Taiwan’s new move to checkmate China: A sovereign wealth fund that will help firms expand globally

Taiwan President Lai Ching-te has announced plans to establish a sovereign wealth fund aimed at helping Taiwanese companies expand overseas. The initiative is intended to strengthen Taipei’s integration with global markets and counter efforts by China to isolate the island.

“In the future, the government will establish a fund to boost Taiwan’s economic development momentum,” Lai said in a speech in Taipei on 20 May, marking his first full year in office. He explained that the fund would work by “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 further details.

Lai also noted that trade discussions with the United States “are still ongoing and progressing smoothly.” This follows the Trump administration’s imposition of a 32% tariff on Taiwanese exports in April, which was subsequently suspended for 90 days to allow for negotiations.

Lai is the first Taiwanese president to publicly advocate for a sovereign fund that invests abroad—an idea previously floated by other Asian nations and proposed informally by earlier Taiwanese administrations. However, Taiwan’s central bank has traditionally been cautious about contributing directly to such a fund.

Earlier in May, there was a proposal to enact a special law to set up an independent organisation to manage the fund. The model would follow examples from neighbouring Asian countries that finance such initiatives through bond issuances, budget appropriations, or capital injections from their finance ministries.

Taipei currently holds foreign exchange reserves of approximately US$582.8 billion (S$755 billion). While Lai did not disclose the fund’s proposed sources of capital, Central Bank Governor Yang Chin-long has firmly stated that the institution would not give away its reserves, though it may be open to lending them. He also suggested that fund proponents consider alternative financing options outside of the central bank.

As of 1:16 pm on 20 May, Taiwan’s benchmark Taiex index rose by 0.1%, and the New Taiwan dollar strengthened slightly to 30.19 against the US dollar.

CY Huang, founding chairman of the Taiwan M&A and Private Equity Council, voiced support for the concept of a sovereign wealth fund. He speculated that Lai’s timing might have been influenced by US President Donald Trump’s recent remarks advocating for a similar American investment fund and that any US investment vehicle may focus on high-tech targets, including Taiwan Semiconductor Manufacturing Co, the archipelago’s largest corporation.

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

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”.