1. Comparison of Mainland China and Taiwan
Similar pattern, different timing?

2. Comparison Land area population Mainland China ≈ U.S.
Taiwan < 1/3 Tennessee
267 times bigger
population
mainland: 1.38 billion
Taiwan ≈ Shanghai
59 times bigger

3. 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

4. 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

5. Comparison GDP (nominal or P.P.P.) Per capita GDP Exports or Imports
Mainland 20 times bigger
Per capita GDP
Taiwan 3 times bigger
Taiwan = Australia (P.P.P.)
Exports or Imports
Mainland 6+ times bigger
Taiwan > Russia

6. Time-lagged development
Land reform
Taiwan (1950s) and mainland (1970s)
economic takeoff
Taiwan (1950s- ) and mainland (1980s- )
tariff rebates
special economic zones
Taiwan (1960s- ) and mainland (1980s- )

7. 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- )

13. 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

14. Evidence from Taiwan

15. 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

16. 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

17. Evidence from mainland

18. Mainland’s export upgrading
Before 1978:
emphasis on self-reliance and inward-looking
trade based on self-sufficiency
increased exports of petroleum & raw materials
: “export substitution” growth
export of labor-intensive manufactured consumer commodities

19. 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

21. 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

22. 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