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  • Many of you have asked for this video, and to be honest we're not surprised

  • The Republic of China, better known as Taiwan, is has some of the most strange and controversial

  • political and diplomatic situations in the entire world.

  • Let me explain, at the time of publishing this video, Taiwan has only received formal

  • recognition from 20 of the world's countries...

  • And some of these countries are pretty small, like the Vatican, Tuvalu and Swaziland.

  • Despite all of this, Taiwan has managed to become one of the richest and freest countries

  • on the planet.

  • It has a well-equipped army and it is one of the spearheads of the United States in

  • South East Asia.

  • But, before we really get into it, let's take a look back and see where it all began:

  • THE GREAT CHINESE SEPARATION

  • The situation Taiwan finds itself in has its origin in the Chinese Civil War which took

  • place between 1927 and 1949.

  • (It was a war between the conservative forces of the Chinese Nationalist Party led by Chiang

  • Kai-shek and the forces of the Communist Party of Mao Tse-Tung).

  • On 10th December 1949, the last city, Chengdu, fell into hands of the nationalists...

  • The war had ended and the Communists had gotten their way.

  • Shortly before Chengdu fell, a plane carrying the nationalist leader, Chiang Kai-shek, left

  • bound for Taiwan, the last province under nationalist control

  • And he didn't go alone.

  • (With Chiang Kai-shek, two more million people took shelter in Taiwan as well as the survivors

  • of the nationalist army)

  • Since then, and even though Mao tried to take the island back, Taiwan has received support

  • from the United States.

  • The US continued recognizing the government of the island as the legitimate government

  • of China up until 1979!

  • As a curious note, Taiwan is the only country, other than the US that has continually operated

  • the famous U-2 spy plane.

  • Their mission was to monitor Mao's China.

  • The CIA itself was actually in charge of conducting these operations.

  • 1979 is an important dateat that time the United States was trying to build trust

  • with Beijing, in order to create some form of double envelopment against the Soviet Union.

  • We actually talked about this in a previous video, I'll leave a link to that in the

  • description...

  • Well, the thing is, in 1979, the President of The United States, Jimmy Carter, decided

  • to establish diplomatic relations with Beijing, and that meant they had to stop recognizing

  • the government of the Republic of China, that is, the government based in Taipei.

  • You see, Taiwan never declared its independence...

  • For years, the government in Taipei kept the considering itself as the legitimate government

  • of all of China.

  • And, of course, a country can only have, diplomatically speaking, one government.

  • And yep, that is how the One-China policy started and today this is supported by Washington

  • and most countries around the world.

  • This is a change, by the way, that caused Taiwan to lose its place in the UN as well

  • as other important international organisations.

  • But, it is true that the United States was still committed to the security of Taiwan.

  • That same year, in 1979, the American congress passed the Taiwan Relations Act.

  • This was a document that, among other things, reserved the option for the US to ensure the

  • security and defence of the island.

  • And since that act was passed, the US has done just that.

  • But as I was saying at the beginning of this video, none of these things have kept Taiwan

  • from being the star of one of the greatest stories of economic and social success.

  • THE BIG ROAR OF THE TIGER

  • In the 1950s, Taiwan was a very poor place

  • It had a pretty rudimentary economy, where there exports were mostly basic products like

  • rice and sugar.

  • So the question at the time was: How to develop such a poor island?

  • Well, the Taiwanese government thought the best way to achieve success was to ensure

  • that the businesses on the island could sell their products all over the world.

  • This was considered to be the best way to open the island to the world and even encourage

  • savings.

  • Yep, it might seem counter intuitive, but this action does actually encourage saving

  • In order to invest you first need to get the resources necessary to do so.

  • And well, they did just that.

  • The government of the island soon started to eliminate almost all import restrictions.

  • This meant that businesses could get all the products required to set up their businesses

  • and assembly lines without being stung by import fees.

  • This is sort of similar to what Singapore did.

  • Besides, this culture of saving added to the legal certainty of the country, and encouraged

  • further investment.

  • Soon, Taiwanese companies started to appear like mushrooms after the rain, and they exported

  • all kinds of products to the rest of the world.

  • In 1980, industrial products were already 90% of the country's exports and they were

  • growing an average of 30% every year!

  • Taiwan, dear viewer, sold all kinds of things to the world: toys, radios, bikes, socks

  • everything!

  • And of course, as you can imagine, with that sort of situation, the per capita income didn´t

  • stop growing.

  • In just 30 years it multiplied by 5!

  • And with that a new Asian Tiger was born.

  • Now, do not think this was an easy process.

  • Taiwan didn´t become a democracy until the 1990s.

  • But, once they got freedom, the Taiwanese people, they held onto it very tightly...

  • Let's have a look at some examples:

  • Taiwan is today the eleventh freest economy in the world.

  • In Asia, only Hong Kong and Singapore rank better.

  • It is a rich country, with quite a high standard of living, and it is one of the countries

  • that has a significant number of civil liberties.

  • And, in fact, Taiwan is about to make history: “Taiwan court rules in favour of same sex

  • marriage in historic first for an Asian country

  • So, as you can see, compared with continental Chinawell there really is no comparison...

  • In terms of per capita income, the Taiwanese are today three times richer than the Chinese,

  • and they are much more free.

  • But, alright, in spite of all this good stuff there are still some clouds on the horizon...

  • CLOUDS IN THE TAIWANESE SKY

  • The truth is that, in the last few years, the country has been going through a few things...

  • Salaries have been frozen for years, and in 2015, the country went through a small recession.

  • Since theneconomic growth has been very slow.

  • And now the rather obvious question has to be: What exactly is happening?

  • Well, there are several ingredients to this rather bitter recipe which is threatening

  • the future of this island.

  • Some of this is competition from new emerging markets like China, Indonesia and Vietnam.

  • There is also the brain drain, the ageing population, and the close-to-broken pension

  • system.

  • The latter of these, the pension system, is the problem that, by far, concerns the government

  • of the island the most.

  • Look, for years, the pensions of public workers were inflated for political reasons.

  • They did this to get votes and it became really, really, expensive.

  • Public pensions were so inflated that they are now threatening the stability of the entire

  • system.

  • Taiwanese workers earn about $1,300 a month on average, but retired high-school teachers

  • receive a whopping average pension of NT$68,340 a month

  • As you know, bad policies turn out to be expensive.

  • But let's consider some of the other problems

  • To continue our metaphor, the next ingredient in our recipe

  • And that would be what could be called the “40-40 issue”.

  • So, the Taiwanese economy is very dependent on the electronic industry and commerce with

  • China.

  • Electronic goods are 40% of all their exports and China is the destination for almost 40%

  • of Taiwanese exports.

  • And now you might be wondering, so what's the problem?

  • Well, this dependence on electronics means that when the electronic industry or China

  • isn't doing well economically, Taiwan suffers too.

  • And that is, precisely, what has happened in the last few years.

  • But wait, we're not done yet

  • Above all else there is a political problem which has affected the country severely and

  • has caused foreign investment in Taiwan to be significantly lower than that of the countries

  • nearby.

  • And, well, what is that problem?

  • Well, foreign investors...They are afraid of China.

  • THE CHINESE THREAT

  • That is, by far, the biggest problem Taiwan is facing.

  • The government of Beijing is determined to regain sovereignty over the island and in

  • its public declaration on the matter they state these two things:

  • First, that it will happen before 2049, the 100th anniversary of the People´s Republic

  • of China.

  • And second, that they are willing to use the force if Taiwan tries to declare its independence.

  • So, let me explain.

  • Taiwan could be considered an independent country from every perspective: the island

  • has its own president (who is democratically elected by the way), its own laws, its own

  • army...

  • However, Beijing isn't going to accept formal independence.

  • The most they are willing to give Taiwan, temporarily, is a status similar to the one

  • that Hong Kong has.

  • And this is serious, among other things because most Taiwanese don't feel that their identity

  • is tied to China.

  • They feel citizens of a free country, which has been independent for almost 70 years.

  • In fact, in 2014, when the previous government of Taiwan tried to approach Beijing to develop

  • a trading agreement, Taiwanese people started a revolution which eventually became know

  • as the Sunflower Revolution.

  • Hundreds of young people protested with the motto: Taiwan is not for sale!

  • It was exactly under this atmosphere of economic and political frustration that, in 2016, the

  • Democratic Progressive Party, a party whose foundations were mainly pro-independence,

  • won the legislative and presidential elections...

  • Tsai Ing-Wen, not the closest politician to Beijing, became the first female president

  • of Taiwan.

  • And even though the economy was the most crucial factor, Beijing didn´t like this election

  • at all.

  • They disapproved of it so much that they decided to start harassing Taiwan again...

  • (In 2017 and up to now, the Chinese tourism to Taiwan has been reduced by a 40%, Beijing

  • has convinced two countries, Panama and Sao Tome to stop recognizing Taiwan, and it is

  • blocking the presence of the island in many international forums).

  • For now, there have been no economic retaliation, but the island know that they could be in

  • line for a severe blow.

  • That is why one of the