ANNUAL REPORT

358
Taiwan’s Economic Challenges
Taiwan faces many economic challenges. First among them is
the Taiwan economy’s dependence on exports, particularly to
China. (See section on ‘‘Cross-Strait Trade and Investment’’ for
more information.) The Tsai Administration seeks to shift Taiwan’s
‘‘efficiency-driven model’’ to an ‘‘innovation-driven model.’’ 10
The efficiency-driven model refers to Taiwan’s economic strategy
of linking itself to regional supply chains, primarily through
China, and expanding exports to increase growth. A Taiwan official
told the Commission that the Taiwan government wants to
collaborate with the United States, Japan, Europe, and Israel to
develop a model for innovation in Taiwan and collaborate in the
areas of research and development (R&D), human resources, and
financial capital. Taipei is also interested in expanding economic
exchanges with India by, for example, encouraging Indian engineers
to move to Taiwan and by encouraging collaboration
among Indian and Taiwan technology industries. 11 Furthermore,
the Tsai Administration is promoting the development of five
‘‘strategic industries’’: green energy, defense, the Internet of
Things, biotechnology, and smart precision machinery. 12
Access to energy is a looming concern: observers in Taiwan told
the Commission that Taiwan may face electricity brownouts by
2017 due to low energy reserves. 13 Taiwan is highly dependent
on imported energy sources to fuel its export-oriented industries.
Currently, about 98 percent of the energy that Taiwan consumes
is imported. Of that amount, the vast majority comprises fossil
fuels from the Middle East. 14 Taiwan has three active nuclear
power stations, all of which are scheduled to be decommissioned
between 2018 and 2025. 15 The state-owned electricity provider,
Taipower, financed the construction of a fourth nuclear power
station, which was set to become operational by 2015. In 2014,
however, Taiwan’s government voted to halt construction of the
plant amid protests and safety concerns following the 2011
Fukushima nuclear disaster in Japan. 16
Observers in Taiwan also told the Commission that Taiwan is
experiencing a ‘‘brain drain.’’ 17 A scholar explained that this
problem is the result of low wages, income disparity, and high
housing prices. 18
dkrause on DSKHT7XVN1PROD with USCC
Although there is no indication that developments in Hong Kong
played a role in the election outcomes in Taiwan, activists in Taiwan
are concerned about the fate of freedom and democracy in
Hong Kong and have demonstrated support for activists there. 19
More broadly, the idea of adopting Hong Kong’s ‘‘one country, two
systems’’ * framework—Beijing’s stated framework for cross-Strait
unification—as a model for Taiwan has long been unpopular among
the Taiwan public. However, J. Michael Cole, senior non-resident
* The ‘‘one country, two systems’’ framework is a policy measure adopted by the People’s Republic
of China following the establishment of Hong Kong and Macau as Special Administrative
Regions. The system grants Hong Kong and Macau the right to self-govern their economy and
political system to a certain extent, excluding foreign affairs and defense.
VerDate Sep 11 2014 14:49 Nov 01, 2016 Jkt 020587 PO 00000 Frm 00003 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2016\FINAL\09_C3_M.XXX 09_C3_M