Because of the political circumstances and international significance attached to Taiwan, its economic viability and development have been matters of world interest.
This island province of China, about the size of New Zealand's Canterbury province, with a population of 13 million and located 85 miles from the Chinese mainland, is the principal territory of China not controlled by the Communists in Peiping.
For many centuries Taiwan was an integral part of the Chinese nation. But in 1895, after a short war, the island was ceded to Japan and became a part of the Japanese empire for 50 years. The restoration of Taiwan to China at the end of World War II is one of those timely historical events that often decide the fate of nations. If Taiwan had continued under foreign control, the Chinese government would have had no native soil to which to move when the mainland fell into Communist hands.
The people of Taiwan are Chinese. They are not a race of people apart, but in blood and bone and breath are a part of Chinese stock. If the 200,000 aborigines of Taiwan's mountains are not a part of this racial stock, they are a minority people within the Chinese nation, just as the Miao tribe of Southwest China and the Tibetans and Mongolians are also component parts of the Chinese nation. The language, the customs, the institutions, and the politics of Taiwan are an indigenous and integral part of China's race, culture, and history.
The war of 1894-95 which doomed Taiwan to 50 years of foreign control had in itself a direct and vital impact on the political history of China from that time to this day. For it was at that time that, indignant and challenged by the humiliating course of the war against a much smaller neighboring country, a young Chinese patriot, Dr. Sun Yat-sen, organized a political party which inspired the revolution overthrowing the mammoth Manchu monarchy and establishing the first republic in Asia in 1911. The activities of this political party, known today as the Kuomintang or Nationalist Party, continued in Taiwan through the 50 years of foreign rule. It is little wonder that fate has fashioned Taiwan to be the fortress of freedom for China and the free world.
When Taiwan was restored to China in 1945, it had suffered great physical and economic damage from World War II. Devastating bombing by Allied forces had caused extensive destruction. The economy was disrupted. Production of rice had sunk to 45 per cent of its peak production of 1938. Electric power production had gone down to 16 per cent of its former peak capacity, and sugar, the largest industry, had fallen to a mere 8 per cent of its 1940 high.
Nearly Bankrupt
With the fall of the mainland into Communist hands, Taiwan was faced with the constant threat of Communist invasion. In addition to this overpowering danger and the pressing internal needs of postwar rehabilitation, the island had to combat problems of several other kinds. These included difficulties imposed by the influx of two million people from the mainland and a high birth rate, both of which combined to give Taiwan a population density of 900 per square mile. Furthermore, the arable land area was sharply limited, as two-thirds of the island's 13,000 square miles is composed of steep, rugged foothills and mountain ranges. There was also the problem of a conservative land-bound social order and the dearth of capital investment, plus the necessary expense of armed forces totaling 600,000 men.
In 1950, when war broke out in Korea, Taiwan was nearly bankrupt. The war-burdened economy could not finance needed repairs of the island's productive facilities that had been damaged during World War II. Neither could it afford imports of necessary foodstuffs and raw materials. Farm productivity was extremely low; industrial output was almost non-existent. Inflation was incipient, unemployment was high, and standards were low.
The Republic of China faced the twin tasks of quickly improving its defensive posture and raising its inadequate living standards. Few observers gave the country much chance of simultaneously achieving both objectives.
Yet Taiwan has been lifted from a state of partial paralysis, social dislocation, and economic exhaustion into an orderly productive economy. Free China is not only growing in military security and increasingly dedicating itself to preserving its freedom from the Communist tyranny on the mainland but is now eager to attain new economic and social goals and, furthermore, to share its experience and new wealth with other nations of the world.
Free China's rapid economic and social advancement over the past 15 years has not made as many world headlines as the Chinese Communist menace. But in June-July of this year the world was somewhat surprised to learn that the Republic of China had "graduated" from the status of a dependent economy, that U.S. economic aid could be terminated, and that China's future capital needs could be met from its own savings, supplemented by ordinary credit sources.
GNP Doubled
Today our gross national product is more than double the figure of 15 years ago and our per capita income has risen 100 per cent to US$150 a year, the second highest in Asia. Our industrial production also has more than doubled; our power output exceeds one million kilowatts; our manufactured goods account for half of our exports. Our gross investment from domestic sources has risen to 70 per cent, with more than 60 per cent of the productive capacity in private hands. Almost 87 per cent of our farmers own their own land. The overall food production has risen 50 per cent, and the average per capita food consumption has risen 8 per cent in the last 10 years. We have shown how a low income area can move forward in freedom and, in the process, develop the needed momentum for sustained growth.
U.S. aid has been one of several important factors that have made possible the remarkable economic achievements of free China. The agreement providing for U.S. economic assistance to China was signed in Nanking in 1948, but the Communists took over the mainland the following year and American aid was then suspended until the outbreak of war in Korea. Over this aggregate period, the United States has given or loaned to China more than US$1,460,000,000, constituting roughly one-third of the capital investment for economic and social development. This is apart from U.S. military assistance of another US$2 billion.
The second factor in our economic development has been the spirit and purpose with which both the Chinese people and their government have applied themselves to assure the material advancement of Taiwan and thus make the island province both the spring-board for mainland counterattack and a model for national development after mainland recovery. The thinking, activity, and energy of the Chinese people and their government are all geared to this basic ultimate objective.
Good Government
The third factor has been the wisdom of sound and enlightened government policy and planning. The Constitution of the Republic of China stipulates that the "national economy shall be based on the Principle of the People's Livelihood and shall seek to effect equalization of land ownership and restriction of private capital in order of attain a well-balanced sufficiency in national wealth and people's livelihood". In pursuit of these objectives the government gave priority to the development of electric power and transportation. It emphasized agriculture and industry equally so economic growth could be balanced. It stresses the social aspect to match the progress of material growth. In this connection, it carried out programs to eradicate epidemic diseases and to institute universal elementary education. The government encourage initial development of industries employing labor intensive production methods and requiring relatively small amounts of capital. The experience and profit gained in the operation of these industries provided a solid foundation for the establishment of more sophisticated industries.
The fourth and perhaps most significant factor in Taiwan's economic development is the land reform program which, more than anything else, has laid the foundation for Taiwan reconstruction.
As a national policy, land reform had begun on the mainland when regional programs in Szechuan province and elsewhere quickly proved successful and satisfying. But the Communist takeover of the mainland in 1949 ended the democratic land reform programs instituted there.
Farm Incentive
In Taiwan province, however, the land reform program was carried out smoothly and to a successful conclusion, providing the needed economic incentive and social stimulation required for modernizing the economy. Land reform not only achieved social justice and improvement in living standards for the masses but also provided an immediate incentive for more intensive cultivation of major crops. There has been little increase of arable land in Taiwan. Intensive farming and greater land productivity, therefore, are the only means by which the available land can yield larger crops. Only a quarter of Taiwan is arable, but there was room for new farming techniques—seed improvement, crop rotation, multi-cropping, inter-cropping, improved fertilizers, pest and plant disease control, improvement of irrigation and drain age. These were followed by farm mechanization with locally produced power tillers replacing draught cattle. The unit area yields of major crops increased by from 10 to 100 per cent. Rice production for example, was 2.2 million metric tons in 1964; an increase of about 100 per cent over 1949 from virtually the same acreage. Diversification of crops and development of rural sidelines such as mushrooms, soybeans, and cotton have become important new farm products. Today a new dairy industry is starting and we are learning from New Zealand to grow grass on our slopelands for sheep and cattle raising.
So eminent has been the success of land reform in Taiwan that it has become world renowned, setting a pattern for similar reforms in the Philippines and Latin America, where teams of technical experts from Taiwan have been invited to give advice.
Land reform in Taiwan was inaugurated in 1949 and divided into three stages. The first was to reduce the land rental, generally about 50 per cent, to a uniform rate of 37.5 per cent of the annual main crop. This meant an immediate increase in the earnings of the tenant farmer. Landlords were required in this initial stage to grant six-year leases, providing tenants automatic renewal rights and declaring advance rent payments and deposits illegal. These provisions gave the tenant farmer both security of land tenure and relief from oppressive financial obligations. As rent income declined, tenant farmers took advantage of the landlords' sudden willingness to sell and so acquired the property they were farming.
The second stage of the land reform program was the sale of cultivated public lands to tenants on a 10-year installment plan. Over 120,000 tenant farmers working on government-owned acreage bought 151,000 acres.
The third step was the redistribution of privately rented land by limiting holdings of landlords to 7.2 acres of paddy land or 14 acres of dry land. Landlords were required to sell the land to the government at fair prices. Some 340,000 acres were acquired in this way and later sold to 195,000 tenant families. By 1963 all tenant farmers had paid their last installments.
Boost for Industry
More than 380,000 farm; families thus have purchased land on long-term installment payments. The value of the land taken over by the government was figured at two and a half times the value of the average annual crop, plus the value of usufruct. Landlords received their payments partly in 4 per cent government bonds, redeemable in 20 semiannual installments, and partly in the stock of government-owned corporations. Some landlords accumulated enough funds from bond repayments and interest to invest in additional enterprises. This has resulted in transfer of these government corporations to diffused private ownership and in creation of a new group of entrepreneurs. A number of industries formerly financed by the Japanese came into government hands at the end of World War II. They included sugar refineries, cement and fertilizer plants, paper mills, an aluminum smelter, and electric power stations. Ownership of four large state enterprises was transferred to former landlords as early as 1954-55 as partial compensation under the land redistribution program.
Four-Year Plans
The economic and social justice that accompanied the land reform program was a powerful impetus to industry. Economic thinking was stimulated into a series of four-year plans beginning in 1953.
The first Four-Year Economic Development Plan of 1953-56 gave emphasis to the production of more consumer goods to satisfy domestic needs and more industrial products from indigenous raw materials, such as cement, window glass, bagasse board, DDT, metal machinery, electric appliances, and fluorescent lamps. With an abundant supply of U.S. aid cotton, wheat, and soybeans, new plants were set up to produce textiles, flour, and edible oil. At the same time long-range projects of hydroelectric power development and irrigation were started.
In the second four-year plan (1957-60) an effort was made to broaden the industrial base through diversification of production so as to let export traders earn the foreign exchange needed to import more raw materials. New Industries that grew from this program were PVC, rayon, dried yeast, monosodium glutamate, and urea made chiefly from domestic raw materials. The growth of private enterprises was accelerated. From 39.5 per cent in 1952, private enterprises rose to 66.8 per cent of all industrial concerns in 1963. Private industrial concerns were floating substantial bond issues. Taiwan was demonstrating that a low-income, newly developing area can create a money or a capital market. The expansion of industry was accompanied by multipurpose water projects and improvement of transportation. Electric power production increased fourfold to 1 million kilowatts in 10 years. By 1967, the general capacity is expected to be 1,770,000 kilowatts.
The third plan (1961-64) had as its main objective the stepping up of the rate of national income growth through private and public investment programs with a view to preparing for the tapering off of United States aid. Special efforts were made to attract American and overseas Chinese private capital. Already 119 factories in Taiwan are owned by overseas Chinese. Foreign investments total nearly US$200 million.
964 Triumphs
Taiwan's economic activities in 1964 showed this to be the island's greatest year to date:
—The rate of economic growth was 10.2 per cent (over the average of 7.4 per cent of preceding years).
—Agricultural production was up 8.9 per cent, industrial production up 20.3 per cent, and trade value 20 per cent.
—Although the money supply was augmented by 32 per cent, commodity prices rose by only 2.5 per cent.
—The population of Taiwan has increased 45.2 per cent in the past 10 years. But in this period the gross national product reached 329.8 per cent (approximately £750 million or US$1,875 million) and per capita income 201.7 per cent (£60 or US$150).
—Of the net domestic product, 33 per cent was industrial and 25.5 per cent agricultural, as contrasted with 23 per cent industrial and 35 per cent agricultural in 1953.
This dramatic industrial expansion is primarily responsible for the great increase in our international trade. In 1952 our total trade was US$226 million; in 1964 it was US$875 million. The unfavorable balance of trade in previous years was reversed in 1963 with an export surplus of US$20.7 million. In 1964 the favorable balance was increased to US$52 million. Of our export products, 11 accounted for 83 per cent of the total 1964 export value. Sugar headed the list with US$135 million, textiles US$61 million, timber products US$41 million, bananas US$33 million, ores and machinery US$27 million, chemicals US$23 million, cement and other building materials US$17 million, canned mushrooms US$16 million, canned pineapples US$13 million, tea US$8 million, and citronella oil US$5 million.
The 1964 export figures show that the economy of Taiwan is no longer predominantly agricultural. Processed agricultural products were 16 per cent of the export total. Agricultural products totaled 40 per cent and industrial products 40 percent. On the import side, our departure from an agricultural economy was indicated by the fact that capital equipment was 23 per cent of the total, agricultural and industrial raw materials 54 per cent, and consumer goods 22 per cent.
Widespread Trade
The Republic of China is doing business with more than 100 countries in the free world. Our major partners are the United States, Japan, Vietnam, Hongkong, West Germany, Malaysia, Thailand, Korea, the Philippines, and the Ryukyus. Besides trade, we also have a foreign aid program extended to 50 countries with which we share our experience and our profits. More than 2,600 persons from foreign countries have come to Taiwan for technical training. We have sent out 24 technical missions consisting of 243 specialists to help in Africa, the Middle East, Asia, and Latin America. Most of the foreign technicians coming to Taiwan have received training in agriculture and natural resources development, education, industrial development, or health and sanitation. The Chinese technical teams invited overseas have specialized in the production of rice and other crops and in the promotion of farmers' organizations, mostly in Africa. In Vietnam, Chinese agricultural teams have worked since 1959 to help in virtually every phase of agricultural development. The Philippines have invited our land reform teams, Malaysia our sugar teams, Libya our doctors and nurses. Other technical teams have been invited to Ethiopia and to Latin America.
This year we have launched a 10-Year Economic Development Plan which aims at further development of private enterprises and stresses proper distribution of wealth and social welfare. The emphasis on industrial development, particularly in heavy industry, is to modernize the economic structure in the coming decade. We are departing from past dependence on agriculture as the mainstay of the economy. Only a change of economic pattern can boost the per capita income to a level comparable to those of developed countries and create adequate employment opportunities. But utilization of agricultural resources and raising of unit yield will continue to be stressed so that the per capita income in agriculture may keep pace with the industrial sector.
We also have a 10-Year Food Production Plan begun this year. If all goes well, Taiwan win produce nearly 3 million metric tons of rice by 1974, when we expect our population to reach 15 million. But we still will have one-third of a million metric tons of rice available for export. The government stands ready to help farmers cut production costs, dig wells, and use the land more economically. Stable food prices are imperative for protecting the consumers arid for meeting overall economic requirements.
The government is pledged to continue the development and protection of private enterprises, to guard the right to a reasonable profit, and to respect the freedom of private management. But private businesses will not be allowed to dictate the nation's interest. Nor will the government allow a few persons or groups to dominate economy. The government will prevent over-concentration of wealth and see that personal profits are in keeping with contributions. Our intention is to become a "welfare state", perhaps second only to New Zealand. Enterprises that are of national interest and that lend themselves to monopolization will be operated by the government. The rest will be in the hands of private owners. More public enterprises may be transferred to private ownership during the 10-year period.
For improvement of social well-being, the government will rely on taxation to assure a large contribution from the wealthy. The money will be spent on education, public works, public health, rural and metropolitan reconstruction, and cultural promotion. The goal is the improvement of the people's standard of living as well as the redistribution of wealth.
The government will seek further foreign investment to speed industrial growth. Enterprises operated by foreigners will be given legal protection and equal treatment. Chinese use of foreign technical assistance will be encouraged. An advanced level of industrialization will be sought, including plants to make steel, heavy machinery, electronics equipment, and sophisticated chemicals. Stress will be placed on renovation and expansion of plants and equipment, reduction in the number of productive units, improvement of management, and establishment of new industries. Scientific research will be strengthened and compulsory education will be lengthened.
A Better Life
We aim to maintain our financial stability and our defense establishments, and these, with our desire for a higher standard of living and greater economic growth, can be accomplished together.
What does this mean to the people of Taiwan, to the man on the street or in the paddy field? First of all, the rights and interests of the working people are being protected and their welfare promoted. We hope that the per capita income by 1974 will be equivalent to US$300 or double the present rate. We have a minimum wage law find labor unions which provide for collective contracts with employers, There are welfare societies with US$2.5 million spent annually for labor welfare. Projects include dispensaries, kindergartens, nurseries, restaurants, bathrooms, and recreation centers. Almost a million workers and their dependents are benefited.
Closely related are social security projects of insurance, relief, and social welfare for all of free China. Insurance coverage is provided for industrial workers, fishermen, sugar cane farmers, and government employees. Labor insurance was initiated in 1950, soon after the implementation of the land reform program. As of June, 1964, more than 360,000 persons were insured. Payments are made for sickness, injury, maternity, disability, old age, and death. Payments of US$3.75 million have been made in more than 120,000 cases. Women's welfare is handled by associations providing recreational, vocational, and home economics training, legal counseling, mediation in family disputes, matchmaking, information on maternity and child welfare, and assistance to the distressed and needy.
Our people are happy. We work with purpose and passion. We are proving to our satisfaction, and we hope to the world as well, that in freedom the Chinese individual is capable of fine performance. We are still learning; we shall always try our best. And what we learn and gain we wish to share with the world as we are, however modestly, doing now. Given the conditions of stability and freedom, we shall perform on the mainland of China what we have achieved on our island of Taiwan.
When we return to our mainland and regain for our people the freedom they have lost, we shall put our house in good order and together with other nations of the world build a new future for all mankind.