One of Asia’s top economic tigers
The Republic of China (ROC), also known as Taiwan or Chinese Taipei, is a country located in East Asia with a population of 23.4 million. Territory includes the main island of Taiwan, also known as Formosa, and 167 other islands. Taiwan currently enjoys limited international diplomatic recognition.
Taiwan is considered one of Asia’s economic tigers. As a newly industrialized country, it has a high growth rate, and its economy is based largely on exports. Another of Taiwan’s assets is its highly skilled workforce. Taiwan’s GDP is $790 billion ($33,910 per capita). In the GDP structure, industry accounts for 37.8%, services for 60.8%, and agriculture for 1.4%. As for the business environment, 98% of companies (1.59 million) are small and medium-sized enterprises (SMEs).
Taiwan was originally an agricultural country, but the process of economic transformation that began 70 years ago saw the economy shift, first to heavy industry and then to high-tech manufacturing. Exports became the main engine of growth at that time. Taiwan has a developed industrial base and a highly skilled but relatively cheap workforce, making its economy more globally competitive. It places the Republic of China among the leading players in the ICT market.
Taiwan and international organizations
Taiwan’s complex political situation in the international arena is the result of the Chinese civil war, which saw the victory of the Chinese Communist Party. As a result, members and supporters of China’s former ruling Nationalist Party of China (Kuomintang) fled the mainland to the island of Taiwan, where they established the Republic of China. Taiwan initially retained a seat in the United Nations. However, it was excluded from the UN in 1971, with the People’s Republic of China taking its place.
Over time Taiwan eventually lost diplomatic recognition, as most countries began to recognize the People’s Republic of China as China’s representative. In parallel, many UN members have avoided stating what territories precisely are meant by “China.” It allows them to maintain relations with both the Republic of China and the People’s Republic of China. Taiwan currently enjoys recognition from 13 countries: Belize, Eswatini, Guatemala, Haiti, Nauru, Palau, Paraguay, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Tuvalu, the Vatican, and the Marshall Islands.
International recognition of the statehood issue poses problems for Taiwan in establishing relations with other countries. Taiwan is currently a member of 40 intergovernmental organizations, such as the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC). Taipei also has observer status in 25 more organizations and their bodies, including the European Bank for Reconstruction and Development (EBRD) and Organization for Economic Cooperation and Development (OECD) committees. In 2013 Taiwan signed its first trade agreement with OECD member New Zealand.
Population of Taiwan
Taiwan’s population is 23.4 million. Official figures show that Taiwan is inhabited by two ethnic groups: the Han Chinese (97.7%) and Taiwanese aborigines (2.3%). As for the former group, 84% are so-called Benshengren, or Chinese, who colonized Taiwan since the 14th century, and 12% are Waishengren or Xinzhumin, who fled mainland China after the civil war and their descendants. The government recognizes 16 Aboriginal tribes, among which the largest are the Amis (37%) and Paiwan (18%). Aboriginal people live mainly in high mountain areas, Lanyu Island, and southwestern Taiwan.
About 570,000 residents are immigrants, primarily from mainland China and Southeast Asia. As for religion, the major groups are Buddhists (35.3%), Taoists (33.2%), and Christians (3.9%). The official language is Mandarin, spoken by about 80% of the population. Southern Minnan, also known as Taiwanese or Hoklo, hakka, and 16 aboriginal Taiwanese languages are also spoken.
Taiwan’s urbanization rate accelerated in the 1950s. These days, 80.1% of citizens live in cities. The largest is the capital, Taipei, with a population of 2.7 million (the number of inhabitants across the New Taipei metropolitan area is 4.5 million). Other major cities include Taoyuan (2.3 million), Kaohsiung (1.5 million), and Taichung (1.4 million). Taiwanese are an aging population. According to National Development Council projections, 20% of Taiwanese will be 65 or older in 2025, and working-age Taiwanese will make up less than two-thirds of the population for the first time.
Economy of Taiwan
Taiwan is a country with a highly developed market economy. Between 1950 and 2000, the Republic of China made significant economic progress, transforming itself from an agricultural state into an Asian tiger. In the beginning, development was facilitated by US economic assistance. Over the years, Taiwan has become a significant investor and trading partner in Asia. Key sectors today are electronics, telecommunications, ICT, financial services, transportation, metallurgy, medicine, petrochemicals, and shipbuilding. Taiwan is also one of the largest bicycle manufacturers in the world.
Since 2016, Taiwan has been implementing the New Model for Economic Development, which supports the expansion of industries such as ICT, biotechnology, medical technology, defense, and energy. Part of it is the New Southbound Policy for strengthening ties with ASEAN countries, Australia and New Zealand. Since 2017, the government has been implementing the Forward-looking Infrastructure Development Program to meet transportation, digital infrastructure, energy, and education needs by 2047.
Taiwan imports 98% of its energy resources. According to the government’s plans, 50% of electricity will be generated from natural gas, and the share of renewable energy in the energy mix will be 27-30% by 2030. The Republic of China has pledged to reduce carbon dioxide emissions by 2025 to the level recorded in 2000, with carbon neutrality to be achieved in 2050. The islands are also home to vast deposits of marble and stones used to produce construction materials.
International trade
Taiwan is the world’s 21st economy by GDP and the 17th largest exporter and importer. The exports amount to $479.5 billion, and the imports to $427.6 billion. Taiwan’s main trading partners are the People’s Republic of China, Hong Kong, the United States, Japan, the European Union, and ASEAN member states.
Among the most frequently imported goods are electronic product parts (18.2%), oil and mineral fuels (15.2%), industrial machinery (12.4%), chemicals (10.8%), and base metals (7.3%).
The group of most frequently exported goods includes electronics (33.1%), information, communication, and audio-visual technologies (10.8%), base metals (8.8%), plastics and rubber (7.1%), and industrial machinery (7.5%).
Trade agreements
Taiwan enjoys trade relations with more than 70 countries, including in the framework of the New Southbound Policy. Taiwan has signed an economic cooperation framework agreement with the People’s Republic of China and six economic cooperation agreements with New Zealand, Singapore, Paraguay, Eswatini, Marshall Islands, and Belize.
Taiwan has signed a total of nine free trade agreements. Free trade agreements with the following countries are still in effect:
El Salvador
Guatemala
Honduras
Panama
In September 2021, Taiwan applied to join the Comprehensive and Progressive Transpacific Partnership (CPTPP).
Taiwan-European Union relations
The European Union and Taiwan enjoy a trade relationship, albeit the EU recognizes the People’s Republic of China as the sole government of China. The EU is set on de-escalating tensions across the Taiwan Strait and has consistently called on the governments in Beijing and Taipei for dialogue. The EU and Taiwan hold annual trade consultations and talks on industrial policy and the digital economy. Fifteen EU member states have offices in Taipei, and the European Commission established the European Economic and Trade Office (EETO) in 2003.
European companies are represented by the European Chamber of Commerce Taiwan (ECCT). Taiwan is the 14th trading partner of the European Union. The EU is the fourth trading partner for Taiwan, after China, the US, and Japan. Trade mainly includes telecommunications equipment, industrial machinery, transportation equipment, and chemicals. In 2022, the value of EU imports from Taiwan was 49.2 billion euros, and exports were 35.1 billion euros. Conversely, the value of trade in services was €13.3 billion. The European Union is the largest foreign investor in Taiwan.
Opportunities and challenges
Many of Taiwan’s regulations and standards differ from those generally recognized internationally. It implies that the entrepreneurs looking to start trading should acquaint themselves with existing provisions, including those for conducting the necessary testing and certification. Taiwan imposes customs duties on imported goods. These are calculated using the cost, insurance, and freight (CIF) method. The duty rate is up to 30% of the CIF amount. A value-added tax (VAT) of 5% is imposed on most goods.
Goods charged the highest customs duties are food products, motor vehicles, alcohol, and textiles. The export of foods is further complicated by phytosanitary procedures and the requirement to obtain the necessary certificates. Simultaneously, Taiwan offers numerous incentives for foreign entrepreneurs. They can be exempted from income tax and may receive research and development grants.
Taiwan has six free trade zones at seaports (Anping, Kaohsiung, Keelung, Suao, Taichung, and Taipei) and a free trade zone at Taoyuan Airport. The zones are used mainly for re-export. Opportunities for foreign entrepreneurs are primarily related to the energy sector, the energy transformation process, and the high-tech industry. Growing consumption also generates opportunities in the food, education, and luxury goods industries.