Import Substitution is an important stage of Taiwan’s economic development. To the Capital Good Industry, it went through the process and became vigorous and prosperous, finally won many varied good reputation, such as the kingdom of the screw or the kingdom of the umbrella.
Therefore, the paper attempts to explore the topic: “Import Substitution: A Case Study of Taiwan Capital Good Industry”, we employ two kinds of different measures (Chenery and Full-Information) developed by Hsu (2006). The finding of the paper is the import substitution of Capital Good Industry, occurred in 1981, 1984, 1991 (by Chenery computation), 1996, 2001. Moreover, the global measure of import substitution can be divided into two effects－the sectoral import substitution effect and the structural effect. Above of each year, all the global measure of import substitution is the sectoral import substitution effect, but it is the different industry to contribute the effect. Finally, we select steel industry from many Capital Good industries and study it carefully. Then we deduce the possible reasons of import substitution are as follows: (1) From 1980s to 1990s, the main reason is production value rose largely and import fell small, and the steel product affect production value in each year is China Steel produce. (2) From 1990s to 2000s, the main reason is production value rose small and import fell largely, and Taiwan’s steel export to China rise multiple year by year.