This study of economic growth in Taiwan covers the 1950-1985 period, predating the financial crisis in Asia in 1997 which caused severe economic slump in countries like South Korea and Thailand while it spared others, including Taiwan. Taiwan's economic miracle began early under the KMT government, which put down the foundation for economic development that led to today's economic growth. Author Yongping Wu, an associate professor at the School of Public Policy and Management at Tsinghua University in Beijing, begins his political study of Taiwan's economy by saying, "Taiwan is a classic case of exported-led industrialization." While large corporations dominated the economies of South Korea and Japan, Taiwan's successful exporters were mostly small and medium-sized enterprises (SMEs) while its large firms provided the products for domestic consumption. The SMEs became the engine of the entire economy in Taiwan even though the SME sector did not fully get the attention from the government when it designed the strategy for economic development. The attention was on large industries and government's industrial policies had very little impact on firms in small-scale economic sector. Compare with South Korea and Japan, the author says the significance of SMEs in Taiwan is even more striking. In Japan, conglomerates contributed a great part of the gross national products and provided final products for exports. In South Korea, ten business groups generated 70 percent of exports. The author says the success in Taiwan's SMEs can be explained by its unique industrial structure and the attitude of the KMT government which distanced itself from SMEs. There was almost no direct link between the state and the SMEs sector. The author says the KMT was an "émigré regime" a reference to the fact that Nationalist troops under Chiang Kai-shek came to Taiwan in 1949 after their defeat at the hands of the communist troops in the mainland. In Taiwan, the KMT faced a population that was 80 percent native Taiwanese. The KMT carried with it a structure inspired by autocratic Leninist principles. It had an anti-business mentality and preferred to be its own economic actor rather than to rely on the native and private Taiwanese economy.

"The role of the KMT state in economic development was related to the nature of the KMT regime," the author writes. "Special historical and international contexts helped the KMT build a unique state on Taiwan. The new state was politically strong (in terms of organization and ideology) and economically independent (because of the huge public sector), and it was an émigré regime."

The KMT was successful because it inherited from Japan a big bureaucracy that was strongly organized and endowed with ideology in contrast to a weak private sector preferred by the Japanese. Japan colonized Taiwan for 50 years until its defeat in World War II. The Japanese occupation resulted in weak and poorly organized local elite that was unable to mount an effective opposition to the rulers. Under such circumstances, the KMT was allowed to fill up the political vacuum, reform the society and rebuilt the state. It favored large, state-owned firms, which monopolized the domestic market. The US also helped the KMT's economic development with large financial assistance, particularly right after the start of the Korean War in 1950. Studies have shown that US economic assistance to Taiwan in the early 1950s was more significant than had been thought, in part because of Washington's desire to counter the communist expansion in Asia after Chinese troops helped North Koreans to invade South Korea. The communist troops fought the United Nations forces under US command in Korea. The success of Taiwanese small and medium enterprises can be attributed to many factors. The author says that the success resides on the country's unique industrial structure, which has made it possible for SMEs to flourish in the export markets. Perhaps it was that situation which helped Taiwan cope with the financial crisis in 1997.