2012 New History
P. O. Box 1-44, Nankang, Taipei 11529, Taiwan, R. O. C.
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The Early Development of Taiwan’s Cotton Textile Industry

Wan-wen Chu

Research Center for Humanities and Social Sciences, Academia Sinica

The textile industry was a leading sector in Taiwan’s early postwar development. This is certainly not unique among developing countries. Taiwan, however, did particularly well in developing this industry. Its performance record was exceptional in that it became self-sufficient in cotton textiles within three years after the government began its proactive promotion program, and in that it successfully developed backward and forward linkage effects. Taiwan hence developed a complete set of sub-industries in textiles, from apparels to man-made fiber. As a result, Taiwanese firms are now top global producers cum exporters in man-made fiber, even after the downstream production moved offshore. Many other developing countries also tried to promote the textile industry using import-substitution policies in the 1950s, but most did not attain self-sufficiency. For those which did attain this goal, most were not able to spread the fruits of their success to related industries, unlike Taiwan and other East Asian economies.

This article examines how and why Taiwan’s textile industry did well. It argues that, even though initial postwar conditions may have been favorable, conscious efforts were made to realize linkage effects, and that adaptive industrial policies played a crucial role in guiding the industry through various rounds of upgrading challenges. For example, the government coordinated policy incentives to develop both spinning and weaving sectors and began to promote cotton textile exports soon after the local market became saturated. It also encouraged early diversification into man-made fiber textiles and pushed to set up upstream production. Consensus among economic bureaucrats in pursuing the economy’s long-term overall development helped to set the direction of policy changes whenever new challenges occurred. There thus evolved a clear set of guidelines to coordinate the sometimes conflicting interests of existing sub-industry segments, which helped to sustain the development of the textile industry in the long run.


Keywords: Taiwan’s economic development, cotton textile industry, textile industry, industrial policy