The Historical Influences
in Taiwan and South Korean
Economic Systems

by Ling-Ya Hong




 Economic system is a reflection of a nation’s history, characteristic, natural resources, and political policies.  Therefore, when two countries, such as South Korea and Taiwan, share a similar historical background, it is not to determine these two countries to have similar economic systems.  Although South Korea and Taiwan reflect the Japanese-colonial influence in the development of economic systems, due to their differences in natural resources and tradition, these two countries hold different aspects in their current economic systems.  In Asia, Taiwan and South Korea are two remarkable cases to study the importance of the many factors in forming an economic system.

Major historical events are the essence in the development of a country’s economic system.  Both Taiwan and Korea were under the Japanese Colony before the year 1945, and developments during these colonial periods are major in shaping the structure of Korean and Taiwanese economic systems.

 Japan invaded Taiwan in 1895 and started to rule Taiwan for 50 years till 1945.[1]  Since Taiwan is a tropical island, it has rich natural resources in terms of agriculture.  Japan enhanced the Taiwanese agriculture during the colonial period, which preset Taiwan’s economy in export.  The Japanese colonial period ended by the entry of Chiang Kai-shiek with Guomingdang in 1945, a tragic historical period for Taiwanese, which is also known as the 228 Massacre.  Taiwan has a long history under other countries invasion and colonization, which plays an important effect in building a national characteristic as “strong in forbearance but weak in talking bold action.”[2]  Even until today, Taiwan continuously seeks international recognition as a country apart from China.

Korea was also under the Japanese colonization for 35 years began 1910 and ended in 1945.  Korea had a backward agricultural economy before Japanese invasion, and Japan later introduced a modern blend of industrial capitalism.[3] During the Japanese colonization, there were non-stop protests again the Japanese Colonization, which is a major difference between Taiwan and Korean during the Colonial period.  The Japanese power ended in petition by the US and the Soviet Union in 1945.  Liberation and Korean War from 1950 to 1953 is another major historical event that helped to shape today’s Korea.  Korean War split Korea into the Republic of Korea, South, and the Democratic People’s Republic of Korea, North. [4]    Taiwan and South Korea reflect these historical experiences in their national characteristics, both have strong determination in liberation and building national identity. 

Taiwan continuously seek international recognition as a country, therefore it strives to earn membership in global organizations such as World Trade Organization (WTO).  “The government hoped to use entry into WTO and other international organiztions as a way of enhancing its international stature in face of unrelenting pressure from the People’s Republic of China.”[5]  Due to this incentive, Taiwan works its way from a Industrialized Economy to an Advanced Economy as a tool to earn a higher status internationally.  Besides the tremendous success in developing economic systems, Taiwan is recognized by the world in the 1900s of it’s rather violent behavior between representatives of legislation.  Before the presidential election in 2000, Guomingdang controlled Taiwan as a continuous brutal suppression to Taiwanese like the Japanese did before 1945.  Therefore, Democratic Progressive Party first started to rebel Guomingdang in the 1900s.[6]

As for South Korea, although it also experienced the Japanese colonization, it already won its liberation over North Korea and gained its status as a country internationally.  Therefore, it is unlike Taiwan that it has to fight for its international recognition; it is on continuous struggle through Asian economic crisis.  Although South Korea is officially separated from North Korea politically, they remain to be enemies.[7]  “Through military, economic and political means, North and South Korea have been waging a competitive struggle for prestige, legitimacy and survival for more than five decades.”[8]  South Korea also continuously strives to distinguish its identity from North Korea by distinct performances in economy, also some South Korean are known to be one of the best in particular profession such as musicians and scientists.

 Still today, both Taiwan and South Korea strive to gain global recognition through their economic performances.  And these two countries successfully became one of the Asian countries with GDP per head of over $15,000UDS. 

The major differences in South Korea’s and Taiwan’s economic conditions is how South Korea is a big business economy and Taiwan is a small-medium enterprise economy.  There are three indicators in determining this conclusion:

1)      the production totals of large-scale firms (over 500 employees) as a percentage of national production was 45.3% for South Korea and only 26.8% in Taiwan in 1993.

2)       The total sales of corporations in the top 5, 10, and 50 listings as a percentage of GNP was 47.6%, 58.8% and 79.9%(1991) for the South Korean economy, while the numbers were much lower at 17.8%, 23.2% and 36.4% (1990) in Taiwan’s case. 

3)      Exports of small and medium enterprises as a percentage of total exports, was 37.7% for South Korea and 67.1% for Taiwan in 1987. [9]


The big business economy in South Korea becomes one of the major effects on its trough during economic crisis.  More so, in the 1990s, the government, desperate to avoid failures due to large wage rises, instructed banks to crop up large firms.  However, Asian crisis knocked the country sideway in spite of the government’s action.[10]  One advantage of the South Korean economic system is its series of Five-year plan that began in 1962.  Because of this five-year plan, South Korea is able to adjust its policies and direction in improving and correcting its economic system.  Therefore, South Korea can quickly respond to recover from economic trough and imbalances in the geographical distribution of industry throughout South Korea.[11]

Taiwan, comparing to South Korea, is a much small-medium company economy; more so, it used to be an export-led economy.  In the 1970s and 1980s, Taiwan is recognized as a label on the back of merchandizes, “Made In Taiwan.”  Beginning in the early 1960s, a combination of export-led growth, heavy investments in education and infrastructure, macro-economic stability, and state guidance, particularly in electronics, resulted in a combination of economic growth, equity and structural transformation that gained attention throughout the world.”[12]  Until now, Taiwan remains to have “a dynamic capitalist economy with considerable government guidance of investment and foreign trade and partial government ownership of some large banks and industrial firms. Real growth in GNP has averaged about 9% a year during the past three decades. Export growth has been even faster and has provided the impetus for industrialization. Inflation and unemployment are remarkably low.”[13] This is the economic transition that Taiwan progressed since post-war, it transitioned from agricultural to industrial, and from traditional to modern, and from backward to advanced economy. Therefore, foreign trade is an important factor in the progress of Taiwanese economy.[14] 

 Due to the historical similarities of Taiwan and South Korea, both countries transitioned from less-developed countries to developed countries.  This includes its transition in economic structure and citizens’ education and perspectives.  This also leads to a greater improvement in their standard of living with higher income.

 The improvement in standard of living can be recognized by the growth of a nation’s GDP per head because this indicates that each person earns a higher income.  Since 1970, South Korea and Taiwan have the considerably fastest growing in GDP in Asia.[15]  Growth in GDP represents the improvement in standard of living, and from statistics, it is obvious that Taiwan and South Korea had a tremendous improvement in their standard of living.  GDP is one indicator to observe the change in standard of living. However, it is much obvious when overlooking the change of life-style and customers’ purchasing power through a span of time, like 30 to 40 years.

As a Taiwanese, I heard and observed immense changes through the past 20 years.  Taiwan’s capital, Taipei progressed a great city structure gradually to become a international city, which attracts foreign investors and over-sea companies.  Although many can argue that this change is a natural phenomenon due to the advance technologies, it is undeniable that Taiwan is famous for its electronic and computer advanced skills. 

 Both South Korea and Taiwan transitioned from an agricultural economy to modern economy, which can be viewed from several perspectives.  One is through the purchasing power, and ability in higher expanses.  Clothing shops and malls are the major places to observe the increase in customer’s purchasing power.  In both countries, there is a rapid increase in the number of name-brand clothing shops, such as European and American brands.  The increase in purchasing power indicates the increase in income and the growth of the economy.  Numerical statistics provides much accurate information on the improvement in stand of living.   In 2000, GDP per head in USD in Taiwan is $13,900 and $9,670 in South Korea.[16]  Also, there are an increasing number every year for South Korean and Taiwanese to go to other countries to pursue higher education.  Facts and observations mentioned above are proves of the improvement in standard of living.  And these two countries are also gaining its international recognition through their increase in standard of living.

Taiwan and South Korea are two major Asian countries that made tremendous progress after post-war; they successfully transitioned from agricultural economy to modern economy.  They have similarities historically, and they made similar progress to today’s success.  However, it is uncertain to tell if these two countries will head to the same direction in the future due to their economic structure.  There is one thing we know about these two countries: they both strive to gain global recognition, and they are not far from it.


[1] Ka, Chih-ming, “Japanese Colonialism in Taiwan”, Westview Press, Inc. 1995 

[2] Chang, Yen-hsien, “Toward a new 21st century Taiwan,” 2002

[3] “South Korea: The Japanese Role in Korea’s economic development” 1990

[4] “Factsheet: Background” South Korea, 2000

[5] Noble, Gregory W. “From island factory to Asian centre: Democracy and deregulation in Taiwan” The Australian National University, Camberra, Australia 1997 page 3

[6]“Toward a new 21st century Taiwan”

[7] “Factsheet: Background” South Korea, 2000

[8] Bridges, Brian “Korea after the Crash” Routledge, London, England 2001, Page 90

[9] Ahn, Byong-Jick, “Industrialization in the colonial period: A comparison of Korea and Taiwan”

[10] “Yesterday’s war, tomorrow’s peace” Survey: South Korea, 1999

[11] “South Korea: Economic plans” 1990

[12] Noble, Gregory W. page 2

[13] “Taiwan: Economy” CIA fact book, 1996

[14] Kuo, Shirley W, Y., “The Taiwan economy in transition” Westview Press, Boulder, Colorado 1983, page 1,2

[15] Asia’s new high-tech competitors,“Growth in Real GDP” figure 16

[16] “Economic data: Taiwan; South Korea” 2002





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