The global financial meltdown in 2008-2009 and its lasting negative impacts on most national economies have driven many to contemplate the importance of financial governance of the state. The fresh focus on the state's role in regulating the free financial market is in a big contrast to what many East Asian countries experienced in the wake of the regional financial debacle of 1997-1998. At that time, many of them were forced to deregulate their financial markets and the states were blamed for the crisis. The so-called East Asian model, in which the state played a leading role in delivering economic growth and strategically controlled the financial market, was heavily questioned. Now as the opinion pendulum swings back, can we reconfirm the model's relevance in the current global political economy? In fact, the question is far from new. It had been hotly debated among policy makers and scholars for years even before the Asian financial crisis in the late 1990s. Also, it has caught more attention with the rise of China and the relatively better economic performance of other East Asian countries over the past decade. During those debates, Taiwan, as one of the paragons of the East Asian model, has been frequently mentioned. But, oddly, it has been cited as evidence for two opposite views: The model is in decline or demise; the model is resilient in adaption. The mixed picture leads to this thesis to clarify the reality of the model's application in Taiwan over the recent two decades by examining how the state addressed financial governance and reform from 1988 to 2008. The Taiwanese state has followed the global trend of financial liberalisation by actively pushing for financial reform since the late 1980s. It has been hoping to establish a new financial sector which is efficient and competitive. While certain progress has been made, two puzzles emerge. First, why did financial turmoil (i.e. run on banks, collapse of financial institutions and mounting bad loans) surge after the mid-1990s? Second, why did it become so hard for the state to pass and implement its new financial reforms? Through examining four key issues of financial reform from the late 1980s to 2008, I argue that rapid political democratisation since the end of martial law rule in 1987 was the key to these puzzles. In a democratic era, the state's capacity in delivering effective financial governance was so significantly squeezed and challenged by newly rising forces and players that its typical state-dominant and top-down approach for financial reform often ran into difficulties. While this is closer to the "decline or demise" view of the East Asian model, the study in fact also finds that the Taiwanese state has been efficient in quelling financial turbulences in recent years. It is because, in face of crises, the state's capacity is often recharged to a higher level than usual by a strong reform mandate from the public. Hence, while it is true that the East Asian model has been under enormous pressure to change or even crash, it might be too early to announce its end in Taiwan. Nevertheless, it is likely that a regulatory state or something in between is rising there. In contrast to many existing works concentrating on how globalisation has shaped or constrained the East Asian model, this study highlights the importance of domestic politics in grasping the changing course of the model. Without denying the impacts of globalisation, it underlines how domestic politics during the periods of democratic transition and consolidation has affected economic governance in general and financial governance in particular of the state in Taiwan. Though it is risky to generalize too much from a single case, the study's findings provide a base for further comparative studies with other East Asian countries.