Background Notes: Taiwan

PA/PC Source: Office of Public Communication, Bureau of Public Affairs Date: Sep 30, 19919/30/91 Category: Country Data Region: East Asia Country: Taiwan Subject: Military Affairs, Cultural Exchange, Travel, History, Trade/Economics, International Organizations [TEXT] Official Name: Taiwan

PROFILE

Geography
Area: 35,981 sq. km. (14,000 sq. mi.); about the size of West Virginia. Cities: Capital--Taipei (pop. 2.6 million). Other cities-- Kaohsiung (1.6 million), Taichung (701,720), Tainan (648,377), Keelung (348,893), Hsinchu (306,547). Terrain: Largely mountainous. Climate: Maritime subtropical.
People
Population (1989 est.): 20 million. Annual growth rate: 1%. Languages: Mandarin Chinese (official). Principal dialects-- Taiwanese, Hakka. Education: Years compulsory--9; Attendance-- 99%. Literacy (1986)--92%. Health: Infant mortality rate (1986)-- 7/1,000. Life expectancy--72 yrs. (men 71, women 76). Work force (7.7 million): Agriculture--17%. Industry--41%. Services--42%.
Political Establishment
Type: One party dominates system, Nationalist Party--Kuomintang (KMT). Originally, one-party system (Nationalist Party) established 1911 in mainland China, moved to Taiwan 1949. In 1986, a group of oppositionists formed the Democratic Progressive Party (DPP), now the main opposition party. The ban on new political parties was lifted in January 1989, and by September 1989 there were 38 registered parties. Constitution: December 25, 1947. Branches: President, Vice President, Premier (president of Executive Yuan or cabinet), Legislative Yuan (parliament), Judicial Yuan, Control Yuan, Examination Yuan. Administrative subdivisions: Taiwan Province, Taipei and Kaohsiung special municipalities, certain offshore islands (the most prominent of which are Quemoy and Matsu) of Fukien (Fujian) Province. Political parties: Kuomintang (KMT--Nationalist Party); Democratic Progressive Party (DPP); Labor Party, Workers Party, other minor parties also exist. Suffrage: Universal over 20. Central budget proposed (FY 1991): $30 billion. Defense (1991): 5% of GNP. Emblem: Red field with white sun in blue rectangle in upper left corner.
Economy
GNP (1989): $150 billion. Annual growth rate (1989): 6%. Per capita GNP (1989): $7,500 Avg. inflation rate (CPI, 1989): 4%. Natural resources: Small deposits of coal, natural gas, limestone, marble, and asbestos. Agriculture (5% of GNP): Products--pork, rice, poultry, shrimp, watermelon, cabbage, corn, citrus fruit, lumber, tobacco, wax apples, mangos, pineapple, grapes. Cultivated land--25%. Industry (43.58% of GNP): Types--electronics, textiles, footwear, plastics, machinery, cement, furniture, other consumer goods, iron, steel, petrochemicals. Trade (1989): Exports--$66 billion: electronic products, machinery and electrical products, textile products, plastic and rubber products, footwear. Major markets--US $24 billion, Japan $9 billion, Hong Kong $7 billion. Imports--$52 billion: machinery and electrical products, electronic products, chemicals, iron and steel, transportation equipment, crude oil. Major suppliers--Japan $16 billion, US $12 billion, FRG $2.6 billion. Official exchange rate (December 1990): 27 Taiwan dollars=US$1. Fiscal year: July 1 to June 30.

PEOPLE

Taiwan has a population of 20 million, including about 100,000 on the Penghu Islands. The native Taiwanese, who number more than 16 million, are descendants of Chinese who migrated from the crowded, coastal mainland areas of Fujian (Fukien) and Guangdong (Kwangtung) Provinces primarily in the 18th and 19th centuries. The more than 2 million "mainlanders," who arrived on Taiwan in 1949 and thereafter, came from all parts of China. About 330,000 aborigines, inhabiting the mountainous central and eastern parts of the island are believed to be of Malayo-Polynesian origin.
Education
In 1985, about 25% of the population attended school, reflecting the relative youthfulness of the island's population-- about 39% under age 20 as of 1986. Since 1968, a 9-year, free educational system has been in effect. Six years of elementary school and three of junior high are compulsory for all children. Taiwan has an extensive system of higher education. In 1988, the number of institutions of higher learning rose to 109, with 496,530 students at 16 universities, 23 colleges, and 70 junior colleges. Admission to both undergraduate and graduate study is through competitive examinations. Each year more than 100,000 students take the joint entrance college exam, and about 45% are admitted to a college. Opportunities for graduate education also are expanding. In 1985, 10,981 students were enrolled in the 293 graduate programs affiliated with universities and colleges in Taiwan. In 1988, 7,841 students, or more than 90% of students from Taiwan going abroad for study, traveled to the United States for advanced education, predominantly in the fields of engineering, natural science, business and management, and computer science. Although the number of graduating students returning to Taiwan is increasing, a majority remain abroad. In 1988, just fewer than 3,000 students returned from study abroad.
Languages
A large majority of people on Taiwan speak Mandarin, the official Chinese language, which has been the medium of instruction in the schools for more than three decades. Most native Taiwanese, as opposed to the mainlanders, speak a variant of the Amoy (Hokkien) dialect of southern Fujian. The Hakka dialect is spoken in the two northwestern counties of Hsinchu and Miaoli and in parts of southern and eastern Taiwan. As a result of the half century of Japanese rule, many Taiwanese over age 50 also speak Japanese.
Religions
The predominant religion is a combination of Buddhism and Taoism brought to Taiwan centuries ago by the original Chinese settlers of the island. The Confucian ethical code, with its ancient rites and ceremonies, has long been considered the "religion" of Chinese literati and today is considered by some to be the "official religion" of Taiwan. Christian churches have been active on Taiwan for many years, and today the island has more than 600,000 Christians, a majority of whom are Protestant. A few Chinese Muslims came to Taiwan with other refugees from the mainland after the communist victory in 1949.
Cultural Background
Taiwan's culture is a blend of its Chinese heritage and Western influences. Fine arts, folk traditions, and popular culture embody traditional and modern, Asian, and Western motifs. Interest in classical Chinese calligraphy and woodblocks remains great, and Western sculpture and painting are increasingly popular.

HISTORY

Chinese migration to Taiwan may have begun as early as AD 500. Taiwan seems to have been known, albeit vaguely, to Sung dynasty historians as early as the 10th century. Dutch traders first claimed the island in 1624 as a base for Dutch commerce with Japan and coastal China. Dutch colonists administered the island and its predominantly aboriginal population until 1661. The first major influx of migrants from the Chinese mainland came during the Dutch period, sparked by the political and economic chaos on the China coast during the twilight of the Ming dynasty and at the time of the Manchu invasion. Manchu China ruled Taiwan as a frontier district until it was declared a separate Chinese province in 1886. During the 18th and 19th centuries, migration from China's coastal provinces of Fukien and Kwangtung steadily increased, and Chinese became the dominant population group. In 1895, a weakened imperial China ceded Taiwan to Japan following the first Sino-Japanese war. At the end of World War II, Taiwan reverted to mainland Chinese rule. During the immediate postwar period, the Nationalist Chinese fought a civil war with communists on the mainland; the Nationalist administration ruling Taiwan was repressive and corrupt. These conditions led to extreme Taiwanese discontent with the newly arrived authorities from mainland China, and anti- mainlander violence flared on February 28, 1947. The uprising was swiftly and brutally suppressed by Nationalist Chinese troops. Although Taiwanese and mainlanders have learned to live together over the ensuing three and one-half decades, a lingering distrust reportedly remains. Toward the end of the civil war in mainland China between communists and Nationalists, about 2 million refugees, predominantly from the military, government, and business, fled to Taiwan. Following the communist victory, Chiang Kai-shek in December 1949 established his "provisional" capital in Taipei.

ADMINISTRATION

The authorities in Taipei claim to be the government of all China, including Taiwan. In keeping with that claim, they maintain in Taipei the full array of central political bodies originally established on the mainland before withdrawal to Taiwan. The governments of Taiwan Province and the special municipalities of Taipei and Kaohsiung are local bodies constituted separately from the central administrative bodies. Under the constitution adopted by the Taiwan-based Nationalist Chinese in 1947, the sovereignty of the people is exercised by the National Assembly, whose seats are filled on the basis of territorial and professional representation. In addition to electing the President and Vice President, the National Assembly has the power to amend the constitution and the powers (as yet unexercised) of initiative and referendum. The first National Assembly was elected in November 1947 with 2,961 delegates from throughout China. Since 1969, the number of seats has gradually increased to provide new seats for Taiwan. There are currently 3,045 seats. All representatives elected in the 1947-48 period hold their seats "indefinitely," due to the impossibility of holding new general elections for assembly members from constituencies on the mainland. In June 1990, however, a decision by the Council of Grand Justices mandated that all "indefinitely" elected members of the National Assembly and other elected bodies retire by December 1991. By November 1990, the National Assembly had declined--for a number of reasons, among them natural attrition--to 651 members, including those added when new seats were created for Taiwan. The President stands above the five administrative branches (Yuan): Executive, Legislative, Control, Judicial, and Examination. The President is assisted by the Office of the President, headed by a secretary-general. With the consent of the Legislative Yuan, the President appoints the Premier or "president" of the Executive Yuan. The Executive Yuan constitutes the cabinet and is responsible for policy and administration. The Legislative Yuan (parliament), originally had 773 seats. With Taiwan's growing population, the authorities ordered supplementary elections in 1969 to add 11 new members. In 1972, triennial elections were inaugurated to fill the supplementary seats, and, in 1989, 101 members were elected to fill these seats. At the same time, 29 members were appointed to represent overseas Chinese constituencies. In 1990, members elected or appointed in Taiwan after 1949 came to be a majority. As of August 1990, the total membership of the Legislative Yuan was 257. The other elected branch is the Control Yuan, which monitors the efficiency of the public service and investigates instances of corruption. Before 1980, the Control Yuan consisted of 42 members of the original 180 elected in 1948 and 10 supplemental members elected for 6-year terms beginning in 1972. As of June, 1990, Control Yuan membership was 50 seats, consisting of 19 "indefinite" term members, 22 supplemental members elected in 1987 by the Taiwan Provincial Assembly and Taipei and Kaohsiung city councils, and 9 supplemental members appointed in 1987 from overseas Chinese constituencies by the President. The Judicial Yuan includes a 17-member Council of Grand Justices that, like the US Supreme Court, interprets the constitution. Its jurisdiction includes civil, criminal, and administrative cases, and cases concerning disciplinary measures against public functionaries. The Judicial Yuan also handles election suits. As the highest judicial organ, it is concerned only with final judicial decisions. The Executive Yuan administers the lower courts. The Examination Yuan functions as a civil service commission and comprises two ministries: the Ministry of Examination, responsible for recruiting public functionaries through competitive examination; and the Ministry of Personnel, in charge of the registration of public functionaries, transfers, promotions, and commendations. The top local administrative organs are the Taiwan Provincial Government (located in central Taiwan at Chunghsing New Village, near Taichung), Taipei Municipality, and Kaohsiung Municipality. The governor of Taiwan Province and the mayors of Taipei and Kaohsiung are appointed by the central authorities. The elected Provincial Assembly and city councils have limited authority over local affairs. Many positions at subordinate levels are filled by local elections.
Principal Government Officials
President--Lee Teng-hui Premier--Hau Pei-tsun Minister of Foreign Affairs--Frederick Chien

POLITICAL CONDITIONS

The National Assembly elected President Lee Teng-hui to a 6- year term as president in his own right on March 21, 1990. Li Yuan- tzu was elected as Vice President. President Lee Teng-hui also is chairman of the ruling Kuomintang (KMT--Nationalist Party). Formerly Mayor of Taipei and Governor of Taiwan Province, Lee succeeded Chiang Ching-kuo as President when Chiang died on January 13, 1988. Lee is sensitive to the pluralistic nature of Taiwan's society and is continuing former President Chiang Ching-kuo's policy of opening the political process to more Taiwanese participation while still maintaining effective KMT control. The KMT organization closely parallels the administrative structure at all levels. Most of the top officials, including cabinet members and the governor of Taiwan Province, are members of its Central Standing Committee. The Central Standing Committee is elected annually by the Central Committee of the KMT from nominees proposed by the party's chairman. At lower levels, KMT committees are organized on a provincial, county, and district basis and in various vocational groupings. Party funds are derived from dues and contributions paid by members and from the proceeds of party-operated businesses. The KMT has more than 2 million paying members, about two-thirds of whom are of Taiwanese origin. Most senior military officers and civilian officials are KMT members. A revision of the constitution in 1948 granted virtually unlimited emergency powers to the President. These powers remained in effect until July 15, 1987, when former President Chiang's reform initiative resulted in the lifting of martial law. For the nearly four decades under martial rule, emergency powers were the basis for strict security measures. Opposition to basic policy (such as expressing views contrary to the authorities' claim to represent all China or supporting independent legal status for Taiwan) were considered seditious and thus punishable under martial law. Restrictions on personal freedoms in recent years have been relaxed. Concurrent with the lifting of martial law in 1987 was passage of a new national security law (NSL). In a significant departure from martial law, the NSL ensures that civilians will not be subject to court martial. Further, the NSL transfers control of Taiwan entry and exit permits from the Taiwan Garrison Command, a military security organization, to civilian authorities. However, the NSL still forbids groups to violate the constitution or advocate communism or the "division of national territory." The Taiwan authorities have, since the end of martial law, considered further political reforms, with the goal of moving toward a more democratic system. Restrictions on the press have greatly diminished. The prohibition against organizing new political parties was ended. President Lee convened a National Affairs Conference (NAC) in June 1990 to discuss broader changes to Taiwan's political institutions, including reform of the parliamentary system, direct elections of key appointive offices, and policy toward the mainland. Until 1986, Taiwan's political system was effectively one- party. Two additional political parties had been organized before the KMT retreated to Taiwan in 1949, but they had no significant influence or following. Other candidates opposing the KMT ran in elections as independents or "nonpartisans." These "nonpartisans" met with increasing success, and, by the elections of 1977 and 1980, they had captured about one-quarter of Legislative Yuan seats up for election. In the 1983 elections, strong KMT organization temporarily reversed the "nonpartisans' " gains, but before the 1986 elections many "nonpartisans" formally grouped together to form-- illegally--Taiwan's first new political party in more than four decades, the Democratic Progressive Party (DPP). Despite the official ban on forming new parties, Taiwan authorities did not prohibit the DPP from operating, and in 1986 elections DPP and independent candidates captured more than 20% of the vote. Since the DPP came about as a coalition of independent "nonpartisans," its membership includes factions with widely varying positions on political issues. Most DPP leaders hold moderate opinions and see their primary purposes as implementing gradual change and providing a system of checks and balances in the political structure. However, due to its orientation toward the Taiwanese population, the DPP platform includes outspoken positions on some of the most sensitive issues in Taiwan politics. For example, the DPP advocates "self-determination," a term party leaders say is not necessarily a call for Taiwan's secession from China but a demand that the people of Taiwan be allowed to determine their own future. However, a number of ranking DPP officials do, in a direct challenge to steadfast tenets of both Kuomintang and People's Republic of China (PRC) policy, openly advocate Taiwan independence. The DPP also advocates immediately abolishing the indefinite-term mainlander seats in the National Assembly and Legislative Yuan, as well as other changes in the political system. The DPP is the largest of the opposition parties and claims a membership of 25,000. The role of the opposition, however, is greater than its small numbers might indicate. The opposition is very vocal in elected bodies, frequently using such public forums to raise controversial or sensitive issues. Consultation between the ruling KMT and opposition DPP on legislative issues is growing over time. In 1972, Premier Chiang Ching-kuo began an effort to bring Taiwanese into more senior positions in the central administration and the KMT. Since his accession to the presidency in January 1988, President Lee Teng-hui has continued this process. Taiwanese now hold 9 of 19 ministerial positions in the cabinet and 13 of 31 positions on the KMT Party Central Standing Committee. Of 2 million KMT members about 70% are Taiwanese. Taiwanese hold most of the elective and appointive positions at the provincial and local levels; nonetheless, mainlanders continue to exercise control in the central governing bodies.

ECONOMY

Over the past three decades, Taiwan has changed from an agricultural to an industrialized economy. In early 1949, the Nationalist authorities started implementing a far-reaching and highly successful land reform program. The redistribution of land among small farmers was followed by a significant increase in farm production. In the land reform program, the Nationalist authorities compensated large landowners with commodities certificates and stock in state-owned light industries. Although some landowners were left impoverished by the compensation, others were able to turn theirs into capital with which to start new, non-agricultural commercial and industrial enterprises. These new entrepreneurs became Taiwan's first industrial capitalists who, with business refugees from the mainland, managed Taiwan's transition from an agricultural to a commercial, industrial economy. Since 1949, Taiwan has developed steadily into a major international trading power. Tremendous prosperity on the island has brought economic and social stability. Foreign investment, mostly from overseas Chinese, the United States, Japan, and Western Europe, helped introduce modern, labor- intensive technology to the island in the 1960s and move industrial production to increasingly sophisticated products for export in the 1970s and 1980s Now the emphasis is to expand domestic demand, upgrade industrial structure, and pursue development of the service sector. During the 1980s, GDP rose at an annual average of 8.1% in real terms despite a series of economic downturns. During the first 2 years of the decade, Taiwan suffered through the second global oil crisis. In 1985 just as the island was recovering from the economic slowdown, the collapse of the island's largest credit cooperative and the largest trust company cut the growth rate in half. Following the G-5 Plaza Summit in September 1985 Taiwan's currency began its 55% appreciation against the US dollar that was to last through 1989. Capital rushed into Taiwan. However, currency appreciation has not seriously damaged Taiwan's export industries; instead, it prompted relocation of the less efficient, more labor-intensive operations to other less developed countries. During this period, Taiwan has been transformed from a debtor to a creditor economy, holding one of the largest foreign exchange reserves in the world.
Major Infrastructure Projects
One of the development strategies adopted by Taiwan authorities has been to assign priority to infrastructural projects. Ten major construction projects, launched in 1973 and most completed by the end of 1978, provided a firm foundation for further development. They included a north-south freeway linking the major cities of western Taiwan, a new international airport at Taoyuan, near Taipei, railway electrification, modernization of the island's ports and construction of a new port near Taichung, a rail link from Suao to Hualien, the island's first integrated steel mill, a major shipyard at Kaohsiung, petrochemical plants, and additional electric power plants. Twelve new development projects were subsequently initiated in 1978, placing emphasis on more balanced development between the various sectors of the economy. They included construction of additional highways, completion of a rail network around the island, finishing the second phase of the integrated steel mill, constructing the island's second and third nuclear power plants, expanding Taichung Harbor, constructing new towns and housing, improving irrigation and flood control, financing farm mechanization, and construction of local cultural centers. In September 1984, Taiwan authorities announced another infrastructure program consisting of 14 major construction projects. These projects are already under way, although progress on some of them has been stalled by labor shortages. The authorities encourage foreign investment to help finance the island's efforts to move away from light, labor-intensive, export-oriented industry to more capital-intensive production for export and for secondary import substitution. According to Taiwan statistics, foreign investment from 1952 to 1989 totaled $10.9 billion, of which 28%--or $3.1 billion--came from the United States. Electronics is the most important industrial export sector and is the largest recipient of US investment. Textile production, though of declining importance, remains Taiwan's second most important industrial sector. Other major export industries include plastics, toys, sporting goods, footwear, and machinery. Although it is changing, Taiwan's economy has been characterized by highly labor-intensive production. However, the recent rapid development of the service sector, supported by government policy, has taken away some of the labor force, causing serious labor shortages. Tight supply of labor and a steady rise in wages, together with the 55% currency appreciation and other factors, have promoted a massive offshore relocation of production in the past 3 years. Outward investment approvals doubled in 1987 to $103 million, doubled again in 1988 to $219 million, and more than quadrupled in 1989 to $931 million. Many local investors have never reported their overseas projects to the investment authorities, and actual outward investments are many times more than the official approval figures. Outward investments--already making Taiwan one of the most important investors in southeast Asian countries and the PRC--were more than three times greater than the total foreign investment in Taiwan in each of the past 2 years. Thus, while still a recipient of foreign investment, Taiwan has in fact become a major supplier of investment funds to other developing countries. With the prospect of continued industrial emigration, Taiwan's future development will have to rely more on domestic demand and on further transformation to a higher-technology and service-oriented economy. Capital outflow has shifted enough Taiwan business offshore that it led to a slowdown in 1988 and 1989 and a decline in early 1990 in exports from Taiwan. The shift in export sourcing abroad has successfully diversified Taiwan's trade markets, cutting its share of exports to the US from 49% in 1984 to 36% in 1988 and 33% in the first 5 months of 1990. Taiwan's dependence on the US should decrease as its exports to southeast Asian countries and the PRC grow and its efforts to develop European markets produce results. The movement of enterprises offshore also has reduced the importance of Taiwan's three export processing zones which used to be one of the prime engines behind Taiwan's earlier development. The focus of Taiwan's efforts to develop a high-technology industrial base is the Hsinchu science-based industrial park, which opened in 1980 and now employs 19,000 people. Of 120 companies with permits to operate there, 36 are US firms. Products include computers and peripheral equipment, semiconductors, precision electronics, machinery and instrumentation, and telecommunications equipment. Three biotechnology companies also have set up operations. Most production is exported to US and European markets. Two of Taiwan's leading science and engineering schools, Tsinghua and National Chiaotung Universities, are located near the park and provide a readily available pool of skilled labor. Laboratories of the nonprofit Industrial Technology Research Institute (ITRI) are adjacent to the park. ITRI conducts basic and applied research in the fields of energy, environment, materials, and electronic and mechanical engineering.
Foreign Trade
Foreign trade has been the engine of Taiwan's rapid growth over the past 40 years. The total value of trade roughly increased nearly five-fold in the 1960s, more than ten-fold in the 1970s, and tripled in the 1980s. Variety of exports increased nearly four-fold between 1975 and 1980 and doubled from 1980 to 1985. Export composition has changed from predominantly agricultural commodities to industrial goods (95%). Imports are dominated by raw materials and capital goods, which account for more than 70% of the total. Taiwan imports more than 92% of its energy needs. The United States is Taiwan's largest trading partner, taking 36% of exports and supplying 23% of imports. US private investment in Taiwan since 1952 is $3 billion. In 1989, Taiwan's trade with the US was to $36 billion. Imports from the US consisted mostly of farm products, chemicals, machinery, electronic products and home appliances. Exports to the US were mainly consumer goods such as footwear, furniture, and bicycles. The US Department of Commerce calculates Taiwan's 1989 trade surplus with the United States at $13 billion based on US customs value of imports. The United States and Japan account for more than half of Taiwan's foreign trade. Other important trading partners are Hong Kong, Germany, Australia, Canada, Singapore, the Netherlands, South Korea, and Saudi Arabia. The lack of formal diplomatic relations with all but a few of its trading partners has not seriously hindered Taiwan's rapidly expanding commerce.
Agriculture
Taiwan's agricultural sector is very productive. Although only about one-quarter of the territory is arable, virtually all farmland is intensively 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. Although self-sufficient in rice production, Taiwan imports large amounts of feedgrains such as wheat, mostly from the United States. Meat production and consumption are rising sharply, reflecting a rising standard of living. Taiwan exports large amounts of frozen pork. Other agricultural exports include tuna, processed eel, fresh and frozen vegetables, feathers, shrimp, canned vegetables, sugar, tea, and rice. Taiwan has a large fishing fleet and is an important exporter of fish. Deep sea fisheries have increased steadily each year while in-shore fisheries have fluctuated slightly. However, Taiwan's use of driftnets for deep sea fishing has aroused international concerns.
Economic Outlook
Taiwan has mixed economic prospects, but current trends may put the island on a broader development base. Exports in its traditionally trade-oriented economy declined in the first months of 1990, foreign purchase orders dropped, and industrial production suffered the first decline in 15 years. A weaker New Taiwan Dollar since late l989, together with political unrest surrounding the March 1990 presidential and vice presidential elections, caused substantial capital outflows. The Taiwan Stock Exchange plunged, the real estate market was hit hard, and sales at restaurants and department stores fell. All of these factors forced the economic planning authorities to lower the projected growth target of 7% to 5-6% in 1990. However, in the longer run, the continued movement of less efficient, labor-intensive production overseas and the corresponding upgrading of remaining production may help stabilize the island economy on a broader development base.

DEFENSE

The maintenance of a large military establishment, which absorbs about 5% of the GNP and accounts for about 28% of the central budget, places a substantial but manageable burden on Taiwan's expanding economy. The armed forces number about 550,000; two-thirds are ground forces. The rest are divided among air and naval branches. The reserves total more than 2 million troops. Conscription is universal for men over age 19. Taiwan's armed forces are equipped with weapons obtained primarily from the United States, but in recent years stress on military "self-reliance" has resulted in the growth of indigenous military production in certain fields. Taiwan adheres to the Nuclear Non-Proliferation Treaty and has stated repeatedly that it does not intend to produce nuclear weapons.

FOREIGN RELATIONS

The People's Republic of China replaced Taiwan at the United Nations in 1971. Since then, Taiwan's diplomatic position has eroded, as countries changed their official recognition from Taipei to Beijing. In July 1991, Taiwan had formal diplomatic ties with 28 countries. Taiwan has cultivated informal ties with many countries as a means to offset its diplomatic isolation and to expand its economic relations. A growing number of nations have found it useful to set up unofficial organizations to carry out commercial and other unofficial relations with Taiwan. These organizations typically have representatives in Taipei, who provide services required by business travelers and others to or from their countries. A counterpart organization is usually set up by Taiwan in those countries.

US-TAIWAN RELATIONS

On January 1, 1979, the United States changed its diplomatic recognition from Taipei to Beijing. Five consecutive administrations have found normalizing relations with the PRC to be in the long-term interest of the United States. The United States is committed to this effort because it is important for America's global position and for peace and stability in Asia. In the December 1978 US-PRC joint communique announcing the change, the United States recognized the Government of the People's Republic of China as the sole legal government of China and acknowledged the Chinese position that there is but one China and that Taiwan is part of China. The joint communique also stated that "within this context, the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan." On April 10, 1979, President Carter signed into law the Taiwan Relations Act (TRA), PL 96-8, which created domestic legal authority for the conduct of unofficial relations with Taiwan. US commercial and cultural interaction with the people of Taiwan is facilitated through the American Institute in Taiwan, a nongovernmental entity. The Institute has its headquarters in Washington, DC, and field offices in Taipei and Kaohsiung. It is authorized to accept visa and passport applications and to provide assistance to US citizens in Taiwan. A counterpart organization, the Coordination Council for North American Affairs, has been created by Taiwan. It had headquarters in Taipei and field offices in Washington, DC, and (in July 1991) 11 other US cities. In January 1979, the United States notified the Taiwan authorities of intent to terminate the 1954 Mutual Defense Treaty, and termination took effect January 1, 1980. However, in its unilateral statement released on December 15, 1978, concurrently with the US-PRC joint communique, the United States declared that it continues to have an interest in the peaceful resolution of the Taiwan issue and expects that the Taiwan issue will be settled peacefully by the Chinese themselves. Since then, the United States, in accord with Taiwan authorities, has continued the sale of carefully selected defensive military equipment to Taiwan. The August 17, 1982, US-PRC joint communique addressed this point. In that communique, the PRC cited a "fundamental policy" of striving for a peaceful solution to the Taiwan question. With that Chinese policy in mind, the United States said in the communique that it does not seek to carry out a long-term policy of arms sales to Taiwan, that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan . . . . Future arms sales to Taiwan will accord with the policies contained in the August 1982 joint communique. In conjunction with that communique, President Reagan issued a statement that regarding future US arms sales to Taiwan, our policy, set forth clearly in the communique, is fully consistent with the Taiwan Relations Act. Arms sales will continue in accordance with the act and with the full expectation that the approach of the Chinese Government to the resolution of the Taiwan issue will continue to be peaceful . . . . The position of the US Government has always been clear and consistent in this regard. The Taiwan question is a matter for the Chinese people, on both sides of the Taiwan Strait, to resolve. We will not interfere in this matter or prejudice the free choice of, or put pressure on, the people of Taiwan in this matter. At the same time, we have an abiding interest and concern that any resolution be peaceful. US commercial ties with Taiwan have been maintained and expanded since early 1979. Taiwan continues to enjoy Export- Import Bank financing, Overseas Private Investment Corporation guarantees, most-favored-nation status, and ready access to US markets. The US Agency for International Development mission in Taiwan was closed in 1965. More than $1.7 billion in economic aid went to Taiwan between 1949 and 1965. In recent years, US economic dealings with Taiwan have focused on the US trade deficit. The American Institute in Taiwan has been engaged in a series of trade negotiations to reduce the deficit with Taiwan, which was $13 billion in 1989 Such negotiations have focused on copyright issues, tariff reduction, and market liberalization.

TAIWAN AND THE MAINLAND

Over the past few years, Taiwan has relaxed restrictions on unofficial contacts with the PRC. As a result, cross-strait interaction has mushroomed. At least half a million Taiwan residents have visited the PRC since November 1987, when the Taiwan authorities lifted the ban on private travel there. Since May 1990, members of the Legislative Yuan and the ruling Nationalist Party also can travel to the mainland. Indirect trade, mostly through Hong Kong, reached about $3.5 billion in 1989. Indirect investment, although technically still prohibited, totaled $1 billion by 1990. A number of factors have contributed to this upsurge in contacts. Taiwan residents born in mainland China have understandably been anxious to visit their homes and relatives. The indirect trade runs heavily in Taiwan's favor, providing another outlet for the island's booming economy. A lure for indirect investment by Taiwan businessmen in the PRC is the cheaper labor costs there, an advantage Taiwan itself is losing as economic success drives up wages. Ideologically, the Taiwan authorities hope that private contacts will rekindle the sense of "one China" after almost 40 years of separation. They also hope that the message of Taiwan's political and economic success will influence the pace and character of change occurring in the PRC and hasten the day when the unification of China will take place on Taiwan's terms. Some critics in Taiwan have complained that the opening to the PRC has moved too quickly and that its purpose is ill-defined, but their voices appear to have quieted recently. Beijing has a mixed view of these developments. PRC leaders are pleased if such contacts seem to lead toward eventual reunification, which they assume will be on their terms. But the upswing in contacts, combined with domestic political liberalization in Taiwan, has brought more open discussion in Taiwan of its future--including the option of independence, which Beijing strongly opposes. While condemning the PRC for the use of force to crush the pro-democracy movement in June l989, Taiwan leaders have continued their policy of gradually liberalizing guidelines on contacts. Visits, trade, and investment suffered a temporary slowdown during the summer of l989, but they have now resumed their upward trend. The United States believes that differences between Taipei and Beijing should be resolved by the Chinese themselves, free of outside pressure, and is concerned only that the process be peaceful. The United States has welcomed increased contacts as steps which contribute to a reduction of tension and to an environment conducive to the eventual peaceful resolution of the outstanding differences.

TRAVEL NOTES

Immigration: For a stay of less than 2 weeks, a transit visa and confirmed onward passage are required; for a stay of up to 2 months, a visitor visa, valid for a stay of 2 months and extendable twice for a total of 6 months, is required. Persons coming from or passing through disease-infected areas should have inoculations as appropriate. Since health requirements often change, travelers should check the latest information. Climate and clothing: Taiwan is hot and humid in summer and chilly and damp in winter. The climate in the northern half of the island resembles that of the south-central United States; the southern part is similar to Florida. In winter, raincoats, light jackets, and sweaters are recommended; in summer, lightweight garments are essential. An umbrella is useful year-round. Health: Epidemics and serious diseases are infrequent in Taiwan. High pollen counts and air pollution can cause discomfort to people who suffer from allergies or asthma. Drinking water served at Taipei's major hotels is safe, but care must be taken elsewhere. Hepatitis is a major problem. Telecommunications: Telephone and telegraph services are modern and efficient. Bilingual assistance is available through most hotel switchboards. Domestic telephone rates are moderate; however, international calls dialed from Taiwan can be costly. Taipei is 13 hours ahead of eastern standard time. Transportation: Rental cars are available in Taiwan. Although Taipei has an extensive bus system, foreign visitors tend to rely on the inexpensive taxis for transportation. The north-south freeway provides excellent links by car to the island's major cities, but travel around the island by Taiwan's comfortable passenger express trains is preferable. Flights are available from Taipei to Kaohsiung (30 minutes), Hualien, Makung, Tainan, and Taitung. Published by the United States Department of State, Bureau of Public Affairs, Office of Public Communication, Washington, DC , November 1990. Series Editor: Peter Knecht. Department of State Publication 7747. Background Notes Series -- This material is in the public domain and may be reprinted without permission; citation of this source is appreciated. For sale by the Superintendent of Documents, US Government Printing Office, Washington, DC 20402. (###)