Taiwan

Taiwan is located a little over 100 miles (160 kilometers) off China’s southeastern coast (Figure 9.48). With an area of 14,000 square miles (36,000 square kilometers) and over 23 million people, Taiwan is a crowded place. A mountainous spine runs from the northeastern corner to the southern tip of the island, with a rather steep escarpment facing east and a long, gentler slope facing west. Most of the population lives on the western side, especially at lower elevations along the coastal plain. As farming declines, people are increasingly concentrated in a few urban centers. The greatest concentration is in the far north, in the area surrounding Taipei, the capital.

Despite its small size and small population, Taiwan is one of the most prosperous countries of the Asia–Pacific region, a huge trading area that includes all of Asia and the countries around the Pacific Rim (which consists of all the countries that border the Pacific Ocean). It ranks twenty-first globally in the size of its foreign trade, and its GDP per capita in 2012 was U.S.$38,500. After the Communist Revolution in China, Taiwan took advantage of its ardent anti-communist stance, its burgeoning refugee population, and its geographic location close to the mainland to draw aid and investment from Europe, America, and, eventually, Japan. The island’s economy quickly changed from overwhelmingly rural and agricultural to mostly urban and industrial. Green revolution technologies (see Chapter 1, page 26) allowed a surplus labor force in the countryside to be transferred to urban jobs, and today only 5 percent still work in agriculture. Many industries made products for Taiwan’s impressive export markets. Then, slowly, the economic emphasis changed again, from labor-intensive industries to high-tech and service industries requiring education and technical skills.

By the mid-1990s, the domestic economy was expanding rapidly, and local consumers were absorbing a major proportion of Taiwan’s own production: home appliances, electronics, automobiles, motorcycles, and synthetic textiles. The Taiwanese performed a neat pirouette to make possible this high rate of local consumption. As Taiwan lost its labor-intensive industries to cheaper labor markets throughout Asia—including mainland China—Taiwanese entrepreneurs built factories and made other investments in the very places that were giving them such stiff competition: Thailand, Indonesia, the Philippines, Malaysia, Vietnam, and the new SEZs in Southern China. Taiwan was thus able to remain competitive as a rapidly growing economy with strong export markets; it also profited from dealing with the less advanced but emerging economies in the region, including especially China.

Taiwan’s likely future role in the wider world is a hotly debated question. The United States has had a strong relationship with Taiwan since the 1950s, when Taiwan was a symbol of anti-communism. In its own eyes, Taiwan remains independent, though the government favors relaxed relations with China and less nationalistic talk (see Figure 9.21C). China, on the other hand, regards Taiwan as an integral part of the mainland, and Taiwan could easily be militarily subdued, as China periodically demonstrates by flexing its military muscles in the Straits of Taiwan. At the same time, Taiwan is geographically and financially situated to enhance the development of mainland Chinese markets and the integration of the Asia–Pacific economy. China seems to accept this reality, at least for now.