Sugarcane played a key role in Taiwan's economic development in postwar years.

• Key events in Taiwan's history

The history of Taiwan is a story of both frustrations and miracles. Early Taiwan, isolated and underdeveloped, had been a neglected island until the 17th century. However, during the age of exploration and maritime conquest by Europeans, Taiwan attracted the world's attention because of its strategic location and trading position. The Dutch and the Spanish independently colonized parts of northern and southern Taiwan. In 1661-1662,

Ming 明 (1368-1644) general Jheng Cheng-gong 鄭成功 defeated the Dutch and set up a government on Taiwan to defy the Manchus, who had established the Ching 清 (1644-1911) dynasty on the Chinese mainland. The Manchus conquered Taiwan in 1683 and ruled it until 1895, when Taiwan was ceded to Japan after the First Sino-Japanese War. At the end of World War II in 1945, Japan relinquished Taiwan, which in turn came to be ruled by the Republic of China (ROC).

The past half-century has witnessed sweeping transformations in Taiwan. In the postwar years, Taiwan's people encountered numerous formidable challenges. Nevertheless, their enterprising spirit and tireless efforts helped them overcome the difficulties they faced and bring about world-acclaimed economic achievements. Taiwan is now one of the most prosperous, industrialized, technologically advanced countries in East Asia and the world. In addition, Taiwan's people achieved democratization by transforming their government from one of one-party authoritarian rule to one in which free elections determine who governs the nation. The high point of this long and difficult process came when executive power was handed over, peacefully, by the Kuomintang (KMT; "Nationalist Party") 中國國民黨 to the Democratic Progressive Party (DPP) 民主進步黨, in 2000. These events made Taiwan the world's first predominately ethnic Chinese society to become a democracy.

This chapter briefly summarizes Taiwan's history, from traces of early inhabitants to the latest developments concerning the ROC on Taiwan.

Earliest Inhabitants

Taiwan's first inhabitants left no written records of their origins. Anthropological evidence suggests that Taiwan's indigenous peoples are of proto-Malayan ancestry. The morphology and syntax of their languages belong to the Austronesian language family, with whose speakers they share many customs and cultural features such as tattooing, gerontocracy, and spirit worship. Over 1,000 prehistoric sites in Taiwan, including many dwelling areas, tombs, and shell mounds, have provided more and seemingly contradictory clues to the origins of Taiwan's aborigines. The majority of prehistoric artifacts, such as flat axes, unpolished red pottery, decorated bronze implements, and glazed beads, suggest a southern connection. Other items, such as painted red pottery, polished red pottery, chipped stone knives, black pottery, stone halberds, pottery tripods, and bone arrowheads, suggest that Taiwan's earliest settlers might have come from the Asian continent. Many questions remain unanswered, such as whether these prehistoric remains were left by the ancestors of today's indigenous peoples.

What is known for certain is that tribes of indigenous peoples, plus Han people from China, were already living in Taiwan when survivors of a Portuguese shipwreck first visited the island in 1582.

European Colonization

When Portuguese navigators sailed past Taiwan to Japan in the mid-16th century, they were impressed by the beauty of the island's green mountains rising steeply out of the blue-green waters of the Pacific and exclaimed, "Ilha Formosa (meaning "beautiful island")!" The island was thus known as Formosa to the West for centuries. With limited interest in the island, however, the Portuguese never established a permanent settlement on Taiwan.

The next groups of Europeans to come to Taiwan were the Dutch and the Spanish. In 1622, the Dutch East India Company established a military base on the Penghu Islands (Pescadores) 澎湖群島, but were forced out by Ming forces from China and moved to Taiwan in 1624, where they established a colonial capital and ruled for the next 38 years. Two years later, the Spanish occupied northern Taiwan to counterbalance the Dutch expansion, building Keelung 基隆 and Danshuei 淡水 as their bases for trade and the Christianization of the island's inhabitants. The Spanish were forced off the island by the Dutch in 1642.

Taiwan became a trading and transshipment center for goods between Japan, China, Batavia (Jakarta), Persia, and Holland. To promote trade, the Dutch encouraged people from China to migrate to Taiwan in the 1630s to grow sugarcane and rice. An agricultural revolution began on the island, and the amount of land under cultivation increased greatly. Until only half a century ago, sugar and rice were the mainstays of Taiwan's economy. Taiwan became one of the most lucrative branches of the Dutch East India Company in the Far East, accounting for 26 percent of the company's profits in 1649.

In addition to economic development, Dutch missionaries actively sought to convert Taiwan's population to Christianity. Protestant missionaries established schools where religion and the Dutch language were taught. By 1659, the Dutch had converted 6,078 out of 10,109 inhabitants in their parishes to Christianity.

Settlement by Han people in Taiwan dates back to the 16th century, but large-scale immigration did not begin until the 1630s, when the Dutch started developing Taiwan's agriculture. While the Dutch were colonizing Taiwan, China was experiencing a series of rebellions, which were followed by the invasion of the Manchus, who established the Ching dynasty in 1644. As endless wars, famines, and plundering made life more difficult than usual for the average Chinese, thousands of people, especially those from the coastal provinces of Fuchien (Fujian) 福建 and Guangdong 廣東, migrated across the Taiwan Strait to Taiwan. About 40,000 Chinese had moved to Taiwan by 1662.

European colonization marked the beginning of foreign rule over Taiwan, brought the island into the global commercial marketplace, and saw the immigration of large numbers of Han Chinese. These developments had a lasting impact on Taiwan, helping to shape its culture and open its society.

Administration under the Jheng Family

As Manchu troops poured into northern China, many Ming loyalists escaped to the south, where they resisted the foreign invasion for over 20 years. One of the most celebrated resistance fighters was Jheng Cheng-gong, also known as Koxinga 國姓爺. He forced the Dutch out of Taiwan in 1662 and made the island his base for counter-attacking the Manchus.

Jheng Cheng-gong established the first Han political administration in Taiwan. He governed Taiwan as a sovereign country and exercised control over the island's domestic and foreign affairs. Under the rule of Jheng Cheng-gong and his son, Jheng Jing 鄭經, a Chinese-style political system and Han culture were introduced to Taiwan. In addition, agriculture and trade were both promoted to develop the island's economy. Also, a steady stream of Chinese continued to arrive in Taiwan, and settlements sprang up along the western coast. Under the rule of the Jheng family, the population of Han Chinese on Taiwan reached about 120,000.

The Jheng family ruled Taiwan for 22 years before it was defeated by Ching forces in 1683.

Ching Rule over the Island

Taiwan was under the control of the Ching dynasty from 1683 until 1895. During this period, agriculture was expanded, and increasing numbers of Chinese left the mainland to settle on the island, despite laws restricting freedom of movement. Rice and sugar, first developed during the reign of the Dutch, were cultivated and exported to China, Japan, and even Australia for some time.

Following the Ching's defeat in the Second Opium War (1856-1860), four ports in Taiwan were forcibly opened to foreign trade, namely present-day Danshuei, Tainan 臺南, Keelung, and Kaohsiung. Tea and camphor, which enjoyed large global markets, became major cash crops for export. Being the production area for new crops as well as coal, northern Taiwan surpassed southern Taiwan as the island's economic center, with Taipei superseding Tainan as the new political capital. However, conflicts between immigrants and indigenous peoples intensified when the Chinese encroached on the mountainous areas to produce tea and camphor.

Taiwan's resources attracted international attention, and some countries even attempted to seize this island. Japan occupied part of southern Taiwan briefly in 1874, and the French invaded northern Taiwan in 1884-1885 during the Sino-French War.

Foreign interest in the island made the Ching court realize Taiwan's importance as a gateway to the provinces along China's southeastern coast. To consolidate Ching rule, a number of officials stationed in Taiwan in the 1870s and 1880s strengthened defenses, mined coal, and laid telegraph lines between northern and southern Taiwan as well as with Fujian Province. The Ching dynasty incorporated Taiwan as its 22nd province in 1885, and Liou Ming-chuan 劉銘傳 became the first governor. Under Ching rule, Taiwan was fully integrated into the Manchu empire, and numerous Taiwanese attended traditional academies, passed civil service examinations, and some became government officials.

Japanese Colonization

In 1894, the First Sino-Japanese War broke out when the Japanese invaded Korea, a longstanding tributary state of China. Following China's defeat, Taiwan was ceded to Japan in April 1895 under the Treaty of Shimonoseki. Meanwhile, in protest against this move, Taiwan's Ching governor announced the establishment of the Republic of Taiwan 臺灣民主國 in May. When Japanese troops entered Taipei on June 7 of that year, armed resistance broke out. Many Taiwanese joined the local militia to fight against the Japanese troops. However, these anti-Japanese efforts were crushed within a few months.

The period of Japanese colonization can be roughly divided into three periods:

• Pacification and special governance (1895-1919): The Japanese used the military and police to suppress dissent. In light of the differences between Japan and Taiwan, the colonial government introduced a legal system different from that in force in Japan. Several measures, such as the regulation of opium-smoking as well as land reform, were introduced to pacify the Taiwanese. Also at this time, the government nationalized opium, camphor, salt, and other products, and helped to establish some important industries such as sugar and coal.
  
  
• Assimilation of Taiwanese as an extension of the Japanese homeland (1919-1936): Japan claimed that the rights of Taiwanese were also protected under its domestic codes. Compulsory Japanese education and cultural assimilation were emphasized, while economic development was promoted to transform the island into a secure base from which Japan could launch its southward expansion.
  
  
• Kominka (Japanization) (1936-1945): The colonial government adopted a Japanization policy to naturalize Taiwan's residents as Japanese citizens. Taiwanese were forced to deny their heritage by adopting Japanese names, clothing, cuisine, and religious rituals. The use and practice of Chinese dialects and customs were discouraged, and Chinese-language schools were closed. Heavy industry and foreign trade were strongly emphasized during this period to meet Japanese needs in World War II.

Japanese development of Taiwan was extensive, as modern transportation and infrastructure, agricultural research and development, public health, banking, education and literacy, cooperatives, as well as business practices were brought to Taiwan. Such development, however, was primarily for the benefit of Japan, not Taiwan. Moreover, the Taiwanese were denied the right of self-governance and were kept out of high positions in all facets of society. People were taught to see themselves as Japanese and, during World War II, tens of thousands served in the Japanese military. These policies consequently led to recurrent protests. For instance, a movement for the establishment of a Taiwan Assembly 臺灣議會 was launched mainly by Taiwanese students in Japan in the 1920s and 1930s seeking self-governance for Taiwan, but the effort came to nothing. A short but bloody conflict, known as the Wushe Uprising 霧社事件, began in October 1930 in Nantou 南投, where the Atayal tribal leader Mona Rudao 莫那魯道 led indigenous people to fight against colonial rule. Japanese troops used modern weapons, including poison gas, to crush the insurrection. After nearly two months of fighting, the rebellion was put down. Hundreds of Atayal had been killed or had committed suicide by the time the revolt ended. In 1945, following Japan's defeat and surrender at the end of World War II, the Republic of China assumed control of Taiwan.

The ROC on Taiwan

In 1949, the Nationalist government in Nanjing relocated to Taiwan after losing a civil war against the Chinese Communists. The influx of around one and a half million soldiers and civilians from the mainland turned the island into a frontline of the Cold War. With the start of the Korean War in June 1950, the United States dispatched its Seventh Fleet to protect Taiwan from attack by the communists and began to provide Taiwan with considerable economic and military assistance. Taiwan became the focus of attention again in August 1958, when the communists attempted to take over the islands of Kinmen (Quemoy) 金門 and Matsu 馬祖. The attacks eventually stopped, and in October 1958, the US and ROC governments issued a joint communiqué reaffirming their solidarity. Invaluable military support continued through the 1950s and 1960s, preventing Taiwan from being conquered by the communists.

The history of Taiwan after 1949 is one of sweeping change. Over the past few decades, rapid economic development has made the island one of the world's largest and most dynamic economies, with rapid industrialization, urbanization, and modernization dramatically transforming the lives of Taiwan's residents. Following the lifting of martial law in 1987, a process of democratization began, and eventually Taiwan became the first ethnic Chinese democracy.

The following sections summarize Taiwan's economic transformation, political development, as well as foreign and cross-strait relations since 1949.

Economic Transformation

When the Nationalist government moved to Taipei in 1949, the economy of Taiwan was still recovering from heavy Allied bombing during World War II. Only some industrial facilities remained intact; these included sugar refineries and some textile factories. In the initial years, two factors helped stabilize the situation and lay the foundation for a future economic takeoff: aid from the United States and the land reform program.

From 1951 to 1965, large amounts of economic and military aid came from the United States. Much of the aid was used to improve Taiwan's infrastructure and the agricultural sector. US advisors stationed in Taiwan and Taiwanese who had studied abroad were all directed to rebuild the economy. The highly successful land reform program, beginning in 1949, reduced land rent, distributed public land, and purchased and resold land from landlords with large holdings. Farmers were supplied with fertilizer, seeds, pesticides, expert advice, and credit. By 1959, 90 percent of exports were agricultural or produce-related. Increased production and higher income resulted in low inflation and capital accumulation, as importing foodstuffs was unnecessary.

After land reform policies and economic assistance had formed a solid foundation for the economy, two policies of the 1950s and 1960s led to a remarkable takeoff in the 1970s. The first was an import-substitution policy aimed at making Taiwan self-sufficient by producing inexpensive consumer goods, processing imported raw materials, and restricting other imports. Realizing Taiwan's relatively small domestic economy of scale, the government adopted a second policy of export promotion in the late 1950s that continued throughout the 1960s. Using Japan as a model and following US advice, the resource-poor, labor-rich island began to expand its light industries. Export-processing zones free of bureaucratic red tape were set up with special tax incentives to attract overseas investment. Within a short time, Taiwan had become known internationally as an exporter of products of which it was the original equipment manufacturer.

Between 1962 and 1985, Taiwan's economy experienced its most rapid growth in history: an average annual growth rate of nearly 10 percent, or more than twice the average economic growth rate of industrialized countries during this period. Equitable distribution of income was a major objective in the government's economic planning. In 1953, average income of the top 20 percent of the population was estimated at 20 times that of the bottom 20 percent. In the 1980s, this 1:20 ratio was reduced to a range of between 1:5 and 1:4.

A key element in Taiwan's steady economic growth is the implementation of universal education throughout the island. After 1949, the government expanded education to raise literacy rates. In 1951, 34.6 percent of the population six years and older was illiterate. This figure had dropped to 15.3 percent by 1969 (and to 2.84 percent of the population over 15 years of age in 2004). In 1968, six-year compulsory education, a right stipulated in the Constitution, was extended to nine years. Additional technology and vocational colleges also met the needs of the industrial sector during the economic takeoff. (See Chapter 18: Education.)

Beginning in the 1980s, the government implemented a series of plans to liberalize and internationalize the economy and to privatize state-run enterprises. Taiwan's first science-based industrial park, the Hsinchu Science Park 新竹科學工業園區, was also established to upgrade industries. Labor-intensive industries, once the mainstay of Taiwan's economy, gave way to technology- and capital-intensive industries. In the 1990s, the electronics and information-technology sectors expanded rapidly to become Taiwan's main industries, accounting for more output and exports than any other sector in the manufacturing industry. The service sector's performance during this stage was outstanding, averaging an annual growth rate of 9 percent. All of these signs indicate that a knowledge-based economy has taken root in Taiwan.

Another significant economic trend beginning in the 1980s was the rise of investments in China by Taiwan's business community. After martial law was lifted in 1987, private contacts between Taiwan and China were allowed. By 2005, registered investments in China totaled US$47.32 billion. The sharp increase of Taiwan's exports to China beginning in the 1990s decreased the island's dependence on the US market, but raised new concerns of growing economic reliance on this long-time rival.

Owing to globalization and trade liberalization, as well as the rise of neighboring China as a new economic power, Taiwan's economic development in the new century will have to meet new challenges at home and abroad. In response, the government has taken concrete measures to upgrade Taiwan's industries, conducted financial reforms to foster a more attractive investment environment, and promoted environmental protection to achieve sustainable development. Development plans were formulated to transform Taiwan into a "green silicon island." Several major construction projects are also under way. (See also Chapter 9: Economy.)

Political Development

The relocation of the Nationalist government to Taiwan at the end of the Chinese civil war marked the beginning of the period of martial law (1949-1987) in Taiwan, which imposed press censorship, banned new political parties, and restricted freedoms of speech, publication, assembly, and association. Despite these restrictions, direct elections for chief executives and representatives below the provincial level were held from 1950.

Following the death of Chiang Kai-shek in 1975, Yen Chia-kan 嚴家淦 served as president until Chiang's son, Chiang Ching-kuo 蔣經國, was elected in 1978. In 1987, shortly before his death, Chiang lifted martial law, which made full democratization possible.

The late 1970s and early 1980s saw the growth and evolution of the dangwai 黨外 ("KMT-party outsiders") democratic opposition movement. In December 1979, a rally in Kaohsiung sponsored by opposition leaders and Formosa magazine 美麗島雜誌 to commemorate International Human Rights Day turned into a bloody conflict between demonstrators and military police (known as the Kaohsiung Incident 美麗島事件). Many opposition figures were arrested and sentenced to long prison terms. Nevertheless, this event paved the way for a united and organized opposition to the ruling KMT. The formation of the Democratic Progressive Party (DPP) on September 28, 1986 was a landmark moment in Taiwan's progression towards multi-party democracy.

Chiang Ching-kuo's successor, Lee Teng-hui, continued to reform the rigid political system that had been in place during decades of civil war and martial law. Under his administration, press freedoms were respected, opposition political parties developed, visits to China increased dramatically, and the Constitution was revised to allow for the popular election of all legislators and the president.

Taiwan's first direct presidential election was held in 1996, and KMT incumbent Lee Teng-hui was re-elected. But the real test of Taiwan's democratic progress came with the first transfer of power in March 2000. DPP candidate Chen Shui-bian won the second presidential election, ending the KMT's half-century hold on the presidency. This blossoming of Taiwan's democracy after decades of germination and growth was truly a historic turning point, completing the country's transformation from a one-party state to a full-fledged democracy. Chen was re-elected in March 2004. (See also Chapter 5: Democracy and the Electoral System.)

Foreign Relations

The ROC was a founding member of the United Nations (UN) in 1945. However, in 1971, the People's Republic of China (PRC) succeeded in taking the seat held previously by the ROC following the passage of UN Resolution 2758. Since then, most UN members have switched their diplomatic allegiance from Taipei to Beijing. In 1979, the United States severed diplomatic ties with the ROC and abrogated the 1954 Mutual Defense Treaty. In the absence of formal relations, the Taiwan Relations Act was passed by the US Congress to maintain substantive ties with Taiwan, including the sale of defensive weaponry to help defend Taiwan.

With the emergence of "Taiwan consciousness" and rising political and civic awareness in the 1990s, the people have had greater expectations of their government. As a result, new efforts have been made to increase Taiwan's participation in international affairs. Collectively known as pragmatic diplomacy, this policy included a revived effort to expand and consolidate formal diplomatic ties, a new campaign to re-enter international organizations, and an increased emphasis on substantive ties with the US, Japan, and Europe. These efforts have born fruit. For example, after 12 years of negotiation, Taiwan gained entry to the World Trade Organization in January 2002. Nevertheless, Taiwan's ultimate goal of gaining UN membership is still being blocked by Beijing. (See also Chapter 8: Foreign Relations.)

Cross-strait Relations

Relations with China were forbidden during the martial law period. As Taiwan prospered economically and the mainland undertook radical reforms to open to the outside world, the reasons for martial law were no longer seen as valid. In 1987, Taiwan officially permitted its citizens to visit their relatives in China. Since then, cross-strait ties have grown rapidly.

During the 1990s, the two sides carried out consultations through two private organizations, Taiwan's Straits Exchange Foundation (SEF) 海峽交流基金會 and China's Association for Relations Across the Taiwan Straits (ARATS) 海峽兩岸關係協會, which met intermittently to discuss matters concerning cross-strait civil affairs, such as the extradition of hijackers and those from China who enter Taiwan illegally and solutions to fishing disputes. However, consultations were interrupted when Beijing test-fired missiles into waters near Taiwan following President Lee Teng-hui's visit to the US in 1995 and prior to Taiwan's first direct presidential election in 1996. Tensions also increased after President Lee described the cross-strait relationship as a "state-to-state" relationship in 1999.

Cross-strait relations entered a new era following Chen Shui-bian's victory in the 2000 presidential election. In addition to pledges to maintain the status quo, the DPP-led government has extended many olive branches to Beijing, calling for talks to set up a peace and stability framework for cross-strait interactions. The administration liberalized measures in trade, investment, and tourism. It also allowed cross-strait charter flights on special holidays and sea transportation links between Taiwan's outlying islands and China. The PRC, however, still refuses to renounce the use of force against Taiwan and has been increasing its military deployment along its southeastern coast. In 2005, China's National People's Congress passed an "anti-separation law" (the so-called anti-secession law), which provides China with a legal pretext to forcefully and unilaterally change the status quo in the Taiwan Strait. Such an action poses a great threat to stability and peace in the Asia-Pacific region. About one million people in Taiwan took to the streets in March 2005 to express their opposition to China's enactment of the law. (See also Chapter 6: Taiwan-China Relations.)

Related Websites
Academia Sinica：	http://www.sinica.edu.tw
Academia Historica：	http://www.drnh.gov.tw
Taiwan Historica：	http://www.th.gov.tw