Information About Taiwan’s Economy
Note: The article “Made in Taiwan” has a pretty good history of Taiwan’s economy in relation to exports. This article focuses more on the general economy and what it looks like today.
Economics is the bread-and-butter of living in Taiwan. It’s a country with a difficult (or impossible) diplomatic situation, so the natural place to express itself to the world is its economy.
Taiwan’s growth in the latter part of the 20th century saw it loosening trade barriers dramatically and opening up its manufacturing sector to the rest of the world. Today, Taiwan’s economy is mostly driven by a combination of homegrown and foreign companies to manufacture in Taiwan or use the island as a base of operations for manufacturing in mainland China.
Electronics dominates these exports (see article on “Products of Taiwan“). Agriculture has been reduced to developed world levels, making up just 2% of the entire GDP.
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Read some interesting facts about Taiwan and Taipei.
The Economy of Taiwan – Locked with China’s?
What is the ECFA? How can the economy of Taiwan stay (kind of) independent from China’s own economy?
A big question that has been part of the discussion of Taiwan’s economy is how to deal with the rapid growth of China. The KMT administration of President Ma opted to increase economic ties with China rather than to distance itself from it.
This resulted in the controversial Economic Cooperation Framework Agreement (ECFA) which gives Taiwan some preferential treatment toward the Chinese market. It’s controversial because many of its opponents say that the language of the agreement is vague and they suspect that China could easily re-interpret many of the provisions to its own benefit in the years to come.
Whatever anyone says, President Ma and economic forces have definitely created a deeper intertwinement between the two entities – in 2005 China replaced the United States as Taiwan’s #2 importer (Japan stands at #1).
Economy in Taiwan – Some Domestic Stuff
Starting with the Science Park in Hsinchu, much of Taiwan’s economy has been characterized by science and industrial parks, where the government has a number of incentives and tax breaks in place to encourage technology companies to set up in a specific area.
These places are mini Silicon Valleys, where engineers, programmers and project managers bustle around trying to work on the latest touch screen software, lower production costs or the like. Now science parks are all over western Taiwan, from Tainan to Hsinchu and beyond.
The currency that’s at the center of the economy of Taiwan is the New Taiwan Dollar (NTD). It took over the “Old Taiwan Dollar” in 1949 because of hyperinflation going on in Mainland China at the time.
For a scope of that inflation, imagine that the NTD replaced its predecessor at a ratio 40,000 to 1. The NTD has fluctuated considerably since its inception, though in the past decade it has stuck in the low 30s when compared to the US Dollar. Recently the NTD has been gaining on the USD (though so has everything else).
The Future of Taiwan’s Economy
Today, like many other Asian economies, Taiwan’s is facing the question of where to go next. They have almost maxed out export potential, and need to get a boost of innovation to take the steps toward growth. Some of the country’s biggest names – HTC, Asus, Acer, Foxconn – are trying to find these solutions and, well, time will tell.
I really hope that the economy of Taiwan will at least stay as strong as it is now, and hopefully expand in the years to come!