Tea trees are native to Taiwan, and tea was likely used by the aboriginal inhabitants as a medicinal plant. A developed tea culture, however, was introduced to Taiwan by the earliest waves of Chinese immigrants from Fujian province. At this time (prior to the 17th century) tea was used as a beverage but was also considered to be a sort of food with medicinal properties.
The Dutch occupied Taiwan from 1624 to 1662, using it as a trade transfer post between China and Europe. They had introduced tea to Europe and it was an important trade commodity. They investigated the possibility of cultivating tea in Taiwan, but were expelled by Chinese forces before establishing any tea plantations.
It is likely that tea was grown on a small scale from the time of the Dutch occupation, but most of the tea consumed in Taiwan was imported. From the beginning of the Qing Dynasty (which lasted from 1683 - 1895) large numbers of immigrants from China's Fujian province came across the the Taiwan Straits to settle in Taiwan. These immigrants brought tea seedlings as well as their tea culture, but imported tea (mostly from Fujian province) supplied most of Taiwan's tea trade.
Large-scale tea production didn't start until about 1866, when English investors imported tea seedlings from China's Anxi province and provided loans to local farmers to grow tea. An oolong tea processing factory was established in 1868 and the first shipment of this tea was delivered directly to New York in 1869.
In the following years, other American and European business interests were established in Taiwan, making oolong tea the most important export commodity.
During the Qing Dynasty the tea culture of Taiwan became firmly established. Tea was a daily beverage and was also used ceremoniously during rituals such as weddings, funerals, and family worship. Tea was offered to gods and guests alike.
The Japanese occupied Taiwan from 1895 to 1945. They established much of the infrastructure that contributed to the development of Taiwan. This included organization of the tea industry and tea production. They promoted Taiwanese tea at world fairs and succeeded in expanding the market for green tea in America and Europe. The Japanese emphasized green tea, but also experimented with black tea production by introducing seedlings from Assam, India.
The Japanese also established testing and research facilities and some of the clonal varietals developed by the Japanese remain popular to this day.
In 1945, the Japanese were forced to relinquish control of Taiwan back to China. The Chinese introduced their method of producing green tea, which became the major tea export for the next 30 years. Oolong tea was still being produced, but it was mainly for the domestic market.
Sales of green tea gradually died off so that beginning in 1974 more importance was given to the domestic tea market. This trend has continued to the present day, and currently most of the tea produced in Taiwan is for the local market.
The strength of the Taiwanese tea market is due to the long tea culture which is kept alive at the grass roots level and by organizations which are dedicated to tea research and education. Traditional teahouses play a role in this culture: aside from being popular leisure spots they also conducts seminars in tea production and tea preparation.
Tea is also promoted by cultural exchanges such as the Taipei Tea Culture Expo, when participants from Korea, Japan, India, and other countries gave demonstrations about their native tea cultures.