The Economic System of Taiwan: An Analysis

What is the economic system of Taiwan? The economy of Taiwan is based on a mixed economy, that resembles a market economy. The country’s economic system combines elements of a market economy and a planned economy, individuals are free to work, produce, consume, and invest in any way they please.

In Taiwan, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of specific goods and services. No country is purely capitalist or purely communist.

What do the freedom indexes tell about the economic system of Taiwan?

Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, Taiwan is ranked 6th globally and 3rd in Asia-Pacific indicating that the country has a free economy.

In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. Taiwan gets a score of 94/100, which qualifies it as Free.

Taiwan is a country where the government does not control what people do for political reasons, and people have the freedom to choose (what, how much, and how to produce, whether to buy or not, selling price, etc.)

What do the biggest companies in Taiwan say about the country’s economic system?

The biggest company in Taiwan should also be looked at, as well as whether it is a state-owned or private company. In this case, Taiwan Semiconductor is a leading semiconductor manufacturer from Taiwan, providing advanced ICs and solutions for a wide range of applications.

The Taiwan Semiconductor Manufacturing Company (TSMC) is predominantly owned by foreign investors. However, the central government of Taiwan holds the position of the largest shareholder. Source

It shows how the biggest companies in the country are owned by private investors but also have direct support from the government.

More: Top 10 Biggest companies by revenue in Taiwan

The historical factors that have influenced the economic system of Taiwan

Taiwan’s mixed economy system results from a combination of government intervention, market forces, and foreign investment.

The government has implemented policies to promote economic growth, such as tax incentives, subsidies, and infrastructure investment. Foreign investment has also played a role in Taiwan’s economic development, providing capital and technology to the country.

Additionally, market forces have driven the economy’s growth, with the private sector playing a major role in the country’s development.


The Economic System of Taiwan An Analysis


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