FORMOSA: Ten Years Later

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FORMOSA Ten Years Later One bitter December afternoon in 1949, as the Communists swarmed down through southwest China, Generalissimo Chiang Kaishek, wearing a long Chinese gown, a grey felt hat and carrying a cane, gravely took leave of the officers who were remaining behind, and took off in his C-54 for a seven-hour flight to his last place of refuge, Formosa. He found little but desolation. U.S. air raids had shattered the efficient Japanese-built factories, and food production was sagging. Morale was at its lowest ebb, for few Formosans had faith in the Nationalist government that had ruled for four years since the war, and it seemed only a matter of time before the Communists would overwhelm the island.

But with hard work, and one of the largest outlays of U.S. money abroad—more than $1 billion between that day and this, not counting extensive military equipment—Chiang's Formosa did survive, and one recent evening, the Gimo, accompanied by Madame Chiang, drove down to the heart of Taipeh to see the solid evidence of a decade of economic achievements at the First Annual Trade Fair of the Republic of China. "Hao, hao [good, good]," he said, as he passed through row after row of stalls proudly displaying Formosa-made trucks, machine tools, plastic toys—even Ivy League shirts.

In standard of living, Formosans are second only to Japan in the Far East. Model land reforms have helped raise agricultural production to 50% above prewar levels; the rice crop measured 1,894,000 metric tons last year, 680,500 tons over the 1949 harvest; canned-pineapple production has sextupled in nine years, and sugar output is up some 30%. With tripled electric-power capacity, hundreds of new factories turn out textiles, bicycles, gasoline, cement, electric motors and other modern goods.

These are impressive figures, but there are shortcomings. The U.S. still underwrites an annual trade deficit that has ranged from $70 to $90 million, and U.S. advisers fear that this will continue until the Nationalist government provides new incentives for investment in export industries. Private U.S. investors have put only $54 million into Formosa, partly because they object to the terms of Formosa's foreign-investment law, partly because of sad experience with the widespread "squeeze" system, through which some Formosan officials almost seem determined to run foreign businesses out of the country, not bring them in.

U.S. experts on the scene, pleased by the general economic improvement, nonetheless are disturbed by Formosa's high production and consumption of consumer items, which discourages capital formation. "Formosans are consuming too much, saving too little," says one U.S. expert. Formosa now has a population of more than 10 million and one of the highest rates of population increase (3.6%) in the world. Even with heavy expenditure on land reclamation and irrigation, Formosa's currently well-fed citizens will either have to cut down their eating or start importing food by the 19705.