In 1895, Taiwan (Formosa) was placed under Japanese colonial rule and it was not until 1945 that the island was returned to China. In 1927, civil war broke out on mainland China between the ruling Kuomintang (KMT) regime of Chiang Kai-shek and the Communists. In 1949, the KMT lost and the administration fled to Taiwan, continuing to claim that it was the only legitimate government of China.
Initially, the US and other major industrially developed countries maintained diplomatic relations with the Taiwanese administration, which also represented China at the United Nations (UN). However, in the early 1970s they started to normalize relations with mainland China and sever official diplomatic ties with Taipei, though preserving economic and other links, along with commitments to protect it in case of emergency. The seat at the UN was lost in 1971.
In terms of nominal gross domestic product (GDP), in 2007, Taiwan was ranked twenty-fourth on the International Monetary Fund (IMF) list. By per-capita GDP (purchasing power parity (PPP)) it was twenty-eighth—between Italy and Spain. The territory is one of the world’s largest foreign exchange reserves holders—US$290 billion as of May 2008.
Taiwan has a developed economy with a wide range of heavy and light industries. The leading sectors are the production of PCs, semiconductors, and other electronic products, chemicals and the petrochemical industry, oil refining, and the production ...