Why are China and Taiwan even Separate? A Tale of Two Chinas - Part 2

A rival nationalist government formed on the island of Taiwan following the Chinese Civil War in 1949. This separation from the communist controlled mainland China has been a source of International tension ever since. Here, Victor Gamma looks at how and why mainland China separated from Taiwan. He continues the series by looking at the Chinese Civil War and how China and Taiwan grew apart.

Chiang Kai-shek and Mao Zedong meeting in 1945 in Chongqing, China.

Initially the political left (communist) & right (nationalist) wings of the KMT continued to cooperate in the United Front. But it wasn’t long before the conflict which would ultimately lead to the current China-Taiwan conflict began. On May 30, 1925, a crowd of Chinese students in Shanghai staged an anti-foreign protest at the International Settlement at Shanghai. The incident turned deadly when the Shanghai Municipal Police opened fire on the protesters. This sparked outrage throughout China, including the Canton/Hong Kong Strike. The CCP reaped the greatest benefit from these events and attracted many members. Conservatives and moderates grew alarmed at the growing power of the leftists. Right and left also clashed over policy: the left pushed the strike while the Nationalists wanted to end the strike because much of their financial support was coming from foreign trade. Moreover, Chiang was trying to consolidate his control in anticipation of the coming campaign to unify China and did not want political disunity in the ranks. For this reason, as well as suspicion of a possible communist take-over of the Nationalist movement, on March 20, in what is called the Canton Coup, he purged communist elements from the Nationalist army. Chiang moved to limit the fallout from the purge by taking actions to conciliate the Soviets and the remaining leftists. He still desired Soviet support as well as help from the CCP for the campaign fight against the warlords.  

Shortly thereafter, Chiang launched his long - awaited campaign against the warlords. By March, 1927 Chiang had taken Nanjing. Here the fall of the city was accompanied by widespread looting and rioting with foreign warships bombarding the city. This led to conflict between Nationalists and communists. Chiang believed that the Russians and communists instigated the riots and stirred up anti-foreign feelings deliberately to increase their own power and weaken the KMT. Therefore, on April 12, 1927 he ordered the violent purging of communists in Shanghai. This marked the official beginning of all-out war against the communists and the start of the Chinese Civil War. In addition to Nanjing, the nationalist government had moved to Wuhan. Here leftists took control, acting largely independent of Chiang’s authority. By April the Wuhan government had gone beyond that to actually acting against Chiang. They issued a series of edicts reducing Chiang’s authority. They also began to construct a parallel government in KMT territory.  Chiang clearly could not move forward against the warlords and felt it necessary to halt his advance in order to deal with the communists. This marks a pattern which appeared throughout Chiang’s career; no matter how great the problem, he always placed the communists or internal threats as his greatest threat and would cease all other operations to deal with them. And so in the spring of 1927, he halted the anti-warlord campaign and violently turned on the communists. He began with a purge of communists in Shanghai. 

On August 1, 1927, the Communist Party launched an uprising in Nanchang against the Nationalist government in Wuhan. Around 20,000 communist members of the Kuomintang revolted and took over the city of Nanchang. This incident is called the Nanchang uprising. It resulted in the formation of the People Liberation Army and is still celebrated today as “Army Day.” Ultimately, however, the communists withdrew into a remote location to rebuild their strength. Chiang launched several offensives in an attempt to destroy the communists once and for all, but they managed to elude his pursuing armies to reach the safety of a remote city in Shaanxi Province called Yenan. Once settled in their new base, the communists carried an intensive training and indoctrination program to “correct unorthodox tendencies,” mold the peasantry into the communist model and become an effective force.

Anti-communism

Scholars have debated the reasons that Chiang turned on the communists. There are multiple reasons. Chiang was a reformer but also a traditionalist. Although recognizing the need for modernization, he was deeply connected to the past. He was, in fact, a neo-Confucianist. He was an ardent admirer of Tseng Guo Fan, the 19th century paragon of Confucian virtue. In addition to that, like Chiang, Tseng also was involved in leading the government forces in restoring unity to China through quelling the Taiping Rebellion. One of Tseng’s superiors said  “Taiping Rebellion is a disease of the heart, Russia is a disease of the elbow and axilla, England is a disease of skin; We should exterminate Taiping first, then Russia and England.” Chiang repeated this phrase almost word for word in an interview years later, substituting “Taiping” with “communist” - “Remember, the Japanese are a disease of the skin, but the communists are a disease of the soul.” He was alarmed at ideologies that he felt threatened traditional Chinese culture. Chiang had a chance to observe a communist regime up close when he was in Russia for training and rejected it as an appropriate system of government for China. He felt it to be an alien ideology that undermined Chinese traditions. He attempted to unify China both politically and ideologically. Part of his ideological effort would become the “New Life Movement.” This would be a civic campaign that promoted confucian values as well as cultural reform. It was partly launched as a counter to communist ideology. He also was not interested in sharing power. He believed one of China’s greatest needs at this time was one leader firmly in control. The communists had demonstrated that they would not submit to Chiang. One of the first objectives the communists focused on when they gained power in Wuhan during the Northern Expedition, for instance, was an attempt to strip Chiang of his power.

World War II

The state of civil war continued until 1937, when the Japanese invasion forced the two sides into the Second United Front for the duration of the Second Sino-Japanese War (1937- 45) Although technically allies in the struggle against Japan, the Front never functioned as a firm alliance, even at times resembling more a hostile competition than an alliance. In practice, though, cooperation between the two factions was minimal. Chiang, in fact, instead of an aggressive strategy against the Japanese, hoarded his forces for the post-war showdown with the communists.

At the end of World War II, although technically on the winning side, the Nationalists were psychologically the losers in the eyes of many Chinese, especially peasants. They were seen as putting more energy into trying to exterminate the communists than fighting the rapacious foreign invader. Some even blamed Chiang for Japanese depredations by using forces against his internal political foes that could have been used against the Japanese. Chiang, in fact, had to be forced at gunpoint to agree to the Second United Front in the first place. Even before the guns fell silent in 1945, he had lost the war for the hearts and minds of the peasants, who were 90% of the population. His alliance with the mercantile and landowning class helped tie Chiang to conservatism. He had little understanding of the plight of the peasants.  His communist rivals, meantime, worked feverishly and brilliantly to build a powerful following, based largely on peasant support. This included a military force that numbered into the 600,000 range by 1945. While Chiang’s Nationalist movement was riddled with corruption and lack of real reform, the communists won the hearts and minds of vast numbers through the training, land reform and fierce, consistent commitment to the struggle against Japan and whatever injustice the peasants had been traditionally subjected to.

In 1945 both Nationalist and communist forces accepted the surrender of Japanese forces. Sovereignty had been restored, but not unity. Both Chiang and Mao knew that the long-awaited showdown was about to commence. After a brief period of post-war cooperation, the old animosities erupted into civil war again. This time, the communists were the winners. The Nationalists retreated to Taiwan but never surrendered, just as the communists had refused to surrender despite a succession of defeats in the late 1920’s and 1930’s.

After the Civil War

For some time after the Nationalists fled to Taiwan both sides insisted that they were only the official government of China. A strict policy of no contact  followed. Chiang reformed the corrupt Nationalist Party and, with American aid, set Taiwan on the path of economic modernization and growth. After Chiang’s death in 1975, political reforms also took place. By the 1990’s, Taiwan was not only an economic powerhouse but full-fledged democracy. Meanwhile, Taiwan has largely given up its claim to the mainland. In 1991 Taiwan declared that the war with the PRC was over. 

In 2000 Taiwan transitioned to a multi-party democracy when the Democratic Progressive Party (DPP) won the presidency. Although the KMT is still important, it now shares power with other parties. The DPP backs full independence so Beijing viewed the election results with alarm. The PRC backed up its disapproval with the "anti-secession law." The law flatly states that Beijing will use force if Taiwan "secedes" by declaring full independence. The DPP returned to power as Tsai Ing-wen, became Taiwan's first female president in 2016. More importantly for the mainland, she is a firm supporter of independence. In words that are sure NOT to warm the heart of Beijing, Tsai declared "Choosing Tsai Ing-wen... means we choose our future and choose to stand with democracy and stand with freedom."   

China has offered a "one country, two systems" scenario in which Taiwan would enjoy significant autonomy while still under Beijing's control. The mainland also would promise not to use force in resolving the issue. Taiwan turned down the proposal.

Differences

Why doesn't Taiwan want to be under Beijing's control?  it has seemed that the two Chinas have drawn closer together, for example beginning in the 1970s the mainland began economic reforms thus it seemed was becoming more similar to Taiwan. However, the mainland did not change the political one-party state and authoritarian regime which is not a democracy. Taiwan, along with the whole world, watched the 1989 Tiananmen square massacre. Hong Kong was promised a "one country, two systems" arrangement in 1997 as China prepared to take back the British Colony. Included was a 50 year promise that Hong Kong would enjoy its capitalist system as well as political freedoms. In 2020, though, Beijing cracked down on basic freedoms with a Security Act that allows the government to punish or silence critics or dissenters. As of this writing, well over a hundred individuals have been arrested for political reasons. Taiwan at one time was an authoritarian dictatorship, it has now diverged even more from communism, evolving into now a free market and a genuine democracy. 

This contemporary dispute reflects China's painful journey from its time-honored ways of old to modernity. A struggle for stability and prosperity and self-respect consumed that nation in the 20th Century. This journey involved the fundamental question of how China should be organized: the nationalist/traditionalist view - which eventually evolved into today's democratic Taiwan, and the communist (with a semi-capitalist economy) vision, now ruling the mainland. These two paths represent the right and left ideologically, one which looked to the West and its liberal traditions and traditional Chinese culture and the other which turned to distinctly antiliberal doctrines of Marx and hostility towards the past. These two approaches struggled over who's vision would succeed. In a sense, then, this struggle has never truly ended and continues to threaten global stability. The world watches to see how far Beijing will go in achieving its goal of one China. 

What do you think of the China and Taiwan separation? Let us know below.

Now read Victor’s article on the explosive history of the bikini here.

References

CHIANG ATTACKS WARLORDS AND REDS - 11. Chiang Attacks Warlords and Reds

Timeline: Taiwan’s road to democracy - Timeline: Taiwan's road to democracy | Reuters

Why are China and Taiwan even Separate? A Tale of Two Chinas - Part 1

A rival nationalist government formed on the island of Taiwan following the Chinese Civil War in 1949. This separation from the communist controlled mainland China has been a source of International tension ever since. Here, Victor Gamma looks at how and why mainland China separated from Taiwan. He starts by looking at early 20th century China.

A 1920s portrait of Sun Yat-sen.

When Vladimir Putin recently claimed that Taiwan belonged to the People's Republic of China (PRC), he triggered a withering rebuke from Taipei. In response to Putin's remarks, the Taiwan Ministry of Foreign Affairs fired back, "the Republic of China (ROC/Taiwan) is an independent, sovereign nation… The ROC and the autocratic PRC are not subordinate to each other. The regime of the Chinese Communist Party has never ruled over Taiwan for one day and does not enjoy any sovereignty over Taiwan'' …The future of Taiwan can only be determined by the Taiwanese people and Taiwan will never surrender to any threats from the PRC government.”

The communist (PRC) regime, on the other hand, like Putin, sees Taiwan as part of its territory. Thus, in their view, they have every right to demand reunification - by force if necessary. Why are there "two China's" anyway? What lies behind this threat to peace that has even Japan ramping up its military muscle? Let’s see what history has to tell us.

Background

The current Taiwan-China conflict grew out of the crisis of the "Century of humiliation" as the Chinese call it. This was a period from roughly 1840-1949 when China fell victim to foreign aggression and internal division. By 1900, after 50 years of one disaster after another, it was clear to many that the Imperial Qing Dynasty was hopelessly inept and corrupt. It had long proven itself incapable of coping with the challenges of modernization. 

With chaos and humiliation swirling around them, increasing numbers of Chinese became convinced that they needed major change. Numerous reform and anti-Qing movements arose with the goal of solving China’s problems. Many Chinese realized the need to copy Western techniques if China were to survive. As reformer Kang Yu Wei put it in 1906, “We need, too, governmental and political reforms and a reorganization of our political machinery.” 

Among the many organizations seeking to help was the Revive China Society (Xingzhonghui). Today’s Kuomintang Party or Guomindang (GMD) traces its history to this movement, founded on November 24, 1894. The next year the Society adopted an official flag, the blue sky with a bright sun. This emblem remains the Kuomintang flag and adorns the national flag of Taiwan to this day. In 1905 the Revive China Society was merged into the Revolutionary Alliance aka Tongmenghui. By this time Dr Sun had enunciated his famous “Three Principles of the People;” Nationalism, Democracy and the welfare of the people. The Three Principles were partly influenced by his travels in the United States. Especially influential was Lincoln’s philosophy of government “by the people.” The Principles included civil rights or limited government. termed ``popular soveriegnty'' in the US.  Dr. Sun explained that the people should control their government through means such as elections, referendum, recall and initiative. These principles remain as foundational elements to the Kuomintang and the Constitution of the Republic of China. These are the values Taiwan espouses today. Taiwanese revere Sun Yat Sen as "father of the nation. '' Dr Sun's portrait, in fact, hangs in the main legislative chamber in Taipei.

Revolution

Finally on October 10, 1911 (“double tenth”) an uprising triggered an anti-Qing revolution. There was nothing remarkable about an uprising, but then something incredible occurred: Within a few short months, a system that had lasted 2,000 years collapsed like a house of cards. The ROC (Republic of China) was established by the Chinese people through the Provisional Presidential Election held on December 29, 1911. Dr. Sun won a whopping 94% of the vote to become the first president in his country’s history. On January 1, 1912 he was sworn in and announced the official beginning of the Republic of China. On February 12, 1912 the last Qing monarch abdicated the throne, formally beginning China’s troubled venture as a republic. 

At the time of the Revolution, Sun Yat Sen was the acknowledged leader of the Chinese revolutionary movement. In 1912 the Revolutionary Alliance and several other parties merged to form the Kuomintang (Nationalist) Party, KMT for short, aka “National People's Party.” It evolved out of the revolutionary league that had worked to overthrow the Qing. But it was one thing to overthrow a government, quite another to assert authority. By 1913 Sun had lost the power struggle and fled to Japan in exile, not to return until 1916. China’s infant experiment in parliamentary democracy collapsed. In practical terms,  this meant the dissolution of China into a state of anarchy with regional rulers exercising control.

Mao

Meanwhile, another pivotal event took place in 1893: the birth of a son to a prosperous farmer of Hunan Province, named Mao Zedong. Although reared in the ways of traditional China, including the Confucian Classics, Mao rebelled against all this at an early age. He was expelled from more than one school and ran away from home briefly. When he was 14 a marriage was arranged for him and the young women moved into the family home. Mao refused to even acknowledge her. Instead, he moved to Changsha to continue his studies. When the 1911 Revolution came, Mao quickly joined the Anti-Qing military and did everything he could to overthrow the hated Manchu. Having tasted the wine of politics, Mao became insatiable. Between 1913 and 1918, as a student at the Changsha Teacher’s Training College, he devoured works on political ideologies. Especially impressive to him was the 1917 Russian Revolution and the ancient Chinese Legalist philosophy. Upon graduation he took a job at the Beijing University Library. It just so happened that his boss at the library, Li Dazhou, was a budding communist and soon exerted a major influence on the young Mao. He was one of many who became convinced that the solution to China’s problems lay in Marxism.

By 1919, while Mao was still a lowly librarian, a new revolutionary ferment broke out. Seven years after Dr Sun had proclaimed the Republic, China was still mired in political and economic chaos. Warlords and bandits ruled their own territories in defiance of any national government. Sun returned to China in 1916 but his authority was limited to a small area around Canton. To make matters worse, although China had joined the Allied cause in hopes of attaining an end to its semi-colonial status, China was betrayed at the Versailles Peace Conference; Japan was allowed to keep the territory in Shandong Province it had captured from Germany in 1914. This was a massive slap in the face to China. On May 4, 1919 a crowd of students gathered at Tiananmen Square to voice their frustrations. This was part of a resurgence of nationalism. Among other results, leftist ideologies gained momentum. Movements like Sun’s now expanded into a more grass-roots effort. Leaders such as Li Dazhao and Chen Duxin emerged from the May 4 movement. These two, like many others, began to abandon Western-style democracy and turned to leftist ideology. They looked to the new Bolshevik government in Russia as an example. In 1920, Li was head of the library at Peking University and professor of economics. Captivated by the Russian Revolution, he began to study Marxism. Many were impressed with the apparent success of the Bolsheviks. Li founded a study group to discuss Marxism. This evolved into the Chinese communist party, founded in July 1921. Mao Zedong was among the founding members.  

Sun

Meantime Sun and his Kuomintang, lacking military support, had been unable to build a strong enough political organization to assert their authority. Sun began to realize that his movement needed help if he were to unify China - they had proved to be no match for ruthless warlords and helpless to end the foreign concessions. Sun had tried to enlist the aid of Japan and the West. He even wrote to Henry Ford, imploring his help.  In a  letter to the famous auto manufacturer he wrote; “There is much more to hope, in my opinion, from a dynamic worker like yourself, and this is why I invite you to visit us in South China, in order to study, at first hand, what is undoubtedly one of the greatest problems of the Twentieth Century,” The request came to nothing. Rebuffed by the West, he took a step that would have momentous consequences. By 1921 the Bolshevik in Russia revolutionaries had proven they could take and hold on to power. They had established themselves and were carrying out their reform program. They had accomplished this in four short years while the Chinese revolution had now been floundering for a decade. He invited Russian help in building his party. The Russians were only too glad to help but they attached a price tag: Sun must allow the communists to join his kuomintang. Mikhail Gruzenberg, known as Borodin, was sent to Canton in 1923 to advise Sun. Here was a seasoned agent of the newly-formed Comintern. He had already been to several countries to spread bolshevism. He and Sun established a formidable partnership as Borodin put his considerable political skills to work. It would hardly be an overstatement to say that he almost single-handedly turned the Kuomintang into an effective force. He gave them a tight party organization, drafted a constitution for them and taught effective revolutionary and mobilization techniques. Borodin also convinced Sun to admit the small (300) communist party into his nationalist movement and create the first United Front between the KMT and CCP. This was a potentially powerful move to bring unity and stability to China. This United Front thus combined the conservative and leftist political movements of China. Unity was essential to overcome the warlords, who dominated all of north China. Nonetheless, this is where the conflict between the two China’s begins. For all their cooperation, the two ideologies, communism and nationalism, would prove absolutely incapable of working together for long. Some consider this to be Sun’s greatest mistake. Once given legitimacy, the communists would be very difficult to control.

Additionally, Sun and his followers established a military academy to train officers in the struggles to come. Known as the Whampoa Military Academy, it played a critical role in the centuries major conflicts. In 1924 Sun Yat Sen appointed the general Chiang Kai Shek to be the first commandant of the Academy. Chiang had met Sun in Japan and became a devoted follower. Over the years he had proved his faithful commitment to Sun, even at the risk of his own life. Subsequently, several Academy members, including Chiang, were sent to Russia for training. He remained, at least in word, dedicated to Dr. Sun’s principles throughout his career. In a 1942 message to the New York Herald Tribune Forum on Current Problems Chiang asserted “(our) Revolution is the attainment of all three of Dr Sun’s basic principles.” After the death of Sun Yat Sen in 1925, Chiang continued his rise to power. He became commander in chief of the National Revolutionary Army (NRA) and in June, 1927 began the long-awaited “Northern Expedition” with the objective of destroying the warlords and reuniting the country.

What do you think of the early 20th century in China? Let us know below.

Now read Victor’s article on the explosive history of the bikini here.

The new magazine! History is Now - Issue 1 - The USA, China, the USSR and the nearly-nuclear Taiwan Straits Crisis

Have you heard?

Our interactive digital magazine for the iPad and iPhone, History is Now, has arrived! We love it and we're sure you will too.

Click here for more information! 

So what is the magazine about? Here is what our editor says…

History continues to define and transform our world. Events in 1940s China continue to causes tensions between China an America. The legacy of Communism and Colonialism continue to cause stability and instability, problems and agreements the world over. In short, history is so very important. The lessons you can learn from it, the events that happened, the differences between different ages and countries. Understanding where we as human beings have come from.

So that’s why we’ve decided to start History is Now, the global modern history magazine. Much like our other productions, the focus of the magazine will be on the 19th century, 20th century, Communism, civil war, and Colonialism. That said, from time-to-time we may be tempted to veer slightly off that course. Our articles will come from a variety of sources. We will be providing you with articles from some of our favorite history writers, while at other times we shall be trawling the archives of some of the best sites online to hand-pick the very best pieces just for you. You see, very often the best history has already been written – it’s just finding it that’s almost impossible. And as some of you will know, before our horizons expanded, we were making history podcasts - so in each magazine we will be telling you a bit more about one of our podcasts and inserting it in the magazine.

Click here for more information

The USA, China, the USSR and the nearly-nuclear Taiwan Straits Crisis is the main article! But what else is there in issue 1?

The first edition features articles on:

• How the US, China and the USSR nearly became involved in a nuclear war over Taiwan
• The story of the early stages of the brutal Italian colonization of Libya
• Death in the Eastern Bloc - The harrowing tale of a freedom fighter in Communist Czechoslovakia
• A number of bizarre tales involving lions in Western Europe
• The life and times of the 'log cabin President' William Henry Harrison
• Our first ever podcast!

With all that and more, come and join us inside…

Just click here for more information! Alternatively search for History is Now  on the app store.

George Levrier-Jones

Cold War Taiwan’s Electronic Industry

In this article we look at the importance of countries such as the US in the growth of the Taiwanese economy in the 1960s, and consider the role of the electronic industry in those Cold War years. 

President Eisenhower's trip to Taiwan in 1960

Taiwan’s entry into the global economy was facilitated by a relationship between the Nationalist military and the US.

Taiwan focused on direct exports, subcontracting, consignment work for foreign corporations, and joint ventures. These opportunities provided substantial employment opportunity in Taiwan where, by the mid-1960s, 150,000 additional jobs were needed each year to keep pace with population growth.

In 1966, 723 new factories were established in Taiwan by foreign private corporations, creating 30,000 new job openings annually, 20% of the annual deficit. Moreover, Taipei’s relatively large number of trained professional management and technical persons was a factor in attracting industry.

One corporate executive noted the large reservoir of local talent stating:

In Taiwan trained people work at lower levels than anywhere else. There were many trained engineers among the refugees from the mainland who were working as porters.

Most of the trained refugees had settled in Taipei. Consequently, few Americans were assigned as resident managers in Taipei and most jobs went to local residents, not American expatriates.

An in-depth look at the electronics industry will expand our understanding of the penetration of the local economy by the multinational firm and the associated impact on Taipei’s urban development.

The Electronics Industry

By 1968 the electrical and electronic goods industry was Taiwan’s second biggest exporter after textiles and by 1984 it overtook textiles. The two industries were quite different.

Unlike textiles, the electronics industry had no base in Taipei prior to the arrival of the multinational corporation in the 1960s. It was shaped by global forces from the very beginning. Most of its production was exported, chiefly to the United States. The industry was characterized by a few foreign-invested assemblers, most from the US, and many locally and privately owned suppliers of components to them. Thus, the industry was strongly associated with the emergence of SME’s (small and medium enterprises), which eventually became the core of Taipei’s export sector.

As previously mentioned, the electronics sector was targeted as desirable by the military which was deeply involved in efforts to solicit foreign investment, along with the assistance and advice of US AID. Their hard work brought in first General Instruments (1964) and then other companies which set up bonded export factories throughout the island.

Much of the US incentive came from a need to compete with the Japanese.

In 1953, a Taiwanese firm (Tatung) had signed the first ever technology agreement between a Taiwanese and a Japanese firm. The Japanese company agreed to take engineers from the Taiwan firm for training. The agreement was supported and even funded by US AID (formerly the Economic Cooperation Administration).

By the late 1950s, a number of Japanese firms began seeking local partners for electrical assembly in order to obtain lower labor costs. Seven joint ventures were formed by 1963.

In the next two years, 24 US firms entered into production agreements with the Taiwanese. In 1965, the first export-processing zone opened in Kaoshiung in the south of Taiwan. The bonded factories established by many US firms offered basically the same advantages — relatively unfettered conditions in return for exporting all of their production. The object was to cut costs by getting the labor-intensive part of semi-conductor manufacturing — connecting the wire leads and packaging — done more cheaply than was possible at home.

By 1966, the Taiwanese government had decided to make Taiwan into an “electronics industry center.’

A Working Group for Planning and Development of the Electronics Industry was established to assist in marketing, coordinating production with the demands of foreign buyers, procuring raw materials, training personnel, improving quality, and speeding up bureaucratic approval procedures.

In 1967 and 1968, major exhibitions were held to introduce local manufacturers and foreign investors to each other. The objective was to take what began in Taiwan as an enclave industry and use it to create an entirely new sector of parts and components makers and, eventually, assemblers of finished goods able to compete internationally. According to Thomas B. Gold:

The state was the contrapuntal partner to the market system, helping to insure that resources went into industries important for future growth and military strength — including import substitutes for use in export production, such as synthetic fibers and plastics, and new export sectors such as electronics. Multinational companies became important players in these developments, but only after the state had a well-established presence and leadership position from which it could channel their activities rather than be made subordinate to global profits.

The consumer electronics industry is a good example of a dynamic industry that the state helped initiate and guide, but otherwise did not invest in directly or tie to state enterprises. Transnational corporations (TNCs) performed this function. This is a significant departure from the state-led pattern of the 1950s and represents a clear commitment to the American promoted approach of granting increased scope for private capital, local and foreign.

In a related move, in 1965, the regime established a publicly owned China Data Processing Center to push the use of computers in local industry. In advanced electronics, public research organizations and public enterprise spinoffs were used to acquire and commercialize new technology, a strategy promoted by both the Taiwanese military and the US.

Taipei’s locally owned SMEs play an important role.

Electrical and electronics exports grew at a rate of 58% a year between 1966 and 1971. Foreign firms were quite important in this area.

By the 1970s, over half of foreign firms’ exports were in electronics and electrical appliances, with foreign firms accounting for 2/3 or more of total exports from this industry. It is important to note, though, that foreign-owned companies (companies where more than of the 50% equity is held by foreigners) were surprisingly small and in no way dominated the economy. In fact, they paved the way for a new cohort of entrepreneurs, mostly Taiwanese of a petit bourgeois background.

To underscore, despite the contribution of the American multinational enterprise to the birth and success of export oriented industry in Taiwan, it is important to emphasize the significance of Taipei’s locally owned SMEs. They were an integral part of the drive toward expanded export capability, becoming more crucial over the course of the 1960s.

SMEs were the essence of the new middle class in Taipei which was to become a strong force in the move toward a democratization of politics in a city where the scale of business had a large influence on party affiliation and competition.

Most of the leaders of Taipei’s largest conglomerates had strong ties with the KMT, while heads of small and medium sized businesses tended to support the opposition. This is also consistent with splits along ethnic lines, for owners of SMEs tended to be native Taiwanese rather than mainlanders.

By Lisa Reynolds Wolfe

 

Want to find out more about Cold War Taiwan? Well click here to the see the original article on Lisa’s Cold War Studies site and scroll down the page for a variety of other great Taiwan articles!

And there is even more on Taiwan by clicking here. In this article we look at the deadly Taiwan Straits Crisis.