The Republic of China entered upon a new stage of economic development when the formal U.S. aid program came to an end June 30.
The termination of aid first was announced in May, 1964, by the U.S. State Department and attributed to the rapid economic growth of the Republic of China.
Effective use of U.S. aid by the Republic of China has been praised by many American officials. Only recently, David E. Bell, administrator of the Agency for International Development, cited the Republic of China as an example of the outstanding success of the U.S. aid program.
He said the strong and sensible efforts of the Chinese, plus the aid from the United States, have brought about remarkable progress in 15 years.
"Today," he said, "the Republic of China can go ahead on her own ... The ability to achieve continuing economic and social progress has been established. The crucial change is that now in Taiwan there is enough competence, enough trained leadership, enough of a capital base."
The Republic of China began to receive U.S. economic aid in 1948 when the Chinese government was still on the mainland. After the fall of the mainland to the Communists in 1949, the U.S. suspended its' aid. In the middle of 1950, shortly after the Korean War broke out, the aid program was restored, first in the form of grants to help the Chinese government in Taiwan build an economy to support military defense against Communist aggression.
In that early period aid included industrial equipment, consumer goods, and technical services. After 1957, part of the aid was granted in the form of loans, at first on extremely easy terms. Those granted from 1958 to 1961 were repayable in local currency without interest over a 'period of 40 years. In 1962 loans became repayable in U.S. dollars with a service charge of 0.75 per cent. In 1963, the repayment period was cut to 20 years with annual interest of 35 per cent.
According to the Council for International Economic Cooperation and Development, formerly the Council for U.S. Aid, the Chinese government received US$1.4 billion in U.S. economic aid, including surplus farm commodities under a program that began in 1957.
The United States will continue military assistance to the Republic of China. Farm surpluses also will be supplied as well as economic aid already committed. The Chinese and American governments have jointly established a fund of about US$250 million to be used on economic and social development projects in the next five years. Funds will come from the repayment of loans made under the aid programs and proceeds from the sale of farm surpluses.
Most U.S. aid money was spent on expansion of power production and distribution, industrial and mining reconstruction projects, communications, transportation, and agriculture. Other programs were in education, public health, and public administration.
Reviewing the U.S. aid, the Chinese government recently said a vital contribution was the balancing of international payments. Until 1963 and 1964, the Republic of China had a substantial trade deficit, of which about 80 per cent was met by aid. Of Taiwan imports, about 36 per cent were financed with aid funds.
The Chinese government also said U.S. aid helped stabilize the currency. Sale of U.S.-supplied commodities sopped up excess money and kept inflation under control. In addition, U S. aid supplied the foreign exchange for imported industrial equipment and raw materials.
U.S. technical assistance sent nearly 3,000 Chinese engineers, technicians', and other personnel abroad for professional training and brought many American specialists and experts to Taiwan.
The Chinese government has adopted measures to cope with the U.S. aid termination. Premier C. K. Yen said the government is encouraging savings, domestic and foreign investment, and expansion of trade to sustain economic growth.
He said the government will place priority emphasis on financial stability so as to arrest inflation and stabilize the monetary value.
In the development of industries, he said, the government will balance private and government enterprises. It will encourage private initiative, provide the guidance of national planning, and not neglect agricultural development.
Premier Yen said that with the sound foundation already established, Taiwan will have no difficulty continuing its economic growth. He said that with the hard-working and intelligent Chinese people as "our most valuable assets", the goal now is to diversify "our industrial products and our international trade to as many countries as possible.
Shanghai Bank Reopens
The Shanghai Commercial and Savings Bank, Ltd., one of the oldest banks in China with a history of 50 years, resumed operations in Taipei June 16.
This is the fourth bank to open for business on this island this year. The first three are branches of foreign banks: the First National City Bank of New York, the Bank of America of San Francisco, and the Bangkok Bank of Thailand.
The openings reflect increasing foreign trade, accelerated economic development, and promotion of foreign and domestic investment.
With a capitalization of NT$160 million (US$4 million), the Shanghai Commercial and Savings Bank is authorized to handle all banking business, including foreign exchange.
The bank was established at Shanghai in 1915. It was the first Chinese commercial bank authorized to handle foreign exchange.
Taiwan has about a dozen banks. The Central Bank of China is the banks' bank - responsible for regulating the money market, management of foreign exchange, issuance of currency and the fiscal activities of the government.
The local currency, New Taiwan dollars, is issued by the Bank of Taiwan, which is a provincial bank. BOT serves as agent for the Central Bank in issuing the currency, though assets and liabilities are assumed by the Central Bank.
The Bank of Taiwan is the largest commercial bank and has 30 branches throughout the island. It has a third of total deposits and makes "bout a third of the loans. With a huge network of foreign correspondents, BOT is also the largest appointed foreign exchange bank.
There are such other government banks as the Bank of China, the Central Trust of China, the Postal Remittances and Savings Bank, the Bank of Communications, and the Land Bank of Taiwan.
The Bank of China is a foreign exchange bank. It has branch offices in New York, Tokyo, Sydney, Bangkok, and Saigon. The Central Trust of China acts as a government trading agency. It has branch offices in New York, Los Angeles, Tokyo, Saigon, Sydney, Frankfurt, Kuala Lumpur, and other major cities.
The Postal Remittances and Savings Bank accepts savings deposits at post offices. It also handles domestic monetary transfers. It is not allowed to extend loans.
The Bank of Communications specializes in financing for industry, including mining and transportation. The Land Bank of Taiwan provides long-term credit to farmers and fishermen. The Cooperative Bank of Taiwan provides working capital for farmers. The Land Bank specializes in mortgages.
There are 295 Credit Departments of the Farmers' Associations to provide the base for agricultural credit. They receive deposits from and extend loans to members of Farmers' Associations, and also serve as agents for the Land Bank, the Cooperative Bank, and government agencies in the extension of farm credit.
There are 82 Credit Cooperatives providing commercial banking for their members. Eight Mutual Savings and Loan Associations with 85 branches collect savings and extend loans.
With financial support from international banking institutions, there is a China Development Corporation to provide long-term credit for private industries. Completely private commercial banks include the Overseas Chinese Commercial Banking Corporation, the First Commercial Bank, the Hua Nan Commercial Bank, and the Chang Hwa Commercial Bank.
Four foreign banks are operating: First National City Bank of New York, Bank of America of San Francisco, Bangkok Bank of Thailand, and Kangyo Bank of Tokyo.
Textile Blend
Taiwan's blended textile exports should have a bright future, according to the Foreign Exchange and Trade Commission.
FETC points out that although blended textiles earned only US$2 million in 1964, accounting for about 3 per cent of the year's total textile exports, the value was four times higher than that of 1963. Blended manufactures with less than 50 per cent of cotton content are not covered by the cotton textile quotas imposed by the United States and Canada.
FETC reported that in 1963 and 1964, Taiwan textile exports exceeded imports. In 1963, exports totaled US$44 million, surpassing imports by 9 per cent. The corresponding figures in 1964 were US$61 million and 1.5 per cent.
Cotton accounted for 54 per cent of imports and 60 per cent of exports in 1964. Next came manmade fibers, accounting for 26 per cent of imports and 24 per cent of exports. Woolen manufactures accounted for 19 per cent of imports and 9 per cent of exports. Linen products accounted for 1 per cent of imports and 4 per cent of exports. Blended manufactures, mostly manmade fibers and cotton, made up 3 per cent of exports.
FETC also noted these developments:
—Both domestic and foreign sales of cotton have reached the saturation point. Cotton imports and exports increased in 1964, but the rate of growth was much slower than for other fiber products. Cotton textile manufactures are more sophisticated.
—Imports and exports of manmade fibers are increasing rapidly. Imports of nylon, dacron and orlon products have stimulated local businessmen to establish their own plants. Such new fiber products as polypropylene have appeared on the local market.
—There may be a larger domestic market for woolen products but there is no assured future for exports. Last year's rise in woolen exports was largely in category of yarns.
—Linen is entirely a Taiwan product but has gradually lost its importance.
—Blended manufactures have a bright future, especially those with less than 50 per cent of cotton content. Products are being diversified.
Banana Trade Meeting
A resolution passed by the second conference of the Sino-Japanese Joint Banana Trade Council in Taipei in June called for increased shipment of bananas to Japan.
The conference was attended by more than 50 delegates. The Japanese side was led by K. Higuchi, deputy speaker of the Japanese Diet (parliament), and the Chinese side by Liu Ching-jao, chairman of the local fruit supply association.
Conference accepted the Chinese government decision that for July-September, Taiwan will supply 1,500,000 baskets of bananas "as previously scheduled, but for the year beginning October 1, they seek more than the 7,500,000 baskets of 1964-65.
Taiwan has increased banana exports to Japan rapidly in recent years, from 2,200, 000 baskets in 1963-64 to 7,500,000 baskets in 1964-65. At US$8 per basket, the 1964-65 supply will earn US$60 million in foreign exchange, close to the record US$61 million registered by textiles, Taiwan's second largest export item, in 1964.
Under the sponsorship of the Japanese International Trade and Industry Ministry and the Agriculture and Forestry Ministry, a Japan Banana Importers Association was established in Tokyo in June. Although the association was required by Japanese law, it lacked the support of most Japanese banana dealers represented on the Sino-Japanese Joint Banana Trade Council.
K. Higuchi, Japan's chief delegate to the second council meeting in Taipei, said the organization of the Japan Banana Importers Association would have no effect on the Japanese import of bananas from Taiwan. He said the organization will only serve as a coordinator among Japanese banana traders.
The Foreign Exchange and Trade Commission, highest trade authority of the Republic of China, has ruled that only members of the Sino-Japanese Joint Banana Trade Council are eligible to quote prices for the import of bananas from Taiwan. For the July-September quota of 1,500,000 baskets, those Japanese companies that bought more than 5,000 baskets in the period from April, 1963, to June, 1965, may buy 70 per cent of the total. New and small dealers may buy the remaining 30 per cent.
As Taiwan bananas are supplied at reasonable price:; and are of high quality, there has been strong competition among Japanese importers for the privilege of purchase.
Through diplomatic channels, the Japanese government is negotiating with FETC for the purchase of all bananas on a government-to-government basis. FETC has accepted the proposal in principle.
New Tin Plate Plant
Taiwan will gradually reduce its import of tin plate from now on. A large tin plate plant of the Taiwan Machinery Manufacturing Corporation, a state enterprise, has been completed.
The plant, with equipment and facilities largely bought from the Yawata Iron and Steel Company of Japan, will have annual capacity of 17,500 tons. Imports arc running at a level of 20,000 tons a year. Other local production is small.
The Taiwan Machinery Manufacturing Corporation has machine, foundry, and steel products plants. It also has a shipyard. Products include chemical processing and sugar machinery, diesel engines, steam generating equipment, transportation supplies, fluid turbo machinery, mechanical hoisting and conveying equipment, and farm implements.
The company also is expanding its facilities to produce 1,400 horsepower diesel engines, instead of the present 250 hp., and is buying shipyard facilities to build 1,000-ton trawlers instead of the present 300 tons.
The company has signed a number of technical cooperation agreements with these foreign companies:
—Mitsubishi Nippon Heavy Industries Co. of Japan for water tube boilers.
—Yawata Iron and Steel Co. of Japan for tin plate.
—Shin Mitsubishi Heavy Industries Co. of Japan for diesel engines.
—Buckau R. Wolf A.G. of Germany for sugar machinery.
—Niigata Engineering Co. of Japan for steel fishing vessels and cargo vessels.
—Dorr-Oliver Inc. of Connecticut, U.S.A., for filters, clarifiers, thickeners, and other sugar processing machinery.
—General American Transportation of the United States for floating and lifter roofs and gasholders.