The National Stabilization Fund is aimed at maintaining the stability of Taiwan’s financial and capital markets should irregular domestic and international events arise. The fund is under the direct supervision of the Cabinet and the committee in charge of the fund is made up of government officials and scholars, including vice premier, finance minister and Taiwan’s central bank governor.
The fund controls a maximum of NT$500 billion (US$15 billion). Of that, NT$300 billion comes from state-owned funds, while the remainder can be borrowed from banks. The four major funds are: the Postal Deposit system and Life Insurance Fund, the Labor Insurance Fund, the Labor Pension Fund, and the Civil Servant Pension Fund.
Before the National Stabilization Fund was created, the government had allocated emergency funds to stabilize Taiwan’s financial markets on two occasions. One was in 1996, when panic among investors was triggered by China’s missile test. The other one was in 1997, when the local stock market was shaken by the contagion of the Asian financial crisis. These actions helped maintain public confidence in Taiwan’s economy. But critics said that the emergency measures interfered with market mechanisms. They also said that the lack of a monitoring system could lead to the illegal use of such funds.
The stabilization fund was first used in March 2000 during that year's election season. NT$50 billion was injected into the stock market to stabilize it during uncertain political conditions: Taiwan's first transfer of power in over 50 years.
Another NT$20 billion was injected into the market in October of the same year. That's when the government decided to stop construction on a half-completed new nuclear power plant, causing much political controversy.
The committee in charge of the National Stabilization Fund will meet next Monday to discuss whether the government should intervene in order to stabilize the market.