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Taiwan holds one of the largest stocks of official foreign exchange reserves in the world. The stock has grown rapidly since the 1980s. But in

Taiwan holds one of the largest stocks of official foreign exchange reserves in the world. The stock has grown rapidly since the 1980s. But in 1996, when China threatened Taiwan politically and militarily, Taiwan's stock of foreign reserves shrank. Please explain: (1) the impact of the incident on the demand for Taiwan dollar (2) how the exchange rate of Taiwan dollar changed (3) why the foreign reserve shrank.

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