a few decades has dramatically transformed the lives of Taiwan's residents. The scale of this transformation has seldom been witnessed anywhere in world history.

Tragic Early Days

Following Japan's defeat and surrender in August 1945 at the end of World War II, Taiwan was retroceded to the Republic of China on October 25. After having been occupied by the Portuguese, Dutch, Spanish, Manchus, and Japanese, Taiwan was Chinese again.

The first years after the Japanese surrender were not smooth and resulted in one of Taiwan's greatest tragedies, the February 28 Incident. The first troops sent to take over Taiwan were poorly trained and undisciplined, while the major fighting component of Nationalist troops remained on the Chinese mainland battling the communist rebellion. Most importantly, high inflation, shortages of daily necessities, unequal treatment by the Nationalist troops, unjust appropriation of personal property, and unchecked profiteering angered Taiwanese natives.

The tension finally exploded on February 28, 1947, following an incident in Taipei where an elderly woman was beaten while resisting arrest for selling untaxed cigarettes in Taipei, and a bystander was shot in the commotion. Crowds rioted across the island, seizing police stations, arms, and radio stations and killing a number of mainlanders. In the succeeding months, after the arrival of troop reinforcements from the mainland, Governor Chen Yi proceeded to arrest and execute thousands of people who had demanded government reforms. Chen Yi was discharged from his governor post, and later was tried and executed in 1950 for conspiring with the Communists to overthrow the ROC government while serving as governor of Zhejiang Province. The February 28 Incident has continued to be a source of tension between Taiwanese and those who came from the mainland after 1945.

Rapid Development after 1950

With the outbreak of the Korean War in late June 1950, US President Harry S. Truman ordered the US Seventh Fleet to protect Taiwan against attack by the Chinese Communists, and the US began to provide Taiwan with considerable economic and military assistance. The international community sided with Taiwan and the internal situation began to stabilize. Taiwan became the focus of world attention again in August 1958 when the Communists, in an attempt to take over Taiwan, began shelling the islands of Kinmen (Quemoy) and Matsu in the Battle of the Taiwan Strait. The attack eventually subsided, and on October 23, 1958, the US and ROC governments issued a joint communiqué reaffirming solidarity between the two countries. This invaluable military support continued through the 1960s and 1970s, and prevented Taiwan from being conquered by the Communists.

Miraculous Economic Transformation

When the ROC government moved to Taipei in 1949, the economy of Taiwan was still recovering from heavy Allied bombing during the Second World War. Only a few industries remained, including sugar refining and some textile manufacturing. In the initial years, two factors stabilized the situation and laid the foundations for a future economic takeoff: aid from the US and the land reform program.

From 1951 to 1965, large amounts of economic and military aid came from the US as part of its cold war efforts to preserve this valuable ally in Asia. Much of the aid was used to improve Taiwan's infrastructure and the agricultural sector. Advisors stationed in Taiwan and Taiwanese sent abroad for education were all directed to rebuild the economy. The highly successful land reform program, which was completed in 1953, reduced land rents, distributed public land, and purchased and resold land from large landlords. Farmers were supplied with fertilizer, seeds, pesticides, expert advice, and credit. By 1959, 90 percent of exports were agriculture or food related. Increased production and higher income resulted in low inflation and capital accumulation, as importing food was unnecessary.

After land reform policies and economic assistance had formed a solid foundation for the economy, two policies of the 1950s and 60s led to the remarkable takeoff of the 1970s. The first was an "import substitution policy" aimed at making Taiwan self-sufficient by producing inexpensive consumer goods, processing imported raw materials, and restricting other imports. When far-sighted government planners realized that economic development was limited by Taiwan's small domestic economy, a second policy of "export promotion" was adopted in the late 1950s and continued throughout the 1960s. Using Japan as a model and employing US advice, the resource-poor, labor-abundant island began to expand light industries. Export-processing zones, free of bureaucratic red-tape, were set up with special tax incentives to attract overseas investment. Soon, Taiwan had secured an international reputation as a world exporter.

Between 1962 and 1985, Taiwan's economy experienced its most rapid growth in history: an average annual growth rate of nearly 10 percent, or more than twice the average economic growth rate of industrialized countries during this period. Equitable distribution of income was a major objective in the government's economic planning. In 1953, the average income of the top 20 percent of the population was estimated at 20 times that of the bottom 20 percent. In the 1980s, this 1:20 ratio was further reduced to a range of between 1:5 and 1:4, indicating a highly equitable distribution of income.

The economic structure of the nation shifted from reliance on agricultural exports in the 1950s to light manufacturing in the 1960s and 70s; and to high technology and chemical product exports in the 1980s and 90s. By 1995, technology-intensive products constituted 46.7 percent of exports, and by 2002, 54.09 percent.

A new and significant economic trend beginning in the 1980s was the rise of investments in the Chinese mainland by Taiwan's business community. After the Emergency Decree was lifted in 1987, civilian contacts between Taiwan and China were allowed; and, by 2002, Taiwan's business sector had invested over US$26.6 billion on the mainland, according to official ROC statistics (Beijing's statistics indicated a much higher figure of US$33.1 billion). The sharp increase of Taiwan exports to China beginning in 1990 decreased Taiwan's dependence on the US market, but raised new concerns of growing economic reliance on the ROC's long-time foe. Although politically divided, investment and trade by the business community have brought the two sides closer economically.

Education

Much of the credit for Taiwan's steady economic growth must go to the spread of universal education throughout the island. After 1949, the government expanded education and raised literacy rates. From 1950 to 2002, the number of university students, including those at private colleges and universities, increased by more than 100 times to 770,915. Although there were only five M.A. candidates in 1950 and Taiwan did not have its first Ph.D. student until 1956, by 2002 there were 103,425 students in 3,806 master's degree programs and 18,705 students studying in 1049 Ph.D. programs. Thousands of others were enrolled in graduate programs abroad in the US, Japan, Canada, Australia, Britain, and other European countries. The number of high school students also increased from around 34,000 in the early 1950s to more than 383,509 in 2002. Most noticeable has been the change in the literacy rate. In 1951, 34.60 percent of the population six years and older were illiterate. This figure had dropped to 15.30 percent by 1969. At present, only about 5.09 percent of the population is illiterate, mostly the elderly.

Politics and Foreign Relations

Despite restrictions under martial law, the ROC government consistently promoted local self-government. Beginning in 1950, all the chief executive and representative bodies below the provincial level were directly elected by the people, and in 1951, 16 county and five city governments and councils were established. In June 1959, the first Taiwan Provincial Assembly was established, extending political participation from the county to the provincial level.

Following the death of Chiang Kai-shek in 1975, Yan Jia-gan (Yen Chia-kan) briefly served as president until Chiang's son, Chiang Ching-kuo, was elected in 1978. It was under his rule that full democratization began, starting with the lifting of martial law in 1987 shortly before his death in 1988. The first major opposition party, the Democratic Progressive Party (DPP), was formally established on September 28, 1986, marking the beginning of multiparty democracy in Taiwan. Chiang Ching-kuo's successor, President Lee Teng-hui, continued to reform the rigid political system that had experienced decades of civil war and martial law. Under his administration, press freedoms were guaranteed, opposition political parties developed, visits to the mainland continued, and revisions to the constitution completed.

Representatives of the National Assembly, the Legislative Yuan, and the Control Yuan, who had been frozen in office since 1947, were also asked to step down during Lee's administration. Elections for all seats in the National Assembly and the Legislative Yuan were first held in 1991 and 1992, respectively. The Control Yuan was transformed into a semi-judicial institution following the 1992 constitutional amendment. On March 23, 1996, the democratization process peaked with the election of the ROC president, the first direct election of the head-of-state in ethnic Chinese history. Provoking considerable debate and controversy, the provincial government was effectively dissolved in 1998.

On March 18, 2000, the second direct presidential election was held, with five pairs of candidates contending for the positions of president and vice president of the Republic of China. In a tight, three-way campaign, former Taipei City Mayor Chen Shui-bian of the DPP narrowly defeated his rivals with 39.3 percent of the vote, closely followed by former Taiwan Provincial Governor James Soong (independent) with 36.8 percent. Vice President Lien Chan of the KMT received 23.1 percent of the votes to finish third. This election not only brought a record 82 percent voter turnout, but also ended the KMT's five-decade hold on the presidency.

On March 20, 2004, the third direct presidential election was held, with two pairs of candidates contending to become the 11th-term president and vice president of the ROC. Incumbent President Chen Shui-bian of the ruling DPP was re-elected with 50.1 percent of the votes cast, compared with 49.9 percent for Lien Chan of the KMT-People First Party Alliance ticket. The first national referendum was held alongside the presidential election, but was automatically invalidated as less than 50 percent of the electorate voted on the two questions on national defense and negotiation with China.

These domestic political changes were closely related to Taiwan's international experiences. The ROC was a founding member of the UN in 1945. However, after the withdrawal of the government to Taiwan and the establishment of the PRC, diplomatic competition increased between the two rivals. In 1971, the PRC succeeded in gaining admission to the UN General Assembly, forcing the ROC to walk out. Since then, most of the remaining UN members have switched their ties from Taipei to Beijing. A low point was reached at the end of the 1970s, when the United States became one of the last major powers to sever diplomatic ties and the 1954 Mutual Defense Treaty. Since then, the US has continued economic ties and sold defensive military equipment to Taiwan in accordance with the Taiwan Relations Act of 1979.

With the beginning of democratization, the people's dissatisfaction with the state of Taiwan's affairs led to a new effort to increase international participation. Collectively known as pragmatic diplomacy, this policy included a revived effort to expand and consolidate formal diplomatic ties, a new campaign to re-enter international organizations, and increased emphasis on substantive ties with the US, Japan, and Europe. During the 1990s, these efforts resulted in some progress, although the ultimate goal of UN membership still faced many obstacles.

Until 1987, Taiwan remained under "martial law." During that forty-year period, opposition political parties were banned, publishing and the media were restricted, and relations with China were forbidden. However, religious and business activities were essentially free, and citizens regularly traveled around the island and the world. This policy was adopted because of the continued military threat from China.

As Taiwan prospered economically and the mainland undertook radical reforms and began to open to the outside world, reasons for martial law were no longer seen as valid. On November 2, 1987, the ROC officially permitted its citizens to visit relatives on the mainland. Since then, cross-strait ties have grown: by the late 1990s, Taiwan residents made millions of trips to China, involving visits to relatives, tourism, and scholarly, cultural, and sports exchanges, whereas the number of people from China allowed by the Taiwan government to visit for cultural and educational purposes totaled more than 94,720 as of September 2003.

In February 1991, the semi-private Straits Exchange Foundation (SEF) was set up to manage cross-strait contacts. Its mainland counterpart, the Association for Relations Across the Taiwan Straits (ARATS), was established ten months later. These organizations have met intermittently to discuss technical or business matters, such as the repatriation of hijackers and illegal entrants and solutions for fishing disputes.

Two recent developments that will strongly affect Taiwan's future are its entry into the World Trade Organization (WTO) and its increasing economic involvement with China.

After more than 12 years of negotiations and waiting, Taiwan signed its WTO accession accord in November 2001, with official entry on January 1, 2002. Membership in the WTO has enabled Taiwan's industrial and business sector to fully participate in the world economy on a more equal basis. However, opening the domestic economy to the world has also exposed the island to increased competition, which may have a negative impact on some industries, most notably agriculture.

The second major development has been the substantial increase of Taiwan investment and business activity in China. Many businesses have sought cheap labor and potential markets on the mainland. The government has been working toward normalizing relations across the Taiwan Strait by establishing a new, expanded review mechanism for China-bound investments. For instance, in March 2002, the government lifted its ban on investment in 8-inch wafer fabrication plants in China to raise Taiwan's competitive edge in the international semiconductor market.

Before Taiwan and China were admitted to the WTO, the Cabinet announced in October 2001 that the previous "no haste, be patient" policy restricting investments on the mainland was being replaced with a policy of "proactive liberalization with effective management." Since then, most limits on individual investment projects in China have gradually been scrapped, local banks have been permitted to open representative offices in China, and offshore banking units can now engage in direct business exchanges with mainland financial institutions.

Limited transportation links have been authorized between the ROC's islands of Kinmen and Matsu and the PRC since January 2001, allowing more imports from the mainland to enter Kinmen and Matsu. However, establishing direct transportation links between Taiwan and China is still under discussion.

Present and Future

Although the greatest change in post-1949 Taiwan has been the island's economic revolution and spectacular rise in income and living standards, the social transformation brought about following the lifting of the Emergency Decree in 1987 cannot be overlooked. The legalization of labor strikes, demonstrations, and the formation of new political parties have given more power to the people, while the lifting of restrictions on newspapers and publishing has produced significant media growth and broadened the perspectives of an increasingly sophisticated audience.

Taiwan's considerable democratic experiences, technological capabilities, and economic power enable the nation to apply these advantages for the benefit of the international community. Taiwan is thus able to contribute to the peace, prosperity, and stability of both the Asia-Pacific region and the rest of the world.