In 1949, the National Army was victorious against Communist forces in the battles of Guningtou in Kinmen and Tengpu Island in the Zhoushan Islands, temporarily beating back the Chinese Communist military forces. President Chiang decided to withdraw ROC forces from Hainan Island and the Zhoushan Islands and concentrate on defending Taiwan. After the outbreak of the Korean War, the U.S. stationed the 7th Fleet in the middle of the Taiwan Strait and the two sides have since been separately governed. The military standoff between China and Taiwan continued until the Second Taiwan Strait Crisis in 1958.
On May 19, 1949 an “Order of Martial Law” was promulgated in Taiwan and implemented the next day. This decree limited freedoms and basic human rights while focusing on the maintenance of social control and stability. During the period of martial law the government simultaneously sought to promote political and economic development.
Politically, local self government was a priority policy focus of the Nationalist Government after relocating to Taiwan, including holding elections for county and city assemblymen, county commissioners and mayors. Although it was widely said that the Taiwan Provincial Assembly had “Five Dragons and One Phoenix” (Lee Wan-chu, Kuo Yu-hsin, Kuo Kuo-chi, Wu San-lien, Lee Yuan-chan and Hsu Shih-hsien) and despite the fact it was unable to challenge the authority of the central government during the Martial Law period, local autonomy sowed the seeds of future opposition.
Economically, the national government introduced a series of land reforms, both before and after relocating to Taiwan, as a relatively non-coercive way of encouraging local landlords to invest in commerce and industry. This approach also promoted economic development as the government adopted a planned economic model, with the fifth economic construction plan (each plan being four years in duration) completed in 1972. The model focused on industrialization and the expansion of exports, which in turn established the trade-based foundation for Taiwan’s economic development. In 1968 Taiwan officially introduced a national nine-year compulsory education system to improve national educational standards, the quality of available manpower and national strength, effectively establishing the human resources foundation on which the booming economy of the 1970s was built.