The Republic of China, better known as Taiwan, is has some of the most strange and controversial

political and diplomatic situations in the entire world.

Let me explain, at the time of publishing this video, Taiwan has only received formal

recognition from 20 of the world's countries...

And some of these countries are pretty small, like the Vatican, Tuvalu and Swaziland.

Despite all of this, Taiwan has managed to become one of the richest and freest countries

on the planet.

It has a well-equipped army and it is one of the spearheads of the United States in

South East Asia.

But, before we really get into it, let's take a look back and see where it all began:

THE GREAT CHINESE SEPARATION

The situation Taiwan finds itself in has its origin in the Chinese Civil War which took

place between 1927 and 1949.

(It was a war between the conservative forces of the Chinese Nationalist Party led by Chiang

Kai-shek and the forces of the Communist Party of Mao Tse-Tung).

On 10th December 1949, the last city, Chengdu, fell into hands of the nationalists...

The war had ended and the Communists had gotten their way.

Shortly before Chengdu fell, a plane carrying the nationalist leader, Chiang Kai-shek, left

bound for Taiwan, the last province under nationalist control…

And he didn't go alone.

(With Chiang Kai-shek, two more million people took shelter in Taiwan as well as the survivors

of the nationalist army)

Since then, and even though Mao tried to take the island back, Taiwan has received support

from the United States.

The US continued recognizing the government of the island as the legitimate government

of China up until 1979!

As a curious note, Taiwan is the only country, other than the US that has continually operated

the famous U-2 spy plane.

Their mission was to monitor Mao's China.

The CIA itself was actually in charge of conducting these operations.

1979 is an important date… at that time the United States was trying to build trust

with Beijing, in order to create some form of double envelopment against the Soviet Union.

We actually talked about this in a previous video, I'll leave a link to that in the

description...

Well, the thing is, in 1979, the President of The United States, Jimmy Carter, decided

to establish diplomatic relations with Beijing, and that meant they had to stop recognizing

the government of the Republic of China, that is, the government based in Taipei.

You see, Taiwan never declared its independence...

For years, the government in Taipei kept the considering itself as the legitimate government

of all of China.

And, of course, a country can only have, diplomatically speaking, one government.

And yep, that is how the One-China policy started and today this is supported by Washington

and most countries around the world.

This is a change, by the way, that caused Taiwan to lose its place in the UN as well

as other important international organisations.

But, it is true that the United States was still committed to the security of Taiwan.

That same year, in 1979, the American congress passed the Taiwan Relations Act.

This was a document that, among other things, reserved the option for the US to ensure the

security and defence of the island.

And since that act was passed, the US has done just that.

But as I was saying at the beginning of this video, none of these things have kept Taiwan

from being the star of one of the greatest stories of economic and social success.

THE BIG ROAR OF THE TIGER

In the 1950s, Taiwan was a very poor place…

It had a pretty rudimentary economy, where there exports were mostly basic products like

rice and sugar.

So the question at the time was: How to develop such a poor island?

Well, the Taiwanese government thought the best way to achieve success was to ensure

that the businesses on the island could sell their products all over the world.

This was considered to be the best way to open the island to the world and even encourage

savings.

Yep, it might seem counter intuitive, but this action does actually encourage saving…

In order to invest you first need to get the resources necessary to do so.

And well, they did just that.

The government of the island soon started to eliminate almost all import restrictions.

This meant that businesses could get all the products required to set up their businesses

and assembly lines without being stung by import fees.

This is sort of similar to what Singapore did.

Besides, this culture of saving added to the legal certainty of the country, and encouraged

further investment.

Soon, Taiwanese companies started to appear like mushrooms after the rain, and they exported

all kinds of products to the rest of the world.

In 1980, industrial products were already 90% of the country's exports and they were

growing an average of 30% every year!

Taiwan, dear viewer, sold all kinds of things to the world: toys, radios, bikes, socks…

everything!

And of course, as you can imagine, with that sort of situation, the per capita income didn´t

stop growing.

In just 30 years it multiplied by 5!

And with that a new Asian Tiger was born.

Now, do not think this was an easy process.

Taiwan didn´t become a democracy until the 1990s.

But, once they got freedom, the Taiwanese people, they held onto it very tightly...

Let's have a look at some examples:

Taiwan is today the eleventh freest economy in the world.

In Asia, only Hong Kong and Singapore rank better.

It is a rich country, with quite a high standard of living, and it is one of the countries

that has a significant number of civil liberties.

And, in fact, Taiwan is about to make history: “Taiwan court rules in favour of same sex

marriage in historic first for an Asian country”

So, as you can see, compared with continental China… well there really is no comparison...

In terms of per capita income, the Taiwanese are today three times richer than the Chinese,

and they are much more free.

But, alright, in spite of all this good stuff there are still some clouds on the horizon...

CLOUDS IN THE TAIWANESE SKY

The truth is that, in the last few years, the country has been going through a few things...

Salaries have been frozen for years, and in 2015, the country went through a small recession.

Since then… economic growth has been very slow.

And now the rather obvious question has to be: What exactly is happening?

Well, there are several ingredients to this rather bitter recipe which is threatening

the future of this island.

Some of this is competition from new emerging markets like China, Indonesia and Vietnam.

There is also the brain drain, the ageing population, and the close-to-broken pension

system.

The latter of these, the pension system, is the problem that, by far, concerns the government

of the island the most.

Look, for years, the pensions of public workers were inflated for political reasons.

They did this to get votes and it became really, really, expensive.

Public pensions were so inflated that they are now threatening the stability of the entire

system.

Taiwanese workers earn about $1,300 a month on average, but retired high-school teachers

receive a whopping average pension of NT$68,340 a month

As you know, bad policies turn out to be expensive.

But let's consider some of the other problems…

To continue our metaphor, the next ingredient in our recipe…

And that would be what could be called the “40-40 issue”.

So, the Taiwanese economy is very dependent on the electronic industry and commerce with

China.

Electronic goods are 40% of all their exports and China is the destination for almost 40%

of Taiwanese exports.

And now you might be wondering, so what's the problem?

Well, this dependence on electronics means that when the electronic industry or China

isn't doing well economically, Taiwan suffers too.

And that is, precisely, what has happened in the last few years.

But wait, we're not done yet…

Above all else there is a political problem which has affected the country severely and

has caused foreign investment in Taiwan to be significantly lower than that of the countries

nearby.

And, well, what is that problem?

Well, foreign investors...They are afraid of China.

THE CHINESE THREAT

That is, by far, the biggest problem Taiwan is facing.

The government of Beijing is determined to regain sovereignty over the island and in

its public declaration on the matter they state these two things:

First, that it will happen before 2049, the 100th anniversary of the People´s Republic

of China.

And second, that they are willing to use the force if Taiwan tries to declare its independence.

So, let me explain.

Taiwan could be considered an independent country from every perspective: the island

has its own president (who is democratically elected by the way), its own laws, its own

army...

However, Beijing isn't going to accept formal independence.

The most they are willing to give Taiwan, temporarily, is a status similar to the one

that Hong Kong has.

And this is serious, among other things because most Taiwanese don't feel that their identity

is tied to China.

They feel citizens of a free country, which has been independent for almost 70 years.

In fact, in 2014, when the previous government of Taiwan tried to approach Beijing to develop

a trading agreement, Taiwanese people started a revolution which eventually became know

as the Sunflower Revolution.

Hundreds of young people protested with the motto: Taiwan is not for sale!

It was exactly under this atmosphere of economic and political frustration that, in 2016, the

Democratic Progressive Party, a party whose foundations were mainly pro-independence,

won the legislative and presidential elections...

Tsai Ing-Wen, not the closest politician to Beijing, became the first female president

of Taiwan.

And even though the economy was the most crucial factor, Beijing didn´t like this election

at all.

They disapproved of it so much that they decided to start harassing Taiwan again...

(In 2017 and up to now, the Chinese tourism to Taiwan has been reduced by a 40%, Beijing

has convinced two countries, Panama and Sao Tome to stop recognizing Taiwan, and it is

blocking the presence of the island in many international forums).

For now, there have been no economic retaliation, but the island know that they could be in

line for a severe blow.

That is why one of the priorities of the new government is to open up to new markets as

soon as possible.

So, now you might be wondering, where is the US?

This is a Visual Politik video after all, we've got to mention the US at some point,

right?!

So where are they?

Well, for now their support seems to remain intact.

In fact, Trump's administration has approved a new weapon sale to Taiwan worth $1.5 billion.

Trump Administration Approves Its First Arms Sale to Taiwan.

And, on top of that, the powerful Senate Armed Services Committee in the United States allowed

navy ships to use Taiwanese ports, and they did so with a majority of votes from both

the Democratic and the Republican Parties.

If both chambers finally approve that decision, you can bet that Beijing is going to be pretty

annoyed…

But, what is Washington's objective?

Well, that would be to try and prevent Beijing from even thinking about a military invasion

of Taiwan.

So, that's it for now.

Here at VisualPolitik we are going to keep a close eye on Taiwan as the situation develops.

But now it's your turn.

What do you think the future of Taiwan will hold?

You can leave you opinion in the comments below as well as in this survey.

So I really hope you enjoyed this video, please hit like if you did, and don't forget to

subscribe if you haven't already, brand new videos every Monday and Thursday.

And don't forget to check out the Reconsider Media podcast - they provided the vocals in

this episode that aren't mine.

And as always, I'll see you in the next video.