National identities and cross-strait relations: challenges to Taiwan’s economic development

Abstract In the increasingly volatile global political order, national economic structures and international relations, integrated as they are, are showing concerning signs of strain. Taiwan, whose world-leading semiconductor industry is indispensable in Global Supply Chains and whose economic prosperity and security are critical to a stable global economic system, has received much research interest since the late 1980s. Against the background of a slowing Taiwanese economy, starting in the 2000s, this paper seeks to investigate the causes of Taiwan’s challenges and the linkages to the global economy vis-à-vis China. Based on previous research from different social science disciplines, this paper shows that Taiwan’s economic performance has been undermined by the declining effectiveness of its industrial policy and the general state intervention in the country, which is in turn caused by deep socio-political divisions on issues of national identity and Taiwan-China relations. The paper reveals the dilemma, which results from this.