In the years following World War II and during the Chinese Civil War, Taiwan experienced severe economic challenges, including rampant inflation and scarcity of goods. The Kuomintang (KMT) party took control of Taiwan and nationalized assets previously owned by the Japanese. With a focus on agriculture initially, Taiwan's economy rebounded to its pre-war levels by 1953. Supported by American aid and domestic policies like "Nurture industry with agriculture," the government began to diversify the economy towards industrialization. Import substitution policies were enacted to support domestic industries, and by the 1960s, Taiwan started to shift its focus towards export-oriented growth, attracting foreign investment and setting up Asia's first export processing zone in Kaohsiung. The efforts paid off, as Taiwan maintained high annual average economic growth from 1968 until the 1973 oil crisis.

During this period of recovery and growth, the KMT government implemented significant land reform policies that had far-reaching positive impacts. The 375 Rent Reduction Act reduced tax burdens on peasants, while another act redistributed land among small farmers and compensated large landowners with commodities and shares in state-owned industries. This dual approach not only eased the financial burden on the agricultural community but also gave rise to Taiwan's first generation of industrial capitalists.

The government's prudent fiscal policies, such as moving China's gold reserves to Taiwan, helped stabilize the newly issued New Taiwan dollar and curb hyperinflation. Real estate assets, nationalized from Japan, along with American aid like the China Aid Act and the Sino-American Joint Commission on Rural Reconstruction, also contributed to Taiwan's quick post-war recovery. By capitalizing on these initiatives and foreign aid, Taiwan successfully transitioned from an agrarian economy to a burgeoning commercial and industrial powerhouse.