Chiang Kai-shek who was defeated by China escaped to Taiwan (Formosa). He went to Taiwan with a lot of gold and priceless artifacts. In Taiwan, he formed a government in exile called Republic of China. Taiwan was once part of the Chinese Empire. In 1894-95, when China was defeated by Japan, Japan occupied this region and transformed it into their colony.
When Japan lost in the WW II, Taiwan was again given back to China.
Chiang Kai-shek ruled Taiwan like a despot. His government was repressive. Chiang denied the people freedom of speech and political protests. He also kept the local people away from the administration. But through land reforms, he was able to increase agricultural production and to revive the economy. The economy which was based on trade grew fast and the gap between the rich and poor was reduced. The biggest change that happened in Taiwan was its step toward democracy.
This happened after the . Death of Chiang Kai-shek in 1975. In 1987 the martial law in Taiwan was repealed. Opposition political parties were allowed to function. In the first free elections, the process to bring the local people to power was started. Most countries had only trade relations with Taiwan. Since Taiwan is part of China, it is not possible to have full diplomatic relations and embassies there. The unification of Taiwan with China is a matter of dispute. However, the relations between Taiwan and China are improving. Taiwan has large investments and trade with China.
