Getting to Know the Asian Tigers – Taiwan

By Michael Jones (michael.jones@tsiglobalconsulting.com)

Last time, this blog series discussed Hong Kong, and about just how far this Asian nation has developed in recent years to become one of the most desirable markets in the world.  We also learned about the nature of Hong Kong’s complicated relationship with mainland China, and how that relationship can affect foreign investment.  But can you guess what country (We’ll be using that word, even though many disagree if it is the correct term here) has an even more complicated relationship with China today?  Of course, today’s topic of discussion is Taiwan, A.K.A. the Republic of China, and the many opportunities that are open to the savvy international businessman.  However, success can only be achieved by understanding the history, economic situation, and influence of the mainland, on the 3rd Asian Tiger today.

Taiwan, perhaps more so than the other Asian Tigers, has a recent history that is very important in terms of understanding its viability as an economic partner.  Taiwan had been just another part of China until 1895, when it was lost to the Japanese as a result of the Sino-Japanese War.  It remained under Japanese control until 1945, when it was returned to the mainland under the control of the Nationalists.  However, in 1949, Mao Zedong’s Communist Party had successfully managed to expel the Nationalist government from the mainland, with its remnants fleeing to Taiwan.  There, the government-in-exile re-established itself, with the goal of retaking the mainland.

Ever since this split occurred, Taiwan’s political status has been a confusing, contentious point for all parties involved.  In the years following the war, Taiwan did enjoy considerable help and acknowledgment from the U.S. as a part of the American Cold War strategy which opposed the mainland’s Communism.  However, even that disappeared in the 70s, as Taiwan lost its seat on the UN and the U.S. formally acknowledged the government of the People’s Republic on the mainland.  To this day, the People’s Republic maintains a policy of refusing to develop relations with any other country that recognizes the Republic of China, or supports a policy of Taiwanese independence.  However, this policy has not decreased Taiwan’s economic output, and Taiwan still can carry out economic relationships with countries that do not necessarily recognize it politically.

So why is all of this history important, you may ask?  Why does any of it matter as long as I can work with Taiwan now?  Well, the primary reason why it is important hasn’t actually come into play yet.  Today, the mainland and Taiwan share a tenuous, though improving relationship that has seen increased integration economically and politically.  However, military tensions have continued to escalate in recent years.  This is worrying since, because so few countries formally recognize Taiwan and even less would intervene if a severe military crisis were to occur (which experts think could feasibly happen starting at around the year 2020 at the earliest), foreign investment could be drastically affected and potentially even wiped out should the mainland take control over the country.  While, of course, this is an extreme example and a fairly unlikely possibility, it is important to understand Taiwan’s history so that one is made aware of this.

Well, that seems like a pretty condemning statement, doesn’t it?  “Working with Taiwan will lead to your company’s ruin if the mainland interferes,” definitely does not have a pro-Taiwan investment ring to it.  Of course, as previously mentioned, it’s only something to be aware of, not necessarily something to fear.  However, if you do have any doubts about Taiwan, allow me to disperse them with some staggering facts about Taiwan’s economy that would make any international businessperson ready to get started investment today.  First of all, here are some hard numbers that reflect the growth of this Asian Tiger: Taiwan is currently the 19th largest economy in the world, and is growing at a rate of roughly 2% per year.  If is an export-oriented economy, and has the largest computer chip industry in the world.  Other important industries include other electronics industries, and (surprisingly) a rapidly growing agricultural sector.

While in regards to its industries, Taiwan shares many similarities with the other Asian Tigers, the unique aspect of Taiwan’s economy is in its resilience.  Unlike the other countries in the region (including all of the other Asian Tigers), Taiwan was able to recover from the severe economic distress brought forth by both the Asian Financial Crisis in the 1990s, and the Global Financial Crisis of the late-2000s.  This is because of the diversity of Taiwan’s economy compared to its competitors: even though it does have some areas of specialization, one of the hallmarks of the Taiwanese economy is that it is composed of smaller businesses than in other countries.  Instead of folding like other parts of Asia, Taiwan simply diverted to its other industries and was able to recover much faster than its competition.  Through this diversity, one can have success in any field in Taiwan, often at much less risk than in other countries.

Taiwan really is a golden opportunity for international growth.  While the specter of Chinese tensions is certainly a factor to take into account, one should look towards the positives and give this amazing Asian Tiger a shot.  The benefits would well be worth the minimal risk required.  If you are interested in working with Taiwan, please give TSI Global Consulting a call at 210-757-0618 for a consultation.

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