Taiwan has a developed capitalist economy that ranks as the 19th largest in the world by Purchasing power parity (PPP) ,ranks as 18th in the world by gross domestic product(GDP) at purchasing power parity Per capita(person) and 24th in nominal GDP of investment and foreign trade by the Republic of China (ROC) government which governs Taiwan. In keeping with this trend, most large government-owned banks and industrial firms have been privatized. Real growth in GDP has averaged about 8% during the past three decades. Exports have grown even faster and since World War II, have provided the primary impetus for industrialization. Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world's fourth largest. Agriculture contributes 3% to GDP, down from 35% in 1952, and the service sector makes up 73% of the economy. Traditional labor-intensive industries are steadily being moved off-shore and replaced with more capital- and technology-intensive industries, as well as creative industries.

Taiwan (ⁱ/ˌtaɪˈwɑːn/ TY-WAHN; Chinese: 臺灣 or 台灣; pinyin: Táiwān; see below), officially the Republic of China (ROC; Chinese: 中華民國; pinyin: Zhōnghuá Mínguó), is a state in East Asia. Originally based in mainland China, the Republic of China now governs the island of Taiwan (formerly known as Formosa), which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu, and other minor islands. Neighboring states include the People's Republic of China to the west, Japan to the east and northeast, and the Philippines to the south. Taipei is the capital city and economic and cultural centre of the country, and New Taipei is the most populous city.

The earliest evidence of inhabitation of Taiwan dates back to the late Paleolithic era. The island of Taiwan was mainly inhabited by Taiwanese aborigines before being colonized in the 17th century by the Dutch and the Spanish Empire. The first Han Chinese polity on Taiwan began when Koxinga's troops defeated Dutch forces and established the Kingdom of Tungning. The island was subsequently ruled by the Qing Dynasty after the kingdom's defeat in the Battle of Penghu in 1683, a period that lasted for over 200 years. Following Japan's victory over the Qing Dynasty in the first Sino-Japanese war, Taiwan was ceded to Japan under the Treaty of Shimonoseki in 1895.