Economy
GDP (2007): $379 billion.
Real annual growth rate (2007 estimated): 4.6%.
Per capita GDP (2007 estimated): $16,596.
Unemployment (2006) 3.9%.
Natural resources: Small deposits of coal, natural gas, limestone, marble, and asbestos.
Agriculture (1.5% of GDP): Major products--pork, rice, fruit and vegetables, sugarcane, poultry, shrimp, eel.
Services: (71.7% of GDP).
Industry (26.8% of GDP): Types--electronics and computer products, chemicals and petrochemicals, basic metals, machinery, textiles, transport equipment, plastics, machinery.
Trade (2006): Exports--$224 billion: electronics, optical and precision instruments, information and communications products, textile products, basic metals, plastic and rubber products. Major markets--U.S. $32 billion, P.R.C. and Hong Kong $89 billion, Japan $16 billion. Imports--$203 billion: electronics, optical and precision instruments, information and communications products, machinery and electrical products, chemicals, basic metals, transport equipment, crude oil. Major suppliers--Japan $46 billion, P.R.C. $27 billion, U.S. $23 billion.

TAIWAN ECONOMY
Through over five decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan dollar (NT$), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to China and Southeast Asia. Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Taiwan is now a creditor economy, holding the world's fourth-largest stock of foreign exchange reserves ($261 billion as of August 2007). Although Taiwan enjoyed sustained economic growth, full employment, and low inflation for many years, in 2001, Taiwan joined other regional economies in its first recession since 1949. The economy began to recover in 2002, but the outbreak of severe acute respiratory syndrome (SARS) slowed growth to 3.5% in 2003. The world economic upturn drove growth in 2004 to 6.2%. However, slower world growth in 2005, higher energy prices and interest rates, and excess inventory dragged 2005 growth to 4.1%. Continued expansion of exports sustained Taiwan's economic growth at 4.6% in 2006. Economic growth is expected to remain well above 4% in 2007.

Foreign Trade
Foreign trade has been the engine of Taiwan's rapid growth during the past 50 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to fluctuations in the world economy. The total value of trade increased more than five-fold in the 1960s, nearly ten-fold in the 1970s, doubled in the 1980s, and nearly doubled again in the 1990s. In the first half of this decade, exports grew 60%. Export composition changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment. Taiwan became a member of the World Trade Organization (WTO) as a special customs territory in January 2002.

Taiwan firms are the world's largest suppliers of computer monitors and leaders in PC manufacturing, although now much of the final assembly of these products occurs overseas, typically in China. Textile production continues to move to lower-cost locations overseas, but is still a major industrial export sector and employs nearly 190,000 people. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports coal, oil and gas to meet most of its energy needs. Reflecting the large Taiwan investment in China, it supplanted the United States as Taiwan's largest trade partner in 2003. In 2006, China (including Hong Kong) accounted for over 27% of Taiwan's total trade and almost 40% of Taiwan's exports. Japan was Taiwan's second-largest trading partner with 15% of total trade, including 23% of Taiwan's imports. The U.S. is now Taiwan's third-largest trade partner, taking 14% of Taiwan's exports and supplying 11% of its imports. Taiwan is the United States' ninth-largest trading partner; Taiwan's two-way trade with the United States amounted to $57 billion in 2005 and rose 7.6% to $62 billion in 2006. Imports from the United States consist mostly of agricultural and industrial raw materials as well as machinery and equipment. Exports to the United States are mainly electronics and consumer goods. The United States, Hong Kong, China, and Japan account for 61.5% of Taiwan's exports, and the United States, Japan, and China provide almost 50% of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. The U.S. trade deficit with Taiwan in 2006 was $15.2, up 19% from $12.8 billion in 2005. Even though Taiwan maintains formal diplomatic relations with about a score of its trading partners, Taiwan maintains trade offices in nearly 100 countries. Taiwan is a member of the Asian Development Bank, the WTO, and the Asia-Pacific Economic Cooperation (APEC) forum. Taiwan is also an observer at the Organization for Economic Cooperation and Development (OECD). These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.

Taiwan Agriculture Economy
Although only about one-quarter of Taiwan's land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agriculture only comprises about 1.5% of Taiwan's GDP. Taiwan's main crops are rice, sugarcane, fruit, and vegetables. While largely self-sufficient in rice production, Taiwan imports large amounts of wheat, corn, and soybeans, mostly from the United States. Poultry and pork production are mainstays of the livestock sector and the major demand drivers for imported corn and soybeans. Rising standards of living have led to increased demand for a wide variety of high-quality food products, much of it imported. Overall, U.S. agricultural and food products account for more than 30% of Taiwan's agricultural import demand. U.S. food and agricultural exports total about $2.5 billion annually, making Taiwan the United States' sixth-largest agricultural export destination. Taiwan's agricultural exports include frozen fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Taiwan's imports of agricultural products have increased since its WTO accession in 2002, and it is slowly liberalizing previously protected agricultural markets.

Economic Outlook
Taiwan faces many of the same economic issues as other developed economies. As labor-intensive industries have relocated to countries with low-cost labor, Taiwan's future development will rely on further transformation to a high technology and service-oriented economy and carving out its niche in the global supply chain. Taiwan's economy has become increasingly linked with China. Taiwan official statistics indicate that Taiwan firms had invested about U.S. $55 billion in China through 2006, which is more than half of Taiwan's stock of direct foreign investment. Many unofficial estimates put the actual number well over U.S. $100 billion. More than one million Taiwan people are estimated to be residing in China, and more than 70,000 Taiwan companies have operations there. Taiwan firms are increasingly acting as management centers that take in orders, produce them in Taiwan, the mainland, or Southeast Asia and then ship the final products to the U.S. and other markets. This process is made more difficult by the lack of direct transportation links between China and Taiwan.

DEFENSE
In proportion to its population, Taiwan still maintains a large military establishment. Defense expenditures account for 2.69% of GDP in 2007, and the 2008 central budget proposal increases defense expenditures to 3% of GDP. The military's primary mission is the defense of Taiwan against the P.R.C., which is seen as the predominant threat and which has not renounced the use of force against Taiwan. Taiwan's armed forces were reduced as part of a reform initiative from 1997 to 2001, going from about 450,000 to 385,000, with further reductions since then bringing the total force level down to just under 300,000. Registered reservists reportedly totaled 3,870,000 in 1997. Conscription remains universal for qualified males between the ages of 18 and 30. In 2007 the length of conscription service was dropped from 16 to 14 months, with a view toward eventually creating an all-volunteer force. For qualified applicants, alternative service is available in police and fire departments and public clinics, as well as through teaching in some rural schools. Applicants with advanced degrees may qualify for National Defense Service, consisting of reserve officer training followed by four years of work in a government or academic research institution.

Taiwan's armed forces are equipped with weapons obtained primarily from the United States. In recent years, however, Taiwan also has procured some weapons from other Western nations and has stressed military "self-reliance," which has resulted in the growth of indigenous military production in certain fields. In 2007 Taiwan's legislature approved funding for certain defensive weapons systems the U.S. agreed to sell Taiwan in 2001 and earlier. These included the Patriot Advanced Capability (PAC-2 upgrade) missile defense system, P-3C maritime patrol aircraft, and a preliminary study of diesel-electric submarines. These systems would give Taiwan key capabilities in missile defense and anti-submarine warfare to remedy vulnerabilities in countering the P.R.C.'s accelerated military modernization. Taiwan adheres to the principles of the nuclear Non-Proliferation Treaty and has stated that it does not intend to produce nuclear weapons.