A major evolution of the research system has taken place in the Asian region. Taiwan, as an emerging economy, has systematically upgraded its knowledge production and international academic collaboration during recent decades. Within this broader context, this research aims mainly to investigate the contemporary development of knowledge production and internationalisation of research in Taiwan. Particular attention is directed to the concrete policies and mechanisms, current scenarios, and emerging issues and challenges. Despite relatively successful development until the early 2000s, our empirical evidence has revealed relatively low-ranked expenditures on R&D, declining R&D personnel, shrinking total international publications, stagnant research quality, and unbalanced disciplinary development. Moreover, emerging issues and challenges include intertwined factors that have lowered research outputs, diverse academic approaches, talent shortages, ageing faculty, and a lack of institutional underpinnings. In other words, Taiwan has reached a new watershed. Conclusions and implications are drawn in line with the systematic downsizing and quality enhancement.