Comparison of Mainland
China and Taiwan
Similar pattern, different timing?
Comparison
• area
– mainland: 9,596,960 km2
– Taiwan: 35,980 km2
• population
– mainland: 1.35 billion
– Taiwan: 23 million
Political similarities
• Chinese Communist Party (CCP)
– Marxism-Leninism and Mao Zedong Thought
– “Deng Xiaoping Theory”
– “Three Represents”
• Nationalist Party (KMT or GMD)
– the “three principles of the people”
• both CCP & KMT borrowed party-building
principles from Soviet Union in 1920s
Political similarities
• Leninist party-state in mainland and
Taiwan
– political liberalization in Taiwan since 1980s
• organizational principles of party-state
– party as the guardian of the people
– strict party hierarchy and discipline
• no organized opposition to party
leadership is allowed
Comparison
• P.P.P. GDP (2004-2014)
– mainland
• $7 trillion to $18 trillion
– Taiwan: $0.6-1.1 trillion
• trade volume (2004-2014)
– mainland
• $1.1 trillion to $4.3 trillion
– Taiwan: $0.3-0.6 trillion
Time-lagged development
• Land reform
– Taiwan (1950s) and mainland (1970s)
• economic takeoff
– Taiwan (1950s- ) and mainland (1980s- )
• tariff rebates
– Taiwan (1950s- ) and mainland (1980s- )
• special economic zones
– Taiwan (1960s- ) and mainland (1980s- )
Time-lagged development
• Promotion of small and medium size
enterprises
– Taiwan (1960s- ) and mainland (1980s- )
• depreciation of currency exchange rate
• differences
– decentralization in mainland (1980s- )
– foreign direct investment in mainland (1980s- )
• significantly contributed to export upgrading
• technology-oriented selection criteria (1995- )
Taiwan's Currency Exchange Rate (per US$)
45
40
35
30
25
20
15
10
5
0
1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974
-5
-10
-15
-20
-25
-30
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
19
75
19
73
19
71
19
69
19
67
19
65
19
63
19
61
19
59
19
57
19
55
19
53
Taiwan & Mainland's GDP Growth Rate
25
20
15
10
5
0
Taiwan's GDP Structure 1984-2002
100%
service
90%
80%
70%
60%
50%
industry
40%
30%
20%
10%
agriculture
0%
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Export dynamics
• Continuous upgrading in the structure of
exports
– inclusion of more sophisticated commodities
– development of new markets
– growth in export volume
• structural changes cause the growth in
export volume
Evidence from Taiwan
Taiwan’s export upgrading
• 1940s: agricultural exports
– import manufactured consumer goods
• 1950s: import substitution growth
– export of processed agricultural commodities
– import decreasing share of manufactured
consumer goods
• 1960s: export diversification growth
– export of processed agricultural and industrial
commodities
Taiwan’s export upgrading
• 1960s: export diversification growth
– import food, manufactured consumer goods
and producer goods
• 1970s: import & export substitution growth
– increasingly sophisticated commodities
• after 1986
– exports of labor-intensive goods decrease
– exports of hi-tech products increase
Evidence from mainland
Mainland’s export upgrading
• Before 1978:
– emphasis on self-reliance and inward-looking
– trade based on self-sufficiency
• 1978-1985
– increased exports of petroleum & raw
materials
• 1985-1995: “export substitution” growth
– export of labor-intensive manufactured
consumer commodities
Mainland’s export upgrading
• after 1995: further diversification
– attempt to export more sophisticated
commodities
• exports of hi-tech product
– total US$661 billion in 2014
– 28% of total exports from mainland
– 73% are exported by foreign-invested
enterprises
– less innovation-driven than in Taiwan
Market share development
• Flying-geese model
– more advanced economies lose comparative
advantages in labor-intensive industries
– movement of industries through foreign direct
investment
– does not seem to hold true for manufactured
commodities that require
• high research and development (R&D) expenditure
• rapid product and process innovation
Export of office machinery
• Can’t be explained by flying-geese model
• Taiwan became major developer,
producer, and exporter
• special case
– 1 category
– 8 years