Taiwan Today

Avoidance of excessive inflation has played a big role in the Taiwan economic success story. With 1966 as 100, the wholesale price index of 586 items stood at just over 103 in December of 1970. The average figure for 1971 was still under 104 and that for 1972 under 109. The index stood at 113.55 as 1972 came to a close.

On the same 1966 base of 100, the retail price index for urban Taiwan stood at 117.53 in 1970, 120.54 in 1971 and 126.39 in 1972. The figure was just over 127 moving into January of 1973. Inflationary forces became irresistible in 1973. But these were largely outside the Republic of China's control. The record of 1966-1972 continues to stand as a remarkable record which is probably unique among developing countries with high rates of economic growth.

How did the Republic of China manage to achieve economic growth of 10 per cent or more annually over an extended period while prices were rising by a negligible amount? The answer to that question is necessarily complicated. Many factors were at work. Government did not have delusions of grandeur. People did not expect to catch up with the American or even the Japanese living standard overnight. The work ethic was uppermost.

Taiwan was a poor land at the time of the Chinese Communist usurpation of the mainland in 1949. One middle-sized island of less than 14,000 square miles had to absorb an extra million and a half people within the span of a year. An in­frastructure wrecked in World War II had to be rebuilt. Industry scarcely existed. Agricultural production was low because absentee landlordism and high land rents had undermined rural incen­tive.

Economic planners of 1950 had no dream of making Taiwan into a developed land that would surpass the mainland in trade within a little over two decades. They were content to think of some light industries producing import substitutes. Agri­culture was to be the backbone of the economy. Everyone knew that Taiwan was a sugar, rice and fruit bowl. The land was not too bad, the people were hard working and the climate was favorable.

So first priority went to the task of giving the farmer something to work for. Land reform wiped out absentee landlords and reduced tenancy to a little over 10 percent. Farmers had reason to improve their land, to mechanize and to diversify their crops. They also had money left over to save and thus provide capital for the beginnings of industry. The landlord class found industrial outlets for its entrepreneurial spirit and drive.

Land reform was a success of such magnitude that the world now comes to Taiwan to study what was done and why. The Land Reform Institute, which has American as well as free Chi­nese backing, holds seminars attended by potential land reformers from Asia, Africa and the Americas. In all the world, no country has ever conducted a more successful land reform program - and without the loss of a single life or the expropria­tion of a single piece of land which was not paid for at a fair price.

In 1952, on the eve of the Land to the Tiller program, Taiwan had 4,257,000 farmers. They made up 52.4 percent of the population. But only 1,598,000 owned their farms. There were 1,113,000 farmers who owned part of their land. Tenants numbered 1,546,000. Full owners made up 38 percent, part owners 26 percent and tenants 36 percent of the total farm population.

Twenty years later the farm population had increased to 5,947,000, although this was down to 38.9 percent of the total population. Full owners had risen to 4,646,000, or 78 percent. Part owners were down to 709,000, or 12 percent, and only 592,000, or 10 percent were renting all the land they tilled.

With 1952 as the base of 100, agricultural production had risen to 205.9 and animal hus­bandry to 402.8 in 1972. Rice output increased from 1,570,000 metric tons to 2,440,000 m/t, although the cultivated area declined from 785,700 hectares to 741,600 h/a. The yield per hectare climbed from 1,998 kilograms to 3,291 kg. Sweet potatoes were up by nearly 50 percent and soybeans by four times. Tea more than doubled despite a 14.5 percent reduction in planted area. Bananas climbed from 106,856 metric tons to 366,411 m/t and the yield nearly tripled.

Taiwan has become the world's largest exporter of canned pineapple. Output was only 62,760 metric tons in 1952. But the figure had risen to nearly 335,000 m/t by 1972 and the yield per hectare was up 2½ times. Only 27,770 metric tons of citrus fruit was grown in 1952 compared with the more than 290,000 m/t of 1972. Pro­ductivity was nearly doubled. Sugar was Taiwan's principal export from the early 17th century until the mid-1960s. But when King Sugar was dethroned by textiles and then surpassed by other products, it was not due to lack of production. Only 520,453 metric tons of sugar was produced in 1952 compared with more than 713,000 m/t in 1972. Yield per hectare rose from less than 7,000 kilograms per hectare to nearly 8,700 kg. In 1965, with the world sugar price' at zenith, Taiwan produced more than a million metric tons of sugar and attained a per hectare yield in excess of 10,000 kilograms.

Watermelons made up a locally consumed crop of 26,790 metric tons in 1952. Export demand helped push the 1972 output to 216,227 m/t with productivity nearly doubled. There were several new crops. Mushrooms were first grown in 1963. The 38,639 metric tons of that year had risen to more than 85,000 tons 10 years later. Asparagus began as a curiosity of 616 metric tons in 1964. The 1972 output was 106,602 m/t. Productivity of asparagus rose three times; that of mushrooms doubled.

The industrial growth story was even more fantastic. U.S. aid funds totaling US$1,500 million from 1951 to 1965 helped establish industrial infrastructure and manufacturing plants to make products which were consuming large amounts of foreign exchange. With 1952 as 100, the general index of industrial production stood at 1,700.6 in 1972. Manufacturing reached 2,015.5. Fac­tories increased from fewer than 10,000 to nearly 25,000.

These are examples of increases in production (figures are metric tons):

                             1952            1972
Wheat flour        16,026          419,724
Cotton yarn        13,576           91,362
Cotton fabrics     87,639         498,688
Paper                  27,633         453,888
Caustic soda         8,906          151,906
Soda ash                 601             54,207
Fertilizer            148,000       1,384,000
Cement             446,000        5,690,000
Pig iron                 9,927            81,022
Steel bars            17,842          738,804
Aluminum ingots     3,856           32,104
General machinery  6,155         321,695


Electric power generation rose from 1,420 million kilowatt hours to 17,449 million kwh in the 1952.72 period. Canned pineapple output rose from 363 standard cases to 4,294. Refined crude oil went up from 300,000 kiloliters to 1,384,000 kl. Rayon filament and polyvinyl chloride were not produced until 1957. Rayon output rose from 759 metric tons to 3,369 m/t in 16 years. PVC started at 1,035 metric tons and had reached 171,781 m/t in 1972.

Other 1952-1972 gains were sewing machines, from 25,050 to 916,458; electric fans, from 9,852 to 544,166; and shipbuilding, from 565 gross tons to 292,781. With a start of 36,000 pieces of fluorescent lamps in 1955, production had climbed to 11,565,000 in 1972. Watt-hour meter production began in the same year at 13,518 and stood at 316,798 in 1972, down from the 624,196 of 1971.

All this has meant a better life for the people. With 1952 as 100, the index of real national in­come stood at 484.3 in 1972 and per capita income at 271.9. Per capita income reached US$467 in 1973 and in 1974 will break through the US$500 mark which is sometimes used to distinguish the "have" nations from the "have­ nots." For the 1952-1972 period, real national income rose at a rate of 8.2 percent annually and per capita income at a rate of 5.1 percent despite population growth of 3.2 percent.

Prosperity and the good life were reflected in the advance of education. Taiwan had 1,769 schools in 1952 and 4,155 in 1972. The number of students rose from 1,187,858 to 4,244,854. To serve the needs of nine-year basic education (as contrasted with the six years obtaining before 1968), the number of secondary schools was increased from 214 to 940. Universities and colleges mushroomed from 8 to 99.

Health care was made available to everyone at reasonable cost. Medical personnel rose from 11,613 in 1952 to nearly 40,000 in 1972. Physi­cians increased from slightly over 5,000 to nearly 12,000. Hospitals and other medical institutions rose from 578 to 1,110. Most communicable diseases were wiped out. Taiwan had its last cholera case in 1962. Malaria was eradicated.

In 1952, the economy managed to get along with a money supply of only NT$1,336 million. The 1972 requirement was NT$60,808 million. The currency issue went from NT$798 million to NT$22,176 million. Savings showed a rise from NT$630 million to NT$99,933 million. Banking institutions increased from 682 to 922.

Government maintained its solvency through­ out the period. Revenues of government totaled NT$3,626 million and expenditures NT$3,576 in calendar 1952. In fiscal 1972 the comparable figures were NT$65,258 and NT$62,943. Taxes as a source of government revenue rose from 53.6 percent in calendar 1952 to 62.9 percent in fiscal 1972. General administration and defense was a declining share of government expenditures despite the continuing Communist threat. In calendar 1952, general administration and defense costs made up 59.3 percent of government spend­ing. The figure was only 43.8 percent in fiscal 1972. The big increases were in expenditures for education, science and culture (up from 7.8 to 17.6 percent) and social affairs, relief and health (up from 5.6 to 12.9 percent). Government em­phasis was on a better life for the people but without sacrifice of defense and essential services.

Transportation and communications were de­veloped to serve the people and the economy. Taiwan's railway and highway systems were in place by 1952. Many improvements were made but rail mileage and stations declined from 1952 to 1972. The increase in highway mileage was small. Yet vehicle registrations increased from 10,710 in 1952 to 1,114,737 in 1972. The gain in motorcycles, Taiwan's all-purpose family vehicle, was from 2,002 to 957,650. In public transporta­tion, the railroads carried 81 million passengers in 1952 and 143 million in 1972. The increase for buses was from 82 million to 714 million. Rail freight tonnage rose from 17,098,000 metric tons in 1952 to 33,919,000 m/t in 1972. The truck increase was from 2,597,000 metric tons to 42,014,000 m/t.

The Republic of China's merchant marine and fishing fleets had 897 vessels in 1952 and 5,970 in 1972. Tonnage increased from 539,271 to 1,978,037. Import and export cargoes totaled 1,859,000 metric tons in 1952 and more than 25,000,000 in 1972.

Postal establishments increased from 1,544 to 8,593 in the two decades. Mail routes rose from 50,396 kilometers to 245,557 km. Letters in­creased from 62.3 million posted and 70.4 million delivered in 1952 to 697.6 million and 734.9 million in 1972. Telephone subscribers increased from 0.30 per 100 population in 1952 to 2.50 per 100 in 1972. The figure for Taipei went up from 1.32 to 8.73.

Foreign trade is one of the prime indicators of what was happening in the Taiwan economy during the 1950s and 1960s. With 1952 as the index base of 100, exports had risen to 7,950.3 and imports to 3,979 in 1972. In terms of money, 1952 exports were valued at US$116,474,000 and imports at US$187,2l5,000 in 1952. This was the trade of a small island economy. The com­parable figures for 1972 were US$2,988,123,000 and US$2,513,502,000. There was further two­ way gain of 50 percent in 1973 to a total of US$8,263,600,000 with a favorable balance of nearly US$700 million. Per capita value of trade rose from US$40.8 in 1952 to US$393.7 in 1972. Increases were 33.4 percent in 1970, 33.5 percent in 1971, 44.4 percent in 1972 and 50.2 percent in 1973.

Composition of exports indicates the change from an agricultural to an industrial economy. In 1952, processed agricultural products were dominant at 68.3 percent of the total. Agricultural products made up 26.9 percent and industrial products a mere 4.8 percent. The 1972 figures were 82.9 percent for industrial products, 9.9 percent for processed agricultural products and 7.2 percent for agricultural products. For 1973, industrial products rose to 92.6 percent with the remaining 7.4 percent split between processed and unprocessed agricultural products. Heavy in­dustry supplied 37.43 percent of the industrial total. Last year's export gains included 65 percent each for transportation equipment and ply­ wood. Export of plastic products was up 59 percent, electrical machinery apparatus by 57 percent and metal products also by 57 percent.

Trade with Taiwan's biggest customer, the United States, was substantially favorable. That with Japan, Taiwan's principal supplier, remained unfavorable, but the gap was narrowed. Japan once wanted only Taiwan bananas, rice and the like. Now the Japanese are looking to Taiwan for labor-intensive products which they can no longer produce profitably because of high wage rates.

All of this was achieved with a rate of infla­tion which was one of the lowest in the world. With 1952 as 100, the wholesale price index had risen to 246.69 by 1972. The principal rise was in the 1953-62 period, in which annual increments averaged 7.6 percent. The 1953-72 average was 4.6 percent. That for the 1963-72 period was an astonishingly low 1.7 percent. Retail prices went up from 1952's 100 to 1972's 308.67. The overall average increase was 5.8 percent annually with that of 1953-62 recorded at 8.8 percent. The 1963-72 figure was only 3 percent.

With 1966 as 100, the wholesale price index stood at only 103.78 in 1970 and 108.63 in 1972. The stability of prices can be seen in these 1972 indices (1966 = 100): food, 119.47; textiles and products, 98.57; leather and products, 120.59; fuel and electricity, 107.89; metals and products. 107.80; lumber, 106.35; building materials, 108.44; rubber and products, 82.63; paper and pulp, 112.73; pharmaceuticals, 113.65; miscellaneous, 100.63. The general index for retail prices was 126.3 9 with these breakdowns: food, 135.3 1 ; clothing, 102.26; housing, 120.97; communication services, 125.22; pharmaceuticals and medical care, 143.76; education and recreation, 107.50; miscellaneous, 105.73.

At the close of 1972, Taiwan may well have been the cheapest place in the world to live. Food was still cheap. Most manufactured necessities were made domestically. The rest of the world was wrestling with inflation rates ranging from 6 per cent upward. Then came 1973 and the end of Taiwan's good thing. Inflation pummeled Taiwan at last, and not gently, although the fault was found in the marketplaces of the world and not at home.

Taiwan's victory over inflation was real enough and long lasting. It was based on government economy, on the willingness of workers to accept moderate wage increases and on the dynamic performance of new entrepreneurs. The industrial­ists and people of free China made a better prod­uct at a lower price. The world didn't exactly beat a trail to Taiwan's door. International trade doesn't work like that. But traders and govern­ment joined forces to introduce Taiwan goods as widely as possible. Trade increased even with those countries which had decided to recognize the Chinese Communists.

Nothing much changed in Taiwan. But the energy shortage, declining stocks of raw materials and the sharply rising prices of everything Taiwan buys packed a powerful inflationary wallop. Gov­ernment tried to hold the line through 1973. Hundreds of millions of dollars were spent to subsidize the prices of imported commodities ranging from petroleum products to soybeans. Attempts were made to hold down the money supply. Interest rates were raised twice during 1973 to encourage savings and cool off economic expansion. Yet even economic success tended to fuel the fires of inflation. The foreign exchange surplus neared the US$2,000 million mark. Foreign and overseas Chinese investment set an all-time record of US$148 million in 1973. The favorable trade balance was nearly US$700 million.

Finally, on January 26, the government an­nounced an economic stabilization program which included sizable price, utility rate and fare in­ creases, especially for power and petroleum prod­ucts. Premier Chiang Ching-kuo explained that the increases were required by "import inflation" and not because of any weakness in the economy. "The government will continue to encourage ex­ ports and expedite trade growth," he said. If a trade deficit develops in 1974 because of higher prices for raw materials and machinery that will not necessarily be injurious, he said, but could be a price stabilization factor. He noted that the government has spent NT$2.7 billion to subsidize the price of soybeans and wheat. Calling for public support, the premier said government in­ tends the increases as a measure of "once and for all." No further raises are contemplated. As enunciated by Premier Chiang, the underlying principles of the stabilization program will be:

- Strengthening of the nation's economic foundation.

- Assurance that the economy is based on sound financial policies.

- Improvement of the people's livelihood.

- Protection of the welfare of military personnel, civil servants and teachers.

Dr. Fredrick F. Chien, director-general of the Government Information Office, said the govern­ment "has done its best to reduce the impact of this price increase on people of low incomes, in­cluding farmers and fishermen." This was re­flected in sliding scales for increases which averaged 85 percent for gasoline, 80 percent for electric power and 65 percent for flour. To assure a maximum rice crop this year, the government decided not to increase the price of fertilizer. Telephone rates were not boosted.

These were some of the increases:

- Gasoline, premium, to NT$12 per liter and ordinary grade to NT$11 per liter, an increase of 85 percent. Diesel fuel went up to US$5.7 per liter.

- Electricity up by from 90 to 134.7 percent for industrial use. Householders will pay more on a sliding scale according to consumption. There will be no increase for meter readings of under 100 kilowatt hours per month. For consumption of 100 to 200 kilowatt hours the increase will be 9 percent. The maximum increase for consump­tion above 800 kilowatt hours monthly will be about 54 percent. Business will pay more. School rates remain the same.

- Bus fares up from NT$1.50 to NT$2.50. Student tickets remain unchanged at NT$0.50 a ride.

- Taxi fares up from NT$6 to NT$8 for the first kilometer and from NT$2.50 to NT$3 for each half kilometer thereafter.

- Airline flights from Taipei to Kaohsiung rose to NT$647 one way.

- Train fares from Taipei to Kaohsiung rose to NT$109.50 for ordinary service and to NT$44 1 for the best express.

- Propane went up from a range of NT$7.5 - NT$9.5 per kilogram to NT$13.5-NT$15.5, depending on transportation.

- Cigarettes rose proportionately, with the most expensive brands going up the most. A package of Presidents rose from NT$12 to NT$18. The cheapest brand, popular in the countryside, was not raised at all.

- Liquor followed the same rule as cigarettes. The best shaohsing wine was raised from NT$65 to NT$100 a bottle and ordinary shaohsing from NT$42 to NT$65. Rice wine was up from NT$15 to only NT$18. Beer went from NT$18 to NT$24.

- Flour was priced at from NT$181.5 to NT$190.5 per 22-kilogram sack depending on quality.

- Water was up from NT$1.9 to NT$3 per kiloliter but on a sliding scale and depending on the consumption quota set for the consumer.

Government pay was raised by 10 percent but this meant only NT$100 to NT$400 for the average employee. The increase is figured on the base pay, which makes up only about half of compensation. The rest comes from various al­lowances.

Bank interest rates were raised again. Savings held for a year earn 15 percent. A secured loan for the same period costs 17 percent.

The increases were announced in the waning days of the Chinese New Year celebration. As business resumed after the holidays, merchants reported people were buying necessities but passing up more expensive goods. The price of rice rose sharply in Taipei, largely because of a shortage induced by lack of deliveries over the holidays and a shortage of transportation. The government moved to increase the supply and prices tapered off, although at a level about three times higher than in early 1973.

Business and industrial leaders joined in sup­ porting the government's stabilization effort. Nearly 300 of them joined with government of­ficials in a discussion meeting sponsored by the Ministries of Interior, Finance and Economic Af­fairs, the Central Bank, Economic Planning Council and Social Work Department of the Kuomintang Central Committee. Resolutions were passed to:

- Refer proposals to government agencies for study and possible implementation.

- Give industrial and commercial support to increased production, reasonable prices and co­operation with the government.

- Back economic growth as the best way of stabilizing prices.

Participants urged reduction of tariffs and taxes, increased imports, expansion of exports, improvement of quality and various measures to promote economic growth and abet stabilization. Government officials said more commercial of­ficials speaking French, Spanish and English will be sent overseas to serve the needs of trade. Gov­ernment is also planning to encourage economic diplomacy through private investment in overseas plants. Minister of Economic Affairs Y.S. Sun urged business and industry to avoid nonproduc­tive consumption of petroleum and power. He said that 500,000 metric tons of coal will be im­ported this year to meet industrial needs. Reduc­tion of production costs and profits may be necessary to hold world markets and maintain economic growth at a reasonable rate, he said. Minister Sun expressed concern about the eco­nomic situation of small and medium industries and said government will cooperate in assuring their survival.

Seven associations of industrialists and busi­nessmen expressed backing for the stabilization program. "We regard the plan as wise," they said, "and promise to refrain from hoarding." The organizations were the National Federation of Industry, National Federation of Commerce, Chi­nese National Federation of Industry and Com­merce, Taiwan Federation of Industry, Taiwan Federation of Commerce, Taiwan Association of Industry and Taipei Chamber of Commerce.

Stabilization complaints came from taxi drivers, who said the fare increase was not enough to make up for the increased cost of gasoline. Taxis were also suffering from the public's decision to cut down on cab riding and crowd aboard buses. Sales of big cars were off. Both Ford Lio Ho and Yue Loong, makers of light cars, expressed con­fidence their sales will rise despite higher gasoline prices. Some government officials deadheaded their limousines in favor of light locally made ears. The Chu Kuang Express, the deluxe train between Taipei and Kaohsiung, had seats to spare. It had been the first to be sold out before the 70 percent increase in the fare. Domestic airline business was off by 10 percent.

Press comment was generally favorable to the government's stabilization efforts. This editorial expression summarized the reaction:

- Government announcement of across-the­ board price increases was made reluctantly and with deep regret. The government had held the line as long as it could. More than US$71 million was spent subsidizing soybean and wheat purchases. Such largesse could no longer be con­tinued.

- Increases are steep, ranging up to 135 percent for some industrial power rates. Their palatability is greatly enhanced by government's ef­forts to scale them so that those who can least afford to pay are hurt very little. For example, the household power rate will remain unchanged for those using less than 100 kilowatt hours of electricity monthly. Above that, the rate will rise progressively. People who want the luxury of air-conditioning will have to pay for it. That is only fair.

- Those who drive cars will be paying 85 percent more for gasoline. Motorcycle users will be hurt less because of their moderate fuel consumption. Public transportation fare increases have been scaled so as to hit hardest those who use deluxe trains and buses. City bus riders will have to pay two-thirds more. That seems like a lot. But it must be kept in mind that the city bus fare has been fixed at a low NT$1.50 for several years.

- In explaining the government's position, Premier Chiang Ching-kuo said the objective is maximum price stability in the face of rapidly rising import costs. There is hope, he said, that the increases will be "once and for all" - in other words, no further hikes will be required.

- Premier Chiang said the government will continue to promote exports and trade growth, although this may mean an unfavorable balance this year. Within 1974, foreign trade may exceed the gross national product. We must trade to live.

- No one is going to stand up and applaud price increases, no matter who sanctions them. Yet people and business understand the necessity for the government boosts and can be expected to try to live with them. In the long run, the result may be stability, as the Premier hopes, but in the short run the effect is going to be infla­tionary.

- Inflation eats on inflation. Every increase leads to another. No tiniest segment of the econo­my exists in price isolation. Taiwan had serious inflation last year despite all efforts of the gov­ernment to keep the price lid in place. Now that the government has had to lift the lid, the most important problems will involve the attitude of the industrial and business community and the restraint of the people in demanding wage increases.

- The psychological compulsion is toward further increases in the prices of daily commodi­ties. We are already paying twice as much for rice as a year ago, although this is a commodity over which the government has fairly tight control.

- If the round of government price increases is considered an invitation to industry and busi­ness to do likewise, and if the public rushes into the marketplace to buy everything in sight, in­flation is going to get worse fast. Asking for restraint does not assure it will be forthcoming.

- Government has increased pay 10 percent. Private employers cannot escape doing likewise. The amount is small enough. Ten percent will absorb only a fraction of last year's inflation, to say nothing of what is to come in the first months of this year.

- Pay increases will come slowly. They always do. Yet the process is inexorable. As wages rise, so will the price of our goods to be sold abroad as well as at home. Higher costs of imported raw materials will add further to selling price. If our international competitive position is not af­fected, it will be only because the whole world is caught up in the inflationary spiral.

- Government is wise in leaving as much as possible to the normal workings of the economy. The temptation to rush into the marketplace with tight controls must have been very great. We are better off without price fixing. Whatever level the economy finds, the emphasis will remain on productivity, and that is the best way to serve all the people, rich and poor, and eventually level off prices.

- All things considered, Taiwan is well off. We can contain and live with inflation and retain a maximum degree of economic freedom. That was proved last year. Government still retains the power to do whatever is required to help the people keep body and soul together. We need wise guidance and widespread public cooperation to avoid reducing our economy and way of life to the lowest common denominator.

- One-year savings interest has been increased to 15 percent. Bank loans now cost 17 percent ­ for those who can get them. The government hopes to encourage savings, tighten credit and sop up some of the money supply, thus cooling off inflation. Those who advocate economic expan­sionism do not like to see money so dear. Our rates are being raised, in fact, at a time when those in the United States are starting down.

- Inflation should not be confused with Tai­wan's need to keep building. Our housing need is undeniable. The government has rightly relaxed the high-rise building ban for socially desirable structures. The worse thing that could happen would be a freeze on credit and a tightening of money to the point of stultifying economic growth.

- Developed countries may be able to talk of zero economic growth. Their people are much better off than ours. Taiwan has a long way to go to developed status. The infrastructure must be expanded. People must be housed as well as fed, clothed, cared for and educated. We can live with inflation but not with stagnation.

As for proposals of daylight savings time to conserve electricity, there were reminders that the United States was having doubts about turning the clocks forward an hour. "Daylight savings might be tried as a summer experiment," said one commentary. "If successful, we could renew it annually or even try a year-round extension. The trouble with winter as a time for daylight savings is that there isn't enough daylight to save."

Price indices of the Directorate General of Budgets, Accounts and Statistics of the Executive Yuan showed 1973 increases of 40.3 percent at the wholesale level and 27.3 percent at the urban retail level. These were formidable figures. New Year's buying brought further increases in January and stabilization necessitated more advances in February. Yet the outlook was generally favorable. Economists forecast economic growth of 7 to 8 percent in 1974. A few expressed belief that growth might exceed 10 percent if oil shipments from the Middle East returned to normal early in the year. Per capita income will continue to climb; higher wages and salaries will prevent any interruption in the rising standard of living.

The Republic of China was compelled to take its place in the inflationary world. There was no choice. But the tools of a hard-working people and an efficient, thrifty government are still in free Chinese hands. With the rest of the world in the same boat, there was reason to hope that Taiwan prices would remain competitive and that Taiwan goods would still be in strong demand.

People of the Republic of China had more than the incentive of a good life. Taiwan con­tinues to be the alternative to the subsistence level existence of the mainland. China's smallest province swept past the vast mainland in foreign trade in 1972 and widened the gap in 1973. If the people of Taiwan were paying more for goods, there at least was something to buy. Inflation or the lack of it is meaningless on a mainland with few goods for domestic purchase. By moving farther ahead of the Communists economically, the Republic of China was implementing President Chiang Kai-shek's strategy of mainland recovery by means of measures which are dominantly non-military. Sun Yat-sen's Principles of the People were proving their superiority over Mao Tse-tung's "thought" in economics as well as politics. In­flation in the Republic of China was a challenge which would be overcome.