Nancy Pelosi appears to be on her way to Taiwan, and her aircraft is expected to touch around at 10.20 ET. The US reaffirms its “One China Policy.” Senators from both parties of the aisle, including Democrats Duckworth and Menendez as well as Republicans Graham and Scott, have visited Taiwan this year.
Live footage of the arrival –
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Earlier media reports have stated that Pelosi’s jet may temporarily make an “emergency landing” in Taipei and that the Chinese military “will remain high alert to be fully prepared for armed war.”
Looks like Pelosi’s plane C40C is carefully avoiding flying over South China Sea, now passed thru Kalimantan on its way to Taiwan’s Songshan airport pic.twitter.com/xvpB1WHUuM
— Carl Zha (@CarlZha) August 2, 2022
The combination of Pelosi’s visit and China’s actions will undoubtedly create conditions that make a military conflict more likely. At the absolute least, we have documented Chinese security bluster, and at the most, we have covered staging actions that lead to potential military action against Taiwan.
There is proof that the Chinese use Pelosi’s travel to Taiwan as an excuse to repress the island because they claim she emboldens those who want Taiwanese independence.
China will station jets nearby when Pelosi’s flight traverses Taiwan during the second trip from Malaysia to South Korea. The People’s Liberation Army is also practicing live-fire warfare in the region. According to official Chinese media, if Pelosi’s plane is forced to land because of alleged mechanical difficulties, the plane can be escorted to adjacent airports on the Chinese mainland.
It is very hard to anticipate China’s response to Pelosi’s visit to Taiwan. What I think we know is that:
- The general consensus is that there will be some kind of military response, but these people were wrong about Russia invading Ukraine.
- China relies on the US navy for support to deliver goods, so they would not want to drag the US into a war.
- Chinese President XI is under political pressure to look strong as he faces a historic third term.
Market Opportunites & Response
I just wanted to take a moment to inform my readers of some market-related ideas concerning Nancy Pelosi’s trip to Taiwan and the resulting global geopolitical muddle. The markets as a whole will likely be very chaotic. However, Chinese shares that are listed on U.S. exchanges present a significant risk at the moment.
We are getting closer and closer to a scenario in which the United States slaps sanctions on Chinese stocks as they did with Russian equities as tensions between the U.S. and China continue to rise.
Additionally, the Securities and Exchange Commission has just set new, extremely strict audit criteria for Chinese firms operating in the United States, which I don’t think they will be able to comply with.
If you have the risk tolerance, then shorting Chinese securities would be a good bet. If there is any kind of military action, I fully expect Chinese securities to crash.
6 China Taiwan Scenarios
As mentioned above, knowing how China will respond is very tough. Many think there will be some kind of military response, but what is unknown. If there is any kind of military action, it will likely cause chaos in the markets. Here are six possible scenarios:
Situation 1: Military parade, cyber disruptions, and grandstanding. China deploys its carriers and does some flyovers but doesn’t actively deploy military assets.
Situation 2: Adopting a simple strategy. The South China Sea islands belonging to Taiwan, the Jinmen or Matsu Islands, and maybe even the Penghu Islands are all occupied by the PLA. Additionally, they designate all or a portion of the Taiwan Strait to be off-limits to foreign military vessels. Taiwan presumably wouldn’t want to commit excessively to naval action against the sizable PLA Navy (PLAN) if it didn’t immediately reach the main island, and the PLA would likely find this to be a rather simple task.
Situation 3: Hybrid warfare is scenario two. Along with increased harassment, such as direct flyovers of Taiwan’s territory by PLA Air Force (PLAAF) jets or intrusions into Taiwan’s maritime space by China’s naval militia protected by PLAN warships, there has been some sort of partial naval, and aerial blockade of Taiwan intended to disrupt the economy. Cyberattacks intended to take down the internet and other infrastructure for days at a time may also occur in tandem with this. Taiwan would be forced to adopt a rigid defensive stance, which would lead to actual conflicts between Chinese and Taiwanese forces and present a significant risk of escalation.
Situation 4: A significant assault but no invasion. There would be no ground troops involved, simply air and sea combat. Coupled with a full aerial and naval blockade, a lengthy series of naval and aerial confrontations aimed at weakening Taiwan’s military, and ballistic missile assaults on military targets. Aggressive cyberattacks that bring down vital infrastructure for days or weeks and disable the internet. Once China had established its air and naval dominance, it could take out targets at will, increasing the danger until the government fell.
Situation 5. The Full Monty a legitimate invasion. Complete air and sea embargo, large ballistic missile assaults on military targets, and major cyberattacks to effectively shut down all military, governmental, and civilian contact. aggressive maritime and aerial clashes, followed by persistent aerial attacks by fighters and bombers on military objectives, to weaken Taiwan’s forces and establish battlespace supremacy. Special military groups launched a decapitation attack on Taipei in an effort to capture important leadership figures. planned insider treachery and sabotage operations carried out by criminals, CCP spies, and other pro-China organizations, or the “5th column.” An amphibious attack on one or more Taiwanese sites with close air support from fighters, helicopters, and combat drones, and perhaps an attempt to conquer a significant port like Keelung, Taipei Port, Taichung, or Kaohsiung. After then, tens of thousands of soldiers would begin to arrive, and so on until the island was taken. At least, that would be the plan. The likelihood of PLA success in this quest is exceedingly low. However, they may cause a great deal of harm by attempting. And certainly, they could be successful—at least partly—in taking and controlling the area around Taipei, for example.
Situation 6: Worst-case scenario (short of nuclearComplete air and sea blockade, massive ballistic missile attacks on military targets, massive cyberattacks, aggressive naval and aerial attacks to weaken Taiwan’s forces and gain the upper hand on the battlefield, then aerial assaults by fighters and bombers on military targets and area bombing of civilian targets. Huge numbers of people are killed, Taiwan is subdued with sheer force, surrenders, and the invaders then enter and seize control of the nation.