PESTLE Analysis of Taiwan

PESTLEanalysis Team
PESTLEanalysis Team
PESTLE Analysis of Taiwan
Table of Contents
Table of Contents

Our PESTLE Analysis of Taiwan investigates the political, economic, social, technological, legal and environmental factors affecting the country.

If you love having street food, then Taiwan is the best place for you since Taiwan is famous for its street food.

Besides street food, Taiwan has other tourist attractions, such as its famous Pingxi Sky Lantern Festival. Besides its unique culture, Taiwan is also a hub for electrical equipment manufacturing.

Looking at the diversity of Taiwan, we have decided to conduct the PESTLE Analysis of Taiwan. However, before we proceed to the PEST analysis, let's look at Taiwan's history.

Photo by Jimmy Liao

Taiwan has a history of 30,000 years. However, the rest of the world hardly knew about it. Taiwan is an island 180 km away from China. Even the Chinese emperors knew little about Taiwan.

In 1544 a Portuguese visited Taiwan and named it a "beautiful island." Later, Dutch established a colony in Taiwan, where they began to trade cloth, spices, and other products. However, the Dutch were later attacked and forced to leave Taiwan by a Chinese Ming Dynasty supporter.

In 1683, China included Taiwan in its empire. Although Taiwan was a part of the empire, it was neglected by the Chinese emperors. As a result, Taiwan had lawlessness and a high crime rate.

In the late 19th century, Taiwan seemed attractive to the West and Japan. As a result, people from various countries started taking asylum in Taiwan to avoid their arrest. Taiwan gained the status of a province in 1885.

This became possible because the French took over two cities in Taiwan, due to which China paid attention to Taiwan. So it started developing infrastructure in Taiwan, such as forts and railways, to avoid the invasion.

Soon after becoming a province of China, a war broke out between Japan and China, due to which Japan invaded Taiwan. It crushed the guerilla fighters and took complete control of the island.

Japan spent money on healthcare in Taiwan and also developed infrastructure. However, people were unhappy with the Japanese invasion since it took control of Taiwan's natural resources. A few decades later, an uprising started against the Japanese army. However, all the freedom fighters were crushed.

In World War 2, Taiwan acted as a staging base for Japan. Moreover, men from Taiwan fought in the Japanese army, and prisoners of war were kept in Taiwan. However, Japan gave up Taiwan after losing the war and became part of the Republic of China.

The government provided great incentives to the farmers of Taiwan that changed their lives forever. As a result, many farmers set up their factories. As a consequence, the quality of life improved for the people of Taiwan. Now they had vehicles and were living a good life.

Later, Chiang Ching became Taiwan's president and ensured democracy prevailed in Taiwan. Then, in the 1980s, Taiwan observed an economic boom and started manufacturing tech-related products.

In 1997, Taiwan experienced the Asian financial crisis. Still, Taiwan managed to survive that and kept moving forward. As a result, in 2021, Taiwan's GDP was recorded to be $774.70 billion.

Now that we have analyzed the history and the current situation of Taiwan let's take a look at what PESTLE Analysis is.

PESTLE analysis is a tool that businesses often use to highlight the external factors affecting business operations, industries, and countries. In this section, we will examine how different external factors impact Taiwan. So let's proceed with our PESTLE Analysis of Taiwan.


Political Factors Affecting Taiwan

Political factors are the factors that are related to the government and its policies. In this section, we will analyze the political factors that impact Taiwan.

The political tension between Taiwan and China affects Taiwan significantly. This political tension is China's claim that Taiwan is still a part of China.

Due to this, a hostile environment exists between Taiwan and China, and other countries, such as the USA, also chip in to worsen the situation.

As a result, the threat of war persists between Taiwan and China. Naturally, this threat impacts Taiwan's trade with China. Moreover, foreign investors perceive this threat very seriously. Hence, they hold back from investing in Taiwan.

Moreover, political stability affects Taiwan significantly. Like any other country, Taiwan needs political stability to prosper. Taiwan has been fortunate enough to have a continuous democracy since 1987. Such political stability has resulted in Taiwan's progress.

Besides that, government policies impact Taiwan directly. For example, suppose the government imposes a high tax rate on businesses. People will get discouraged from doing business. On the contrary, if the government provides incentives and subsidies to businesses, the number of businesses in Taiwan will increase. 

Furthermore, the government's trade policy affects Taiwan's operations significantly. For example, Taiwan exports electrical equipment but imports machinery to make those products. Suppose the government imposes a ban on the import of machines, the exports of Taiwan might fall too.

Economic Factors Affecting Taiwan

Economic factors are the factors that account for a country's economy. This section will highlight the economic factors that affect the operations of Taiwan.

Taiwan is greatly impacted by the interest rate in the country. High-interest rates discourage people from spending money and encourage them to save. Hence, high-interest rates in Taiwan would slow down economic activity, and economic growth would be impacted adversely.

However, if the interest rate is low, businesses would be keen to take loans from the bank for investment. This would increase economic activity and increase employment in the country.

Moreover, exchange rates have a significant impact on Taiwan. Taiwan exports a significant worth of products. In 2022, its exports were worth $479.51 billion. A depreciated exchange rate would make the products of Taiwan cheap in the market, which could further increase the demand for goods produced by Taiwan.

On the other hand, Taiwan also has high imports. A depreciated exchange rate would make the imports of Taiwan expensive. Hence, its current account would be impacted adversely.

Furthermore, foreign direct investments play a vital role in the growth of Taiwan. Therefore, in case of an increase in FDI, Taiwan will observe an inflow of technology and capital which will benefit Taiwan.

Moreover, FDI will create job opportunities, which will again increase the employment level in Taiwan and the people's living standards.

Photo by Henry & Co.

Social Factors Affecting Taiwan

Social factors are linked to a country's society and demographics. In this section, we will discuss how various social factors affect Taiwan.

An increasing percentage of the elderly population is a concern in Taiwan. Currently, 17% population of Taiwan is above the age of 65 years. Yet, this number is expected to rise to 41% in a few decades.

Such a high percentage of elderly people can reduce the workforce's efficiency. Moreover, it could exert pressure on the healthcare system of Taiwan.

Moreover, education plays an important role in the growth of any country. Countries with high literacy rates have skilled labor and a higher standard of living. Currently, Taiwan has a really high literacy rate. This year Taiwan's literacy rate is recorded to be 96.1%.

Such a high literacy rate helps Taiwan produce skilled and educated labor with higher efficiency and adaptability. Besides that, unequal distribution of wealth is a problem that could create many problems for Taiwan.

Over the years, inequality in the distribution of wealth has increased in Taiwan. This could result in an increase in crimes and corruption in Taiwan.


Technological Factors Affecting Taiwan

Technology and innovation help any country to progress. Technological factors in the PESTLE analysis analyze the role of technology in the growth of any country. This section of the PESTLE analysis will examine the technological factors that affect Taiwan. 

Access to the internet is very important in today's era since the internet is now being used as a medium for businesses, education, marketing, etc. Taiwan has a high internet user rate, which provides Taiwan with a competitive advantage. In 2022, almost 91% of its population has access to the internet.

Moreover, R&D holds great significance for Taiwan. R&D is important if a country wants to be technologically advanced. Business operations in Taiwan must spend on R&D so that Taiwan leaves other countries behind in research.

Besides businesses, the government should invest in R&D institutions to give Taiwan a research-based advantage over other countries.

Additionally, digitalization would significantly reduce corruption in Taiwan because everything would then be on record. Moreover, digitalization would increase the efficiency of work.

Furthermore, shopping from e-commerce platforms can increase spending in the economy. As the people of Taiwan would start shopping online, more economic activity will take place. Hence, the economy will grow further.

Legal factors are the factors that are associated with the legal framework. In this section, we will highlight what legal factors impact the operations of Taiwan.

Taiwan has a large workforce, and it is responsible for producing goods used in local markets and exported across the globe. In short, laborers are the backbone of the economy of Taiwan.

Hence, labor laws affect Taiwan significantly. In case, Taiwan has strict labor laws where heavy fines are imposed on businesses that mistreat their employees. In that case, businesses will be reluctant to hire employees. This might result in unemployment.

Moreover, environmental regulations also impact Taiwan. Countries have started paying attention to sustainable development plans. To ensure that businesses adopt environmentally friendly practices, governments make environmental laws.

Strict environmental laws made by Taiwan can impose heavy fines on businesses emitting significant carbon emissions. This could discourage businesses from operating. Hence, the economic growth of the country would hinder.

Furthermore, strict intellectual property laws are essential to prevent counterfeit products from entering the market. Therefore, Taiwan's intellectual property laws would help it filter counterfeit products.

As a result, the image of Taiwan would improve, and its exporting goods would be considered trustworthy.

Photo by michael spadoni

Environmental Factors Affecting Taiwan

Environmental factors are factors that are associated with the environment. It takes into account environmental changes. This section will examine some of the environmental factors that impact Taiwan.

Climate change is causing natural disasters such as droughts and storms across the globe. Taiwan is also a country that might be affected by climate change. In natural disasters, the internet service might get disrupted in some areas of Taiwan.

Disruption of internet service can disrupt the operations of businesses and cause the economy to incur losses of billions of dollars.

Similarly, natural disasters could destroy infrastructure. This would also cause a significant loss to Taiwan's economy.

Moreover, Taiwan is currently facing serious water shortages. Such unavailability of water can worsen Taiwan's living conditions and discourage FDI. Besides that, poor living conditions would also discourage the workforce from migrating to Taiwan for work.

To solve this water shortage problem, Taiwan needs to adopt efficient agricultural practices and water management programs.

Other than that, countries are now taking action to adopt environmentally friendly practices and are isolating countries that aren't taking measures to protect the environment. Taiwan has to adopt environmentally friendly business practices so that it doesn't get isolated by fellow countries.


PESTLE Analysis of Taiwan: Final Word

Taiwan is a country with a remarkable history and rich culture. It has been on the map for ages. However, its significance grew gradually. Taiwan had tough beginnings. It went through multiple occupations. Finally, however, it fought its way to independence.

Taiwan is now a technologically advanced country that exports goods and services globally. One of the major exports of Taiwan is electrical equipment.

Looking at how Taiwan fought against all the odds and managed to become a competitive economy, we decided to conduct a PESTLE analysis of Taiwan to highlight the external factors impacting Taiwan.

The PESTLE Analysis framework helped us highlight various external factors that impact Taiwan. These factors provided us with further insights into the operations of Taiwan.

If you enjoyed reading this article and want to know more about PESTLE analysis, here are some examples of PESTLE analysis that will help you understand this analysis technique better.

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