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. (###)