President Lee Teng-hui (
"If you [China] fire your missiles, then I will use money to stabilize the stock market," Lee told local members of the Rotary Club at a function yesterday.
The comments appeared to be a throwback to events that occurred during Taiwan's first direct elections in 1996, when China fired missiles into the Taiwan Strait, jolting the island's stock and currency markets.
The missiles, as well as large-scale military exercises in China opposite Taiwan, followed president Lee's highly-publicized visit to his alma-matter, Cornell University in June, 1995.
In the wake of those threats, the stock market plummeted to around 4,500, down from levels above 6,500, while the NT dollar dropped from NT$25 to NT$27 against the greenback.
During that election campaign, Lee said that Taiwan had "18 countermeasures" to attacks from China.
The president brought up the issue again yesterday, saying "one of the  countermeasures is the national stabilization fund."
The NT$500 billion fund, now institutionalized into law, will come from government pension funds, the labor insurance fund and bank loans using government-owned stocks as collateral, officials said.
A committee of scholars and members from various political parties will be set up to oversee the fund's operations. Any fund managers or other officials convicted of trading on insider information will face up to seven years in jail.
Lee's off-the-cuff remarks, however, understate the grueling 19-hour struggle lawmakers waged over the bill, which finally passed at 5am yesterday morning.
With the majority of KMT lawmakers behind the bill, the DPP and New Party could do little to stop it from passing, said DPP lawmaker Lin Chung-cheng (林忠正).
"Even if we [the DPP] all opposed the bill we would not be able to stop it, so we've worked to amend it where we could," Lin said.
One of the amendments was the inclusion of punishments for insider trading, and measures to insure the fund had a system of checks and balances in place. These include the periodic release of the financial details of the fund and the ability for scholars and experts to sit on the committee which monitors the fund, Lin said.
Passed just prior to the presidential election, some DPP mem-bers were also concerned that if they didn't step in to support the bill they would be dubbed as being anti-business and anti-stability.
"I am for a liberalized economy, but, because of the realities of the market and its size, it's better that we have some controls," Lin said. "You must have the ability to protect against a flood of outside investment leaving the market."
Investors responded positively to the new measures, lifting the local index 168.13 points or 1.9 percent to 9,191.37.
Still, some lawmakers like Lai Shih-pao (
"Aside from calming investors it has 100 disadvantages and not one benefit," Lai said. "Even if China does attack Taiwan, NT$500 billion is not going to keep Taiwan safe, it will only give large financial groups an opportunity to pull themselves out by transferring money over to funds."
Minister of Finance Paul Chiu (
Taiwan lacks a mechanism to deal with domestic financial crises as the island has not been able to obtain assistance from international organizations like the International Monetary Fund (IMF) or the World Bank, Chiu said.
Taiwan has been shut out of the IMF and the World Bank due to opposition from China, which claims it is an matter of national sovereignty.
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