Nineteen hundred and seventy-three, the year of the hard-working ox, was the best ever economically for the Republic of China. The gross national product rose to US$9,390 million and per capita income to US$467. The growth rate of 12.3 percent was an all-time record. Only in 1952 (12.2%) and 1964 (12.1%) did growth go over the 12 percent mark. The year just past was the fourth straight in which the real value of the GNP was advanced by more than 11 percent.
Despite inflation and the energy crisis, industry grew by 22.3 percent, paced by manufacturing at 24 percent. Construction was up 21.7 percent and public utilities 13.8 percent. Agriculture registered a gain of 2.9 percent compared with the 1.9 percent of 1972. Only mining showed up in the red as a consequence of an ailing coal industry beset by rising costs and depleted seams.
It remained for foreign trade to turn in the most smashing performance of the year and one of the most impressive in the annals of developing nations. Two-way growth was just under 50 percent with US$4,400 million in exports and US$3,800 million worth of imports for a total of US$8,200 million and a favorable balance of US$600 million. Taiwan ranked 18th in exports and 21st in imports among the nearly 150 countries of the world. With 1/47th of the Chinese mainland population and 1/264th of its area, the province of Taiwan moved farther ahead of the 27 provinces, autonomous areas and cities under Chinese Communist control. No figure for 1973 mainland trade is yet available from any reliable source. But the 1972 estimate of US$5,800 million would suggest that the 1973 two-way trade of the Peiping regime could not have exceeded US$6,500 million.
The Republic of China is still in the process of achieving rank as a developed country. But there is no longer any question of its right to be considered an industrial rather than an agricultural land. The breakdown of 1973 exports showed 85 percent were industrial products and only 15 percent were of agricultural origin. More than half of the agricultural commodities went abroad in processed form.
Textiles reached a volume of US$1,300 million to remain in first place among exports. The gain for the year was 54 percent, compared with the 60 percent for US$740 million worth of electrical machinery apparatus. Plywood was up to US$400 million, followed by metal products at US$241 million, plastics at US$240 million, fishery products at US$150 million and transportation equipment at US$98 million.
Import leaders were electrical machinery at US$600 million and machine tools at US$450 million, both with increases of 60 percent. More than 70 percent of imports were in the form of industrial raw materials. The volume of US$2,300 million showed an increase of 50 percent. Capital goods stood at US$1,300 million, 36 percent of the total and up by 55 percent.
The United States remained in first place among trading partners at a two-way figure of US$2,500 million – US$1,600 million in exports and US$900 million in imports. The favorable balance was US$900 million despite increased purchases from the United States. Thirty-eight percent of Taiwan's exports went to the United States.
Commerce with Japan was unfavorable by 1 to 2 but this was an improvement over recent years. Exports were US$700 million and imports US$1,400 million. Exports to Japan made up 12 percent of the total. Trade with the rest of Asia totaled US$1,030 million with exports of US$600 million and imports of US$430 million.
European trade was up to US$900 million - US$500 million in exports and US$400 worth of imports. Figures for Latin America and Africa were also favorable. US$50 million worth of goods was exported to Central and South America and US$40 million imported. Two-way trade with Africa was US$120 million – US$80 million in exports and US$40 million in imports.
Overseas investors gave an overwhelming vote of confidence to the Taiwan economy in 1973. Foreign and overseas Chinese investors pledged nearly US$249 million to raise the cumulative total of external capital to a shade under US$1,100 million. The increase over 1972 was US$122 million or 96.5 percent. Japanese, who were wary of Taiwan investment when their government severed relations with the Republic of China in the fall of 1972, returned with full money bags. Their investments of nearly US$34 million represented an increase of 477 percent over 1972. U.S. investment was up 79 percent to just under US$67 million. Europeans put almost US$34 million into the Taiwan economy, representing growth of 394 percent.
Investments tended to be in heavy and petrochemical industries rather than the labor-intensive manufacturing of former years. Shipbuilding also was favored. Entrepreneurs were prepared to risk millions of dollars on the Republic of China's stability and intelligent, dedicated workers. Government added to the attractive investment environment with various incentives and a favorable attitude toward protection of the investor's capital and profits.
Investors hurried to pledge their money while conditions were at their most favorable. The Legislative Yuan has enacted legislation under which the ceiling on taxable income of approved investments will be raised from 25 to 35 percent. Another stipulation of the revised law calls for payment of income tax on half of corporate shares or bonds sold after being held for a year or longer. Investors formerly paid no tax on the sale of such shares.
Another sign of economic health was continued governmental solvency despite the subsidization of number of commodities to help combat inflation. The treasury balance was favorable for calendar 973 and is expected to remain in the black through fiscal 1974. Energy aside, inflation was the most difficult problem facing the Republic of China The wholesale price index climbed 17.58 percent from November of 1972 to November of 1973. The retail price index for Taipei was up 25.45 percent and that for other cities 31.05 percent in the same period. The urban price of rice - the staple cereal of Taiwan's people - had risen 53.46 percent in a year.
Inflation is a worldwide phenomenon. Taiwan has known annual price increments in the 3 to 5 percent range during recent years. So the drastic increases came as a surprise and, in part at least, were induced by psychological factors. Most goods were plentiful. Almost all daily necessities are locally produced. The government prohibited ex port of those goods which were flowing outward so rapidly as to leave the domestic market with serious shortages. Utility rates were not increased, although the price of crude oil, from which 67 percent of Taiwan energy comes, was more than quadrupled. In January of 1974, gasoline was still selling at the same price as in January of 1973. This high level of subsidization obviously could not be continued much longer. The government was planning to ·pass on the price of the increased cost of gasoline and lubricants to users. Electric power charges to business and house holders will be raised on the basis of the greater the consumption, the higher the rate. Industry and public transport will continue to get low rates.
Inflation was pushing up the cost of infrastructure projects which can no longer be delayed. These include the development of new ports and the expansion of old ones, railroad construction and electrification, the building of a big shipyard and integrated steel mill, petrochemical development and nuclear power plants. Nearly US$932 million must be spent on energy development in the 1974-75 fiscal year. This is 81.9 percent of all the funds allocated for investment in government enterprises.
Energy saving programs were conserving about 1.1 million kilowatt hours of power daily in December. Premier Chiang Ching-kuo ordered a 25 percent cut in government consumption of electricity. Advertising illumination was banned after 9 p.m. Places of entertainment were closing at midnight instead of 2 a.m. Voltage was reduced by 3 to 5 percent. Gasoline stations reduced their operating-hours. Establishment of taxi stands was planned to curtail cruising.
Yet Taiwan measures were less stringent than those of many other countries and some of the Republic of China's neighbors, including Japan. There were several reasons for this. About 29 percent of Taiwan's power comes from hydroelectric generation. The island has natural gas and coal, although production of the latter was down again last year. Nuclear power plants are under construction. Geothermal energy resources are plentiful although still unexploited. Experiments in the harnessing of solar power are well advanced. On shore and offshore exploration provides hope that the island may yet find petroleum in important quantities.
The big question at the outset of 1974, which is the year 63 by the Republic of China's calendar, was whether the Taiwan economic miracle could be maintained under the complex conditions growing out of energy shortage and inflation. Opinions of leaders and editorial writers ranged from pessimistic to optimistic. A consensus suggested that the Republic of China would do well or better than most countries, but that the growth rates of 1973 could not be maintained.
Premier Chiang Ching-kuo said the government was confident that difficulties can be overcome. Overall planning should hold adverse effects to a minimum, he said. The nation's chief administrative officer predicted a budget surplus for fiscal 1974 despite the sharp increase in the price of petroleum. The Republic of China will be joining the ranks of developed countries before the end of this decade, he said, with the completion of infrastructure expansion now under way.
Minister of Economic Affairs Y.S. Sun said the economy would slow down this year but did not venture a guess as to how much. The inflationary trend will continue, he said, but prices will not go up as fast as in 1973. The minister said these economic measures are planned to stretch the energy supply and curb inflation:
—Control of exports and encouragement of imports to assure a stable supply of basic consumer goods and raw materials.
—Increase of rice production to 2.5 million metric tons.
—Development of heavy and petrochemical industries.
—Stepped-up oil and gas exploration.
—Conservation of energy and diversification of petroleum suppliers.
—Encouragement of foreign investment from both private and public sources.
Finance Minister K.T. Li called for belt tightening and austerity to surmount the energy crisis. He noted that electric rice cookers alone can consume the peak load power output of two large generating plants. In 1962, there were only 63,400 ice cookers; in 1972, there were 2,340,000. In he same decade, automobiles increased threefold to more than 170,000 and motorcycles multiplied 28 times to 1,150,000. Per capita consumption of textiles rose from 1.71 kilograms in 1972 to 1.41 kilograms in 1972. More than half of textiles Ire synthetics derived from the petrochemical industry.
Minister Li asked for curtailment of conspicuous consumption. He recommended garaging of private cars and especially of big gas-eaters; encouragement of natural lighting and ventilation together with development of solar energy and the discouragement of air-conditioning; reduction of household power consumption by restricting the use of heaters and other appliances; and clothing economies to cut the consumption of synthetic textiles.
The government may raise bank interest rates or loans and savings again to tighten the money supply and encourage savings, Minister Li said. Interest rates were hiked twice in 1973.
A survey of the Bureau of Industrial Development of the Ministry of Economic Affairs said that stockpiling has assured an adequate supply of major raw materials in the first half of 1974. These commodities include coal, coke, carbide, salt, caustic soda, alkali, low-density polyethylene, cement and sheet glass. Supplies of PVC and urea are lightly below estimated requirement.
Industrial growth will drop to 15.1 percent his year, the Bureau estimated. Government investment in modernization is expected to raise he growth rate of agriculture to 4½ percent in 1974. Expressed in metric tons, agricultural targets include rice, 2.5 million; sugar, 830,000; maize, 150,000; soybeans, 90,000; sorghum, 150,000; peanuts, 130,000; sweet potatoes, 3.6 million; fishery products, 800,000. Production of swine will be 5.5 million head with 500,000 to be exported.
The China Credit Information Service, which has a highly accurate record in economic forecasting, predicted that the Republic of China would continue to lead the world in trade growth this year. For 1973, Taiwan was in first place among the 70 countries with populations of more than 5 million.
CCIS predicted 1974 trade of US$11,500 million would surpass the estimated gross national product of US$11,000 million. The growth rate of volume of goods will be down but value will rise sharply because of higher prices. Exports are expected to reach US$5,800 million for a gain of 30 percent. The import forecast is US$5.7 million, which would represent an increase of 60 percent. This would leave a favorable balance of US$100 million. Other economic forecasters have predicted a deficit because of the rising prices of oil and raw materials.
Taking the good with the bad, the Republic of China has no reason to fear the economic future. With the lone exception of the energy supply, everything that has contributed to the Taiwan "economic miracle" is still running in free China's favor. One editorial writer assessed the prospect in this way:
"We are better off than many others in a number of ways. Although not rich in resources, we do have some: our hydroelectric power, natural gas and coal, a few minerals, timber, agricultural by-products and a hard-working, thrifty, patient people. Our export industry has been built on a base of reasonably priced labor. Since everyone else must pay about the same for raw material imports, the competitiveness of our products will depend in large part on keeping the advantage of, reasonable wages. This means that control of inflation is vital."
Premier Chiang answered those who have expressed doubts about the Republic of China's international viability. Countries which have suspended diplomatic relations with the Republic of China have not severed other contacts, he said, but instead have shown an inclination to increase contacts. "We are maintaining trade relations with some 110 countries and areas," the premier said. "Many of these countries have increased their trade with us since recognizing the Chinese Communist regime."
Relations with the United States are satisfactory, Premier Chiang said. He expressed doubt that the U.S. relationship with the Chinese Communists would be expanded. The United States has nothing to gain and much to lose from expansion, he said. Premier Chiang, who has many American friends in high places, said U.S. leaders told him their government did not wish to move toward diplomatic relations with Peiping. This point of view was supported by Secretary of State Henry Kissinger's public assertion that the United States would not push "relaxation of tensions" with the Chinese Communists to the point of diplomatic exchange within this year.
Correspondents who report on Taiwan's preoccupation with economics often fail to look behind the facade of the good life. There was no neglect of education, medicine, the aged and the needy, slum clearance and culture in the Republic of China last year. There will be none in 1974. When the government embarked on its power saving program, Premier Chiang specifically instructed that school lights should not be dimmed. Eighty-five percent of Taiwan's young people are now receiving nine years of education; the figure will be 90 percent in another year or two. Social security coverage has been extended. No one lacks for food, clothing and shelter.
Cultural renaissance is the answer to the continued cultural destruction of the Chinese Communists. The arts are flourishing. Old culture is preserved and new culture encouraged. The Confucius detractors of Peiping have been answered by new free Chinese research on the Sage, his work and the continuing support of the Confucian system of humanism by Chinese everywhere.
Chinese Communist propaganda aimed at the people of Taiwan fell on deaf ears in 1973 as it will in 1974. The 15.5 million people of the island know what they have and what the people of the mainland lack. A few travelers who saw both the mainland and Taiwan last year also know. One visitor who had spent nearly a month on the mainland only a few weeks before arriving in Taipei expressed it this way: "People here have no interest in what the Communists can offer, because the Communists can offer nothing. Taiwan has already reached the point where Mao promised to take the mainland in the Great Leap Forward. The mainland, on the other hand, is not so well off as when Mao made his grandiose promise. Taiwan is the tail that one day will wag the mainland dog."