China vs. Taiwan: An Economic Comparison

China and Taiwan were once part of the same nation. After World War 2 ended, the Chinese political scene was split up between two major opponents. On one side, were the communist guerrillas led by Mao Zedong whereas, on the other side, there were people led by Chiang Kai Sheik, who believed in the market mechanism.

In the political battle that took place after the World War, the communists ended up in control of most of China. The liberals were restricted to a small island close to China called the island of Taiwan. Hence, the difference between China and Taiwan is a perfect case study for communism vs. capitalism. However, it also needs to be acknowledged that China hasn&#;t remained communist in the truest sense of the word. After the 1990s, mainland China has also been following the free market approach which has led to rampant economic growth.

The powerful state of China has no qualms about openly stating that it believes that Taiwan is a rogue state. The Chinese do not acknowledge the existence of Taiwan as a separate nation. It is very likely that China may soon go to war with Taiwan in order to annexe the state.

In this article, we will compare the two economic systems in order to find their relative prosperity.

Economic Comparison: China vs. Taiwan

  • The most obvious way of making a comparison between two countries is by using their GDP numbers. However, this approach is not viable in the case of China vs. Taiwan. This is because the sizes of their economies are very different. Mainland China is home to 1.2 billion people whereas Taiwan is home to only 23 million people.

    This is the reason why a comparison of the per capita GDP makes more sense in order to find the individual prosperity of the citizens of these nations. Here, it needs to be noted that the size of China&#;s population is 58 times greater when compared to the tiny nation of Taiwan. However, it&#;s GDP is only 10 times greater. This means that on an average, every person in Taiwan is 6 times more productive as compared to mainland China.

    It also needs to be understood that these numbers are after the Chinese growth miracle. In the past 25 years, the Chinese government has consistently clocked an astounding double-digit growth. However, even after this miracle, the Chinese are still far behind the Taiwan economy when compared on a per capita basis. This is the reason why the Taiwan economy is ranked at #39 across the world on a PPP basis whereas the Chinese economy has a rank of #135 even though it is poised to take over the United States and become the largest economy in the world.

  • The standard of living of people in Taiwan is also considerably higher as compared to the people of China. This can be seen from the fact that the unemployment rate in Taiwan is only about 4%. At the same time, China has an unemployment problem, and the rate currently hovers around 15% there. Also, it needs to be understood that a lot of Chinese companies are state-run and not making profits. If these companies shut down, the unemployment rate in China could soar even further. Also, Taiwanese have better access to infrastructure and healthcare as compared to their Chinese counterparts. The infant mortality rate in China is four times greater than it is in Taiwan. People in Taiwan also tend to live five years longer than their Chinese counterparts. Also, the number of airports in Taiwan is four times greater when compared to China on a per capita basis.
  • Taiwan also has a much lower level of wealth inequality as compared to China. Gini Index is a measure of inequality which is used worldwide. A higher number suggests higher inequality. Taiwan has been getting close to 30 in this index for many years. On the other hand, China has been getting close to 50 in this index. This is surprising given the fact that China is a communist regime which was found in order to remove inequality from Chinese society. Yet, almost five decades later, it still has more inequality than its capitalist counterpart! Even today, close to 10% of the people in China live under the poverty line and hence are finding it difficult to make ends meet. On the other hand, only about 1% people in Taiwan live under poverty. Most of Taiwan is self-sufficient from an economic point of view.
  • Lastly, corruption in China is also widespread as compared to Taiwan. The Chinese people also express having less freedom of speech or economic freedom of any kind. China&#;s freedom of speech ranks only above six other countries. Hence, as far as the developed world is considered, China provides absolutely no rights to its citizens.

The success of Taiwan is viewed by many as a triumph of a capitalist economy over a socialist one. The western media regularly uses it in order to downplay China&#;s success. This is the reason why China wants to annexe the country as soon as possible. However, it has not been able to do so since any aggression on Taiwan is likely to morph into a full-blown war.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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