Development Policy Formation and Future Policy Priorities in the Republic of China

Abstract

The economic conditions of Taiwan, the Republic of China, during the early postwar period were similar to those in many resource-poor, lowincome developing countries. It was overpopulated, and the natural rate of growth of its population exceeded 3% per annum. The domestic market was small. The inordinate military needs competed with development projects for scarce resources. The economy suffered from chronic balance-of-payments deficits and a violent inflation.' As can be seen in table Al, manufacturing activity accounted for 11% of net domestic product (NDP) in 1952, while 38% of NDP originated in the primary sector. Exports accounted for 8% of GNP, and the share of manufactured exports in total exports was only 7.6% in 1955. In such an environment, the commitment to development by the government was a matter of necessity. It was the history of poverty and war that made the government and the people give their first priority to economic development. This study attempts to examine the contribution of government policy to rapid economic development, as exemplified by the experience of the Republic of China. Section I briefly highlights the success of export-led industrialization and the process of government policy formation in the Republic of China. Section II describes the challenges that the economy faces in the 1980s and examines the future policy priorities for achieving growth and productivity gains in rapidly chang