As a result of the Sino-Japanese War, Taiwan became a colony of Japan in 1895. However, when Japan came out on the losing side at the end of World War II, Taiwan was returned to the Republic of China (ROC). In the second half of the 1960's Taiwan was experiencing great economic growth. Unfortunately for Taiwan, the 1970's brought political isolation as America, Japan and many other countries officially recognized the People's Republic of China. This political setback did not stop Taiwan as its economy continued to expand, turning Taiwan into one of the stronger Newly Industrializing Economies (NIES), an economic success story. What are some of the factors that made this possible?While Taiwan was under Japan's rule, rice and sugar were the main products in the agriculturally driven economy. As Japan was pulled further into the Second World War, industrialization, to a certain degree, was encouraged. At the end of the war, the ROC government introduced agrarian reform laws in which landowners had to distribute their land to their former tenants. In return, the government handed over ownership of the factories previously owned by small to medium-sized Japanese companies to the landowner class. In addition, such strategic fields as iron, electricity, communications and steel were taken over by the government. Up until 1960 agriculture and processed foods were the main components of the Taiwanese economy, but from the end of the 1960's industrialization and exports fueled rapid growth. From about 1965 to 1975 the average annual growth rate of the Taiwanese economy exceeded 10%. In the 1980's, home electronics and other manufactured goods made up 90% of the goods Taiwan exported, making the rate of trade dependence of island country nearly 100%. Even compared with Korea, another exporting giant, Taiwan is the more dependent upon trade of the two. Upon further investigation of the Taiwanese export structure, it is understood that Taiwan imports machines and strategic parts from Japan, makes finished products with cheap labor, and then ships the finished goods to America to be sold. This results in a trade deficit with Japan and a trade surplus with America that exceeds $10, 000, 000, 000 annually.In Korea, huge corporate conglomerates, or“zaibatsu”take responsibility for fueling the country's export economy. In Taiwan, there are a few mid-size “zaibatsu, ”but it is mainly the small to medium-sized corporations that take care of most of Taiwan's exports. One cannot ignore the foreign capital and technology, mainly from Japan and the U.S., that flows into Taiwan. However, the foreign capital and technology that enters Taiwan is not considered to be on a large scale, much of it diluted in the form of joint ventures with Taiwan companies. On the whole, Taiwan's export economy is driven by small and medium-sized Taiwan companies.It is said that one reason why Taiwan's export economy is so strong is due to the cheap labor available. Taiwan's per capita GNP is higher than Korea's but the average wages are lower. A high concentration of young women in the work force who receive very low wages drops the average quite low. In addition, Taiwan does not employ a seniority wage system as is done in Korea and Japan. Wages in Taiwan do not seem to increase once one turns 40. In addition, the make-up of the Taiwanese house keeping is quite varied. Income generated by those other than the householder is great, allowing for relatively comfortable family budgets. It can't be said that there is no labor-management strife in Taiwan, but class conflict is on the most part avoided as the class distinction between labor and management is not so clearly defined in Taiwan.The Taiwanese economy has the characteristics of commercial capitalism. It is the family unit enterprise that powers Taiwanese economy.