taiwan considers sovereign wealth fund to boost financial stability

2025-05-07 general

Taipei, Wednesday, 7 May 2025.
taiwan’s central bank governor yang chin-lung is pushing for a sovereign wealth fund. the fund could be established as early as q3 2025. yang suggests funding via ministry of finance bonds and allocations. this initiative seeks to strengthen taiwan’s financial standing and investment prowess. a key consideration is learning from other asian countries on fund management. however, direct use of foreign exchange reserves without compensation is not recommended. the norwegian government pension fund’s $167 billion loss serves as a cautionary tale, highlighting the need for flexibility and careful management.

funding and investment strategy

The central bank is considering funding the sovereign wealth fund through ministry of finance bonds and allocations [1][2]. This approach mirrors singapore’s model, where special government bonds are issued to acquire foreign currency for investment [2]. The fund aims to diversify investments across public and corporate bonds, stocks, private equity, and real estate [1]. This strategy intends to enhance investment opportunities and stabilize taiwan’s economy [1]. However, the central bank cautions against directly using foreign exchange reserves without proper compensation to maintain monetary policy independence [2].

expert opinions and market impact

Analysts suggest that a well-managed sovereign wealth fund could act as a powerful tool amid global economic shifts [7]. Huang Chih-fang, chairman of the taiwan external trade development council, notes that while new taiwan dollar appreciation may hurt exports, it presents an opportunity to build a new economic model and encourages overseas investments [7]. However, scholars emphasize the need for robust legal frameworks and transparent management to prevent political interference and mismanagement of funds [3][4]. Political stability is a key factor in ensuring the fund’s success [3].

potential risks and challenges

Concerns exist regarding the potential for political influence and the necessity of independent management [3][4]. Without proper oversight, the fund risks mismanagement, potentially leading to significant financial losses [4]. Experts cite singapore’s government investment corporation (gic) as a successful model due to its independence from parliamentary interference [3]. The legislative yuan legal affairs bureau also suggests referencing singapore’s approach to funding sources to minimize the impact on foreign exchange reserves [5]. The new taiwan dollar exchange rate was at 30.25 per usd [5].

broader economic implications

The establishment of a sovereign wealth fund aligns with taiwan’s economic strength and technological advancements [4]. Premier cho jung-tai has indicated active promotion of the fund, emphasizing the need for dedicated legislation and professional management [6]. A sovereign wealth fund could help taiwan diversify its investments and reduce reliance on the us dollar and us bonds [6]. The national development fund, which currently invests primarily in domestic industries, holds 6.38% of tsmc’s shares [6]. A sovereign wealth fund would broaden investment horizons beyond taiwan [6].

Bronnen

Sovereign Wealth Fund Taiwan