Speaking at the inauguration ceremony of a joint venture plant between Taiwan's Nanya Technology and German semiconductor giant Infineon, Chen said the economy had recovered from uncertainty two years ago to post steady and fast growth.
"Looking back the late 2002 when I was here to attend the ground-breaking ceremony of the plant, the Taiwan economy was shrugging off from the bottom and was just to rise," Chen said.
The Taiwan economy hit a low in the third quarter of 2001 when it contracted 4.42 percent year-on-year, Chen said.
"At that moment the economy abounded with uncertainties."
"But a year and a half later, the difficult time was over. The economy grew 6.28 percent in the first quarter of this year... it was marked up from 5.16 percent previously forecast in February," Chen said.
"The economy is expected to grow 5.41 percent this year, up 0.67 percent from the previous forecast. This shows the economy is expanding at a steady and fast pace."
Chen hailed the 50-50 joint venture memory chip plant between Nanya and Infineon as a "far-sighted" investment.
The venture is called Inotera, with the initial stage of the project costing the companies 2.2 billion euros (2.66 billion US dollars).
The plant's capacity is scheduled to increase to 24,000 300-millimeter (12-inch) chips by the end of this year and further to 54,000 next year.
Chen called on enterprises, particularly Taiwanese businesses investing on the Chinese mainland, to cash in on the uptrend and increase their investment here.
Data released Monday by the Council for Economic Planning and Development, Taiwan's highest economic planning body, showed signs of definite overheating for the first time in nearly 10 years.
The total score of monitored indicators rose to 39 points in May from a revised 38 in April and signaled 'red light', pointing to a confirmed overheating of the economy, it said.
The CEPD uses a five-level spectrum to gauge domestic economic health, with blue indicating recession, yellow-blue a slowdown, green steady growth, yellow-red a slight overheating and red an absolute overheating.