Taiwan plans wealth fund to counter China with global expansion

TAIPEI – Taiwan President Lai Ching-te said his government would set up a sovereign wealth fund to help the archipelago’s companies expand globally, a move that would tighten Taipei’s ties to markets around the world and counter China’s attempts to isolate it.

“In the future, the government will establish a fund to boost Taiwan’s economic development momentum,” Mr Lai said in a speech in Taipei on May 20 that marked his first full year in office. 

He added that the platform would be “fully utilising Taiwan’s industrial advantages, with the government taking the lead and cooperating with the power of private enterprises to deploy globally and connect the main target markets”.

He did not provide more details.

Mr Lai added that trade talks with the US “are still ongoing and progressing smoothly” – a comment that comes after the Trump administration in April hit Taiwan with a 32 per cent duty on its exports, later

pausing that for 90 days

as officials try to work out a deal.

Mr Lai is the first Taiwan president to call publicly for a sovereign fund that invests in overseas markets – something many other Asian governments have – though officials in previous administrations in Taipei have suggested the idea.

The plans for a fund dovetail with the Taiwan government’s strategy to expand links with other nations, especially democracies, adding friends that can help counter China’s aggression.

Beijing views Taiwan as a breakaway province that needs to be brought under its control, by force if necessary, and has maintained a high level of military pressure on Mr Lai since he took office.

In an interview aired on May 19 by Nippon Television, Mr Lai called on Japan, the US and other democracies to work together to prevent Beijing from starting a war.

Taiwan’s central bank has long been sceptical about creating a sovereign wealth fund that gets funding directly from the monetary authority.

Earlier in May, it said a special law should be enacted, and an independent agency created to manage the fund.

It pointed to neighbouring Asian countries that get money from bond issuance, appropriations, or capital contributions by their finance ministries.

If Taiwan went that route, it could have its central bank use its foreign exchange reserves in some way, something China and South Korea have done.

Taipei has a forex pile of some US$582.8 billion (S$755 billion).

Mr Lai did not go into specifics on his plans for a fund, including where the money would come from.

Central bank governor Yang Chin-long has said he would not give up any of the institution’s reserves for free but would be willing to loan them.

He said people calling for such a fund should figure out a different way to fund it, rather than taking capital from the central bank.

The benchmark Taiex stock gauge was up 0.1 per cent as at 1.16pm on May 20, and the Taiwan dollar rose nearly 0.1 per cent to 30.19 versus the greenback.

Mr C.Y. Huang, founding chairman of the Taiwan M&A & Private Equity Council, said he has long supported the idea of a sovereign wealth fund.

He said that one reason Mr Lai may be raising the idea now was that President Donald Trump recently did the same, and that any US investment vehicle could focus on high-tech targets, potentially even Taiwan Semiconductor Manufacturing Co, the archipelago’s biggest company.

Mr Trump has said an American fund could be backed by monetising vast government assets and used to back strategic projects in areas like critical minerals or take stakes in companies like TikTok.

The idea has been made a lower priority after running into legal, financial and political realities.

Mr Huang said one challenge Taiwan faces in setting up the fund is that “Taiwan lacks international investment talent, and for these kinds of strategic global investments, it would be best to establish an international advisory committee”. BLOOMBERG