This article investigates the cause of the rapid development of Taiwan’s textile industry during the postwar era. The textile industry, especially the cotton textile industry, is often described as the leading sector which contributed a lot to the economic development of Taiwan in the 1950s and 1960s. However, academia still can not fully clarify the rise of the textile industry in Taiwan. The first half of this article examines the impacts of concurrent policies, including the industrial policy applied to the whole textile industry in 1950-57, which regulated production, transaction, import, and factory establishment of the industry. Besides that, we also discuss the effect of the US aid policy and the exchange rate policy. The second half of this article explores the possibility of the shift from the sugar industry to the textile industry. We believe that the change of production conditions of Taiwan’s sugar industry in the 1950s, namely the fluctuations of the world sugar prices and the decline of the marginal productivity of labor, induced the allocation of production resources to shift from the sugar industry to the textile industry. This might give rise to the fast development of the textile industry.