Is China Preparing to Pounce?

After the election of President Xi Jinping of China, the constitution of the PRC (People’s Republic of China) was edited to include the goal of imposing sovereignty over Taiwan (known as the Republic of China or ROC). Xi made his feelings on the subject known when he called this objective the “essence” of his nation’s “rejuvenation”.

Last year, the PRC launched military drills in both May and October with the aim of intimidating the Taiwanese. Then, in April 2025, China put on another show of force with their Thunder-2025A battle simulation. Since then, Taiwan’s defence ministry has noted a surge in Chinese military operations in the region, with 131 aircraft and 32 warships deployed.

China’s People’s Liberation Army (PLA) seems urgent and enthusiastic about a possible land invasion. In a recent propaganda video, a PLA officer boasted about their demonstrations of might, which included rehearsals for a military blockade of the island. “If Taiwan loses its maritime supply lines”, the PLA officer explained, “its domestic resources will quickly be depleted, social order will fall into chaos and people’s livelihoods will be severely impacted”.

Technically, the USA views Taiwan as part of China, but practically treats the island as their independent ally. For instance, in 2024, they signed the National Defence Authorization Act to give Taiwan access to cutting-edge military technology and to start joint military exercises with the Taiwanese. At the same time, some analysts have suggested that President Trump would hesitate before sending US forces into the region – especially given the fact that he’s cutting off supplies to Ukraine. The Economist points to the recent comment of Pentagon under-secretary Elbridge Colby – that defending Taiwan is not an “existential” matter for America – as proof that Washington would actually let the invasion go ahead.

Will China seize the opportunity of achieving their national dream and reunifying with Taiwan? Join us for some discussion. We’ll tailor our analysis for readers with an interest in the financial markets, whether through conventional or CFD trading.

Trump’s Priorities

A document leaked from the Pentagon in April 2025 reads that America’s top military priority in the Asia-Pacific region is to stand in the way of “a Chinese fait accompli seizure of Taiwan”. This doesn’t seem to suggest any American uncertainty on the issue and, on the contrary, proves that the US views defending Taiwan – as opposed to Ukraine – as an absolute necessity. President Trump knows that there’s robust and widespread support in the Republican Party for US defence of Taiwan from a Chinese invasion.

Very recently, US Defence Secretary Pete Hegseth spoke at the Shangri-La Dialogue conference in Singapore, and he couldn’t have been clearer. “To be clear:”, he said, “Any attempt by Communist China to conquer Taiwan by force would result in devastating consequences for the Indo-Pacific and the world.” In the light of this explicit promise, it’s difficult to argue that the US would abandon Taiwan in the event of battle.

If China decides to attack Taiwan, they will certainly need to invade the capital, Taipei. However, Taipei is very close to several Japanese islands, (particularly Yonaguni Island), so that, in order to pull this off, China would have to encroach into Japanese territorial waters. This would probably draw in Japan’s ally – the United States. Knowing this is itself a partial deterrent for the Chinese military.

The Costs of Defeat

It would hardly constitute China’s national “rejuvenation” if they were to attack Taiwan, only to be rebuffed and forced to swallow an embarrassing defeat. This would leave Xi in a much worse political position than he was in beforehand. The PLA’s prophecy that Taiwan’s “social order will fall into chaos” may then come true in the motherland itself.

Even in the event that a successful Chinese invasion would go on longer than anticipated, Xi could face serious social unrest at home over the matter. A poll conducted in September last year found that 55% of Chinese agree with the statement: “The Taiwan problem should not be resolved using force under any circumstances.” It’s possible that, if the incursion were framed as a quick, relatively bloodless operation, the domestic population could be moved to support it, but this grows less and less likely in the scenario of a protracted battle involving many deaths.

All the more so considering China’s unstable economic trajectory, which is stoking increasing levels of frustration at home. Since an invasion would likely be followed by Western sanctions, this would suffocate hopes for an economic recovery in China, potentially driving locals to acts of political resistance against the Communist regime. Xi knows he can’t risk doing something that would turn the Chinese population against his ruling party.

Final Thoughts

Many analysts believe that, due to the abovementioned considerations and others, it’s most likely that China will continue pushing ahead with less blatant acts of intimidation like airspace encroachments, cyberwarfare, and economic pressure. This might end up being a very effective tactic because their purpose “is not purely to destabilise”, explains The Interpreter. “It is to desensitise, normalise pressure, fragment decision-making, and encourage a sense of inevitability about unification.” China’s plan could be, not so much to convince the Taiwanese that unification is just, but that it is unavoidable.

The Interpreter even suggest that, as a result of this tactic, the Taiwanese people could be persuaded to give over the island peacefully, just as Beijing came under the control of the Chinese Communist Party in 1949 without any death or destruction. This is very questionable, however, because President Lai of Taiwan declared last October that it is “absolutely impossible for the PRC to become the ‘motherland’ of the ROC’s people”. More than that, Lai knows he has the military backing of the USA, Japan, and potentially others behind him. Keep an eye on the evolving situation, especially if you’re CFD trading in stocks in weeks to come.