It is the 8th largest in Asia and 21st-largest in the world by purchasing power parity, allowing Taiwan to be included in the advanced economies group by the International Monetary Fund.

Although aid was cut back in the 1970s, it was crucial in its formative years, spurring industrialization, and security and economic links between Taiwan and the United States were maintained.

Uncertainty about the US commitment accelerated the country's shift from subsidized import-substitution in the 1950s to export-led growth.The development of foreign trade and exports helped absorb excess labor from a decreased importance of agriculture in the economy.

[29][better source needed] Taiwan moved from cheap, labor-intensive manufactures, such as textiles and toys, into an expansion of heavy industry and infrastructure in the 1970s and then to advanced electronics in the subsequent decade.

Investments in mainland China spurred cross-strait trade, decreasing Taiwan's dependence on the United States market.

Taiwan's dependence on the United States should continue to decrease as its exports to Southeast Asia and mainland China grow, and its efforts to develop European markets produce results.

Its economy faced a downturn in 2009 due to a heavy reliance on exports which in turn made it vulnerable to world markets.

[40] In response, the government launched a US$5.6 billion economic stimulus package (3% of its GDP), provided financial incentives for businesses, and introduced tax breaks.

[40] The stimulus package focused on infrastructure development, small and medium-sized businesses, tax breaks for new investments, and low-income households.

[50] Industrial output for November 2010 reached another high, up 19.37% from a year earlier, indicating strong exports and a growing local economy.

Textiles are another major industrial export sector, though of declining importance due to labor shortages, increasing overhead costs, land prices, and environmental protection.

Taiwan is a member of the Asian Development Bank (ADB), the World Trade Organization (WTO), and the Asia-Pacific Economic Cooperation (APEC).

[94] The optoelectronics industry (including flat panel displays and photovoltaics) totaled NT$2.2 trillion in 2010, a 40% jump from 2009, representing a fifth of the global market share.

[106] Due to its strong capabilities in OEM wafer manufacturing and a complete industry supply chain, Taiwan has been able to distinguish itself from its competitors.

[108] Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) are the two largest contract chipmakers in the world,[109] while MediaTek is the fourth-largest fabless supplier globally.

[108][111] From ITRI's first 3-inch wafer fabrication plant built in 1977[108] and the founding of UMC in 1980,[112] the industry has developed into a world leader with 40 fabs in operation by 2002.

[94] Taiwan is a hub for global computing, telecommunications, and data management with a number of large server farms operating in the country.

[125] As such, agriculture became the foundation for Taiwan's economic development during early years and served as an anchor for growth in industry and commerce.

Agricultural modernization has been inhibited by the small size of farms and the lack of investment in better facilities and training to develop more profitable businesses.

[133] Although Taiwan's per capita energy use is on par with neighboring Asian countries,[134] in July 2005 the Ministry of Economic Affairs announced plans to cut 170 million tons of carbon dioxide emissions by 2025.

[137] The government has already built 155 sets of wind turbines capable of producing 281.6 MW of electricity, and additional projects are planned or under construction.

[151] Prior to its implementation, the Factory Act was the primary law governing labor affairs, but was ineffective in practice because of its narrow coverage of businesses and issues and absence of penalties for violation.

[151] Other labor issues were also regulated by the law, including contract, wage, overtime payment, compensations for occupational accidents, etc.

[154][155][156] Active labour market policies were carried out in Taiwan in the late 20th and early 21st centuries as a result of economic structural changes caused by globalization and deindustrialization.

The Employment Insurance Act of 2002 grants income security during unemployment but, at the same time, requires beneficiaries to use all available resources to find jobs.

[147] Article 25 of the Labor Standards Act upholds there will be no sexual discrimination in the conditions of workers,[160] however, because the Taiwanese culture and thus political economy traditionally "categorizes female employees as naturally marriage- and family-oriented," women are assumed to obtain employment in fields that are limited to these ideals.

[161] As a result of feminist ideals becoming more prevalent with women seeking equal work conditions in modern societies such as Taiwan, even marital status policy and immigration policy have been affected as women seek less patriarchal roles to the point where Taiwanese men have sought higher rates of transnational marriages since the 1990s.

[162] In order to promote industrial research and development, the government began establishing science parks, economic zones which provide rent and utility breaks, tax incentives, and specialized lending rates to attract investment.

[168] Over 430 companies (including many listed on TAIEX) employing over 130,000 people are located within the park, and paid in capital totaled US$36.10 billion in 2008.

[163] In addition to companies, several research institutes (including Academia Sinica) and universities have set up branches within the park with a focus on integrated circuits (ICs), optoelectronics, and biotechnology.