US Speaker Pelosi visits Taiwan – China warns of military action

US Speaker Pelosi visits Taiwan – China warns of military action

In the year-2022, Global Financial markets have witnessed a roller coaster ride with major of the global markets now trading in the bearish territory.  This year will also be named in the history to witness the war between Russia and Ukraine which is still underway even after multi months since the start of the first retaliation.

India now being a part of the globalization, it have also taken heat of the global sell off and witnessed steep cuts in the equity as well as the currency markets. Indian rupee made historical lows of around 80 levels due to strong dollar in international markets amid rising inflation in the United States. Though we are now well above the recent lows in the Indian equities but the sword of the war and the inflation is still hovering in the clouds.

The world is still bleeding under the inflation worries due to the ongoing war between Russia and Ukraine and now the new tensions between China and Taiwan is taking centre stage after the US House Speaker Nancy Pelosi portrays her high-profile trip to Taiwan on an Air Force passenger Jet. She has become the highest ranking American official in 25 years to visit Taiwan. Chinese government have already warned America of not to conduct the Pelosi visit to Taiwan and warned of bad consequences if it happens. China always had claimed Taiwan as part of its own territory and it considers visits by foreign government officials as them recognizing the island’s sovereignty.

Let us discuss all about this visit by Nancy Pelosi to Taiwan below:

1. Pelosi has been known for her mission over decades of showing support for embattled democracy movements. It includes her trip in 1991 to Tiananmen Square, where she unrolled a small banner supporting democracy after Chinese security officers tried to shut them down.
2. The speaker is framing her trip to Taiwan visit as a broader mission for supporting democracy. In one of her opinion piece published in the Washington Post said “We must stand by Taiwan” on her arrival in Taiwan
3. The Biden administration, and Pelosi, says that the United States remains committed to its “one-China policy.”
4. Taiwan and mainland China separated during a civil war in 1949 but Chinese always claimed the island as its own territory and has not ruled out using military force to take it back
5. The relations of China and Taiwan have always been under fire on the Territorial issues. Chinese had cut off all its contact with Taiwan in 2016 after President Tsai Ing-wen refused to endorse its claim that the island and mainland China together make up a single Chinese nation.
6. With US Speaker visiting Taiwan, the Chinese government is of the view that it encourages Taiwan on its independent democracy.
7. After the Jet which brought Pelosi to the Taiwan landed on the airport, China announced a series of military operations and drill alongside the border area. The Chinese army planned to conduct live-fire drills from Thursday to Sunday across multiple locations.
8. Taiwan’s Defense Ministry released a statement before that the Chinese army had sent 21 planes flying toward Taiwan, 18 of them fighter jets.
9. On the other side, ahead of Pelosi’s visit, the American military increased its movements in the Indo-Pacific region.
10. Before this visit, Chinese President Xi Jinping and Biden both have made clear they don’t want any conflict on any issues and should cooperate further to solve the existing conflicts.
11. The biggest risk is likely an accident if China tries to go ahead with any military operations towards Taiwan which may lead to dangerous outcomes.

The world will have a close eye on this ongoing event and any disruption from the Chinese side may trigger fresh round of panic in the equity, commodity and currency markets. Market participants should have a close eye on this issue and may have a wait and watch approach till this conflict comes to an end. US and China have been under the tariff war during the Trump Era and some hopes of smoothening emerged after the US President had a talk with President Xi Jinping to solve the conflicts. But this recent development may put a break on these talks and may create fresh negative crisis if the issue escalates.