Economy of Taiwan

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Republic of China (Taiwan) has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by the government. In keeping with this trend, most large government-owned banks and industrial firms have been privatized. Real growth in GDP has averaged about 8% during the past three decades. Exports have grown even faster and since World War II, have provided the primary impetus for industrialization. Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world's fourth largest. Agriculture contributes 3% to GDP, down from 35% in 1952, and the service sector makes up 73% of the economy. Traditional labor-intensive industries are steadily being moved off-shore and replaced with more capital- and technology-intensive industries. Taiwanese investors and businesses have become major investors in the People's Republic of China, Vietnam, Thailand, Indonesia, the Philippines, and Malaysia. The tightening of labor markets has led to an influx of foreign workers, both legal and illegal. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1997-1999.

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[edit] Economic development

Main article: Taiwan Miracle

Through nearly three decades of hard work and what some would call sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. Taiwan is now a creditor economy, holding one of the world's largest foreign exchange reserves of more than $500 billion (100 G$) in 1999. Despite the Asian financial crisis, the economy continues to expand at about 5% per year, with virtually full employment and low inflation. In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (TWD), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to mainland China.

Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Private Taiwan investment in mainland China is estimated to total more than $100 billion, and Taiwan has invested a comparable amount in Southeast Asia.

Taiwan's economy, unlike that of Japan or South Korea largely consists of small and medium-sized businesses with one in seven people an owner of a business.

[edit] Foreign trade

Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased more than fivefold in the 1960s, nearly 10-fold 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 World Trade Organization (WTO) as "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" 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, though of declining importance as Taiwan loses its competitive advantage in labor-intensive markets, is another major 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 Taiwan's exports and supplying 10.9% of its imports. China has recently become Taiwan's largest import and export partner. In 2006, the Mainland 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 both economies become ever 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 Taiwan's 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 with all but 25 of its trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce. Taiwan maintains cultural and trade offices in more than 60 countries with which it does not have official relations. In addition to the WTO, Taiwan is a member of the Asian Development Bank as "Taipei, China" and the Asia-Pacific Economic Cooperation (APEC) forum as "Chinese Taipei". These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy. Taiwan has been negotiating with the U.S. for a Free Trade Agreement (FTA), but this has become difficult due to the expiration of presidential fast track authority.

[edit] Agriculture

Although only about one-quarter of Taiwan's land area is suitable for farming, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Today, agriculture only comprises about 2.69% of Taiwan's GDP. Taiwan's main crops are rice, sugar cane, fruit, and vegetables.

Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption are rising sharply, reflecting a rising standard of living. Taiwan has exported large amounts of frozen pork, although this was affected by an outbreak of hoof and mouth disease in 1997. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Imports of agriculture products are expected to increase due to the WTO accession, which is opening previously protected agricultural markets.

[edit] Economic outlook

Taiwan now faces many of the same economic issues as other developed economies. With the prospect of continued relocation of labor-intensive industries to countries with cheaper work forces, such as in China and Vietnam, Taiwan's future development will have to rely on further transformation to a high technology and service-oriented economy. In recent years, Taiwan has successfully diversified its trade markets, cutting its share of exports to the United States from 49% in 1984 to 20% in 2002. Taiwan's dependence on the U.S. market should continue to decrease as its exports to Southeast Asia and mainland China grow and its efforts to develop European markets produce results. Taiwan's accession to the WTO and its desire to become an Asia-Pacific "regional operations center" are spurring further economic liberalization.

GDP: purchasing power parity - $680.5 billion (2006 est.)

GDP - real growth rate: 4.6% (2006)[1]

GDP - per capita: purchasing power parity - $29500 (2006 est.)

GDP - composition by sector:
agriculture: 1.5%
industry: 25.2%
services: 73.3% (2006)

Population below poverty line: 0.9% (2005 est.)

Household income or consumption by percentage share:
lowest 10%: 6.7%
highest 10%: 41.1% (2002 est.)

Inflation rate (consumer prices): 2.3% (2005 est.)

Labor force: 10.6 million (2005)

Labor force - by occupation: services 58.2%, industry 35.8%, agriculture 6% (2005 est.)

Unemployment rate: 4.2% (2005 est.)

Budget:
revenues: $41.67 billion
expenditures: $50.26 billion, including capital expenditures of $14.4 billion (2005 est.)

Industries:

electronics, petroleum refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products, pharmaceuticals

Industrial production growth rate: 4.1% (2005 est.)

Electricity - production: 218.3 billion kWh (2002)

Electricity - production by source:
fossil fuel: 65.91%
hydro: 7.84%
nuclear: 26.25%
other: 0% (1998)

Electricity - consumption: 206.1 billion kWh (2004)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: rice, corn, vegetables, fruit, tea; pigs, poultry, beef, milk; fish

Exports: $170.5 billion f.o.b. (2004 est.)

Exports - commodities: computer products and electrical equipment, metals, textiles, plastics and rubber products, chemicals (2002)

Exports - partners: China 21.6%, US 16.2%, Hong Kong 15.1%, Japan 7.7% (2005)

Imports: $181.6 billion f.o.b. (2005 est.)

Imports - commodities: machinery and electrical equipment 44.5%, minerals, precision instruments (2002)

Imports - partners: Japan 25.3%, US 11.6%, China 11%, South Korea 7.3% (2004)

Debt - external: $81.64 billion (2005 est.)

Currency: 1 New Taiwan dollar (NT$) = 100 cents

Exchange rates: in US dollar - 31.61 (2008), 32.48 (2007), 32.61 (2006), 31.71 (2005), 34.418 (2004), 34.418 (2003), 34.575 (2002), 33.8 (2001), 33.09 (2000)

Fiscal year: 1 July - 30 June (up to FY98/99); 1 July 1999 - 31 December 2000 for FY00; calendar year (after FY00)

[edit] References

  1. ^ Taiwan may exceed expectations and grow 4.6% in 2007. Taiwan News (2007-05-14). Retrieved on 2007-05-14.

[edit] See also

Sources of Statistics, News, and Commentary:

[edit] External links

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