Hyperinflation prompted the introduction of the New Taiwan dollar in June 1949, shortly before the Nationalist evacuation from mainland China in December.

In 1945, after the Japanese Empire was defeated in World War II, Taiwan was handed over to the Republic of China (ROC).

Due to the Chinese Civil War in the late 1940s, Taiwan, like the rest of mainland China, suffered from hyperinflation.

The Nationalists were defeated by the Communists in December of the same year and retreated to Taiwan.

The government then declared in the Temporary Provisions Effective During the Period of Communist Rebellion that dollars issued by the Bank of Taiwan would become the new currency in circulation.