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Taiwan was historically called Formosa until recent times.
The island of Taiwan (formerly known as "Formosa") was mainly inhabited by Taiwanese aborigines until the Dutch and Spanish settlement during the Age of Discovery in the 17th century, when Han Chinese began immigrating to the island.
The Qing dynasty of China later defeated all the local kingdoms and annexed Taiwan. By the time Taiwan was ceded to Japan in 1895, the majority of Taiwan's inhabitants were Han Chinese either by ancestry or by assimilation.
After Japan's surrender in 1945, the Republic of China (ROC) assumed its control of Taiwan.
Following the defeat of the nationalists on the mainland, the ROC relocated its government to Taiwan, and its jurisdiction became limited to Taiwan and its surrounding islands.
Prior to WWII, Taiwan had a largely agrarian economy. However the war caused major damage to all areas of the country, as far as its ability to sustain itself.
By 1945, hyperinflation was in progress in mainland China and Taiwan as a result of the war with Japan. To isolate Taiwan from it, the Nationalist government created a new currency area for the island, and began a price stabilization program. These efforts significantly slowed inflation.
In 1950, with the outbreak of the Korean War, the United States began an aid program which resulted in fully stabilized prices by 1952. Economic development was encouraged by American economic aid and programs such as the Joint Commission on Rural Reconstruction, which turned the agricultural sector into the basis for later growth. Under the combined stimulus of the land reform and the agricultural development programs, agricultural production increased at an average annual rate of 4 per cent from 1952 to 1959, which was greater than the population growth.
In 1962, Taiwan had a (nominal) per-capita gross national product (GNP) of $170, placing its economy on a par with those of Zaire and Congo.
Today Taiwan has a dynamic, capitalist, export-driven economy with gradually decreasing state involvement in investment and foreign trade. In keeping with this trend, some large government-owned banks and industrial firms are being privatized.
Taiwan has had a real growth in GDP of about 8% per year over the last 25 years, making it a truly economic miracle and an example of what a democratic, capital driven economy can achieve.