Since their emergence, studies. on Taiwan's social classes have been largely concentrated on static, structural analysis, or on merely describing their transformation and searching for the internal causes of these tranformations. Few integrate the international developments to yield a comprehensive consideration. 1n view of this, the present paper attempts to locate and, consequently, analyze the class tranformations in Taiwan in the 1980s in the intricate context of the interplay of the national and international political economy. It discovers that; accompanied by the rise of the East-Asian economies, the continuing recession of the western capitalist economies and their economic protectionism thus introduced, and the rising production costs in Taiwan, since the middle of the 1980s there had appeared in Taiwan repid capital outflows and massive labour imports. Faced with these changing phenomena, the Taiwanese state either was paralyzed or compromised with support. In addition to the role it plcyed in the social and economic arenas (e.g. public enterprises and government expemditures on social welfare), Taiwan's class structure and class income distribution had experienced profound but discouraging changes.