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Inside the report

01 General knowledge

A Decades-Long Standoff

The current tension between Taiwan and China is rooted in a civil war that ended in 1949, when the Nationalist government retreated to Taiwan after losing to Communist forces on the mainland. Since then, the island has operated its own democratic government, while Beijing has continued to claim it as part of its territory and has threatened to use force to bring it under its control. Over the decades, this dispute has become a central flashpoint in global politics, drawing in the United States and other democracies that support Taiwan's self-defense. The U.S. has supplied Taiwan with advanced weapons and maintained informal ties, even after formally switching diplomatic recognition to China in 1979.

China's military pressure has grown in recent years, with regular patrols and large-scale drills around the island, often in response to perceived provocations such as U.S. arms sales. Taiwan has responded by modernizing its own forces and increasing defense spending, while also seeking closer cooperation with like-minded nations like Japan and Australia. The situation is further complicated by the fact that Taiwan is a vital hub in the global semiconductor supply chain, making its stability crucial for the world economy. This long-standing standoff, with its mix of military, economic, and diplomatic dimensions, forms the backdrop for the latest statements from Taiwan's president.

02 The subject

Taiwan's President and His Defense Push

Lai Ching-te is the president of Taiwan and the leader of the Democratic Progressive Party, which has traditionally favored a distinct Taiwanese identity. He has made strengthening the island's self-defense capabilities a central priority of his administration, arguing that a credible military deterrent is essential to preserving Taiwan's democracy and way of life. Under his leadership, Taiwan has proposed significant increases in defense spending, including a special budget of $40 billion, and has overseen military modernization efforts such as the development of indigenous submarines and drones. His stance is that Taiwan's defense buildup is purely defensive, aimed at deterring aggression, not provoking conflict.

03 Explained

The Logic of Deterrence

The concept of deterrence, central to Taiwan's defense strategy, is based on the idea that a credible threat of retaliation can prevent an adversary from taking aggressive action. In Taiwan's case, this means building a military force that is capable of inflicting unacceptable costs on a potential invader, even if that invader is much larger. This is often achieved through 'asymmetric warfare' capabilities, such as anti-ship missiles, drones, and other technologies that can target an enemy's weaknesses. The goal is not to match China's military might, but to make the cost of an invasion so high that Beijing would not consider it a viable option.

Taiwan's strategy also relies on the support of allies, particularly the United States, which provides advanced weapons and has a long-standing, if ambiguous, commitment to the island's defense. However, the effectiveness of this deterrence depends on the ability of Taiwan and its allies to coordinate their military operations, a challenge that has been noted by analysts. The lack of integrated command and control systems between the U.S. and Taiwanese militaries is a significant hurdle, as it could hamper a joint response in a crisis. Thus, deterrence is not just about having weapons, but also about the political will and operational readiness to use them.

04 Previous developments

A Year of Escalation

The year leading up to the National Day speech was marked by a series of escalations and diplomatic maneuvers. In late December 2025, China conducted large-scale military drills around Taiwan in response to a record U.S. arms sale, which Beijing viewed as a provocation. Taiwan responded by placing its military on high alert and continuing its own exercises, including a simulation of repelling a Chinese invasion in January 2026. In February, President Lai proposed a special $40 billion defense budget, but faced opposition from the Kuomintang-controlled parliament, which favored a more limited approach.

The geopolitical landscape shifted further in May when U.S. President Donald Trump announced plans to speak directly with President Lai about a stalled $14 billion arms package, a move that broke with decades of diplomatic protocol. This was followed by Taiwan's first joint military drills using attack drones in September, just before a Trump-Xi summit. The summit, however, was postponed due to the conflict involving Iran, leaving the status of the arms deal and broader U.S.-China relations uncertain. Throughout this period, China's military activity around Taiwan fluctuated, with a notable lull in early March but a resumption of patrols by October, including the 19 aircraft and naval ships that were reported on the day of Lai's speech.

05 The environment

A Region on Edge

The National Day speech came at a time of heightened regional tensions, with China's military patrols near Taiwan serving as a constant reminder of the threat. The international community is closely watching the situation, with Indo-Pacific democracies like Japan and Australia expressing support for Taiwan's self-defense. However, there are also concerns about the reliability of U.S. commitment, especially after the postponement of the Trump-Xi summit and the stalled arms package. This uncertainty is compounded by the fact that China's military capabilities continue to grow, while Taiwan's ability to coordinate with its allies remains a challenge.

The economic dimension is also significant, as Taiwan is a critical node in the global semiconductor supply chain. This has made the island's stability a matter of global concern, with countries like the U.S., Japan, and those in Europe relying on Taiwanese chips. At the same time, China's economic leverage is increasing, and it has become Singapore's largest trading partner, a shift that could influence regional dynamics. The situation is further complicated by the actions of other actors, such as North Korea, which has publicly aligned with China on the Taiwan issue, and the ongoing conflict in Ukraine, which has drawn attention and resources away from the Indo-Pacific.

06 Why this happened

Why Lai is Emphasizing Deterrence

President Lai's speech was a direct response to the ongoing military pressure from China, which has been increasing its patrols and drills around Taiwan. His message was aimed at both domestic and international audiences, seeking to reassure the Taiwanese people that their government is taking steps to protect them, while also signaling to the world that Taiwan is committed to its own defense. The emphasis on deterrence is a calculated strategy to frame Taiwan's military buildup as a defensive necessity, not a provocation, in an attempt to gain international sympathy and support.

The speech also reflects a broader concern about the credibility of international rules and the willingness of democracies to stand up to authoritarian aggression. Lai's call for Indo-Pacific democracies to help maintain peace is an appeal for a collective response to China's actions. He is also trying to manage the delicate balance between self-defense and dialogue, arguing that a strong military is what enables meaningful negotiations with China. This approach is supported by the U.S. intelligence community's assessment that China currently prefers to unify with Taiwan without the use of force, which suggests that deterrence may be working, but it also highlights the need for continued vigilance.

07 Facts and events

The Stakes and Comparisons

The stakes of the Taiwan situation are immense, not only for the island's 23 million people but for the entire global order. A conflict in the Taiwan Strait would have catastrophic economic consequences, given the region's role in semiconductor manufacturing, and could draw in the United States and other major powers. The situation is often compared to the Ukraine conflict, with some analysts drawing parallels between Russia's invasion and a potential Chinese attack on Taiwan. However, there are also key differences, such as Taiwan's geographic isolation and its strong economic ties to the world.

Taiwan's defense spending is a key indicator of its commitment to self-defense. The proposed 2027 budget of over 1 trillion New Taiwan dollars ($35 billion) represents a significant increase, and the government has set a goal of reaching 5% of GDP on defense by 2030. This is in line with pressure from the U.S. for Taiwan to invest more in its own defense. The distribution of civil defense handbooks to over 9.8 million households is another sign of the government's efforts to prepare its citizens for a potential crisis. These measures, while not guarantees of safety, demonstrate a determination to resist external pressure and maintain Taiwan's democratic way of life.

08 Questions answered

Frequently Asked Questions

What is the 'status quo' that Taiwan and its allies want to maintain?

The status quo refers to the current situation where Taiwan has its own democratic government and military, but China continues to claim it as part of its territory, and neither side has formally declared independence or unification.

Why is the U.S. arms sales package to Taiwan controversial?

The arms sales are controversial because China views them as a violation of its sovereignty and a provocation, while the U.S. sees them as a way to help Taiwan defend itself, and the issue has become a bargaining chip in U.S.-China relations.

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