Officials in Taiwan have reported that Chinese military planes have been flying into its air defence space, detailing that this has occurred at least six times in a single week and eight times this month.
The suggested outburst of this military activity from Chinese Authorities over the past few weeks is somewhat unusual and could trigger a dramatic escalation if sustained. According to the Ministry of National Defense statements in Taipei, the Chinese planes that have spotted this month had crossed over the outer reaches of Taiwan’s air defence identification zone.
Given these recent military manoeuvres, it does somewhat reflect the ever-present potential for war over an island that China’s Communist Party has threatened to take by force ever since the nationalist government of Chiang Kai-shek fled the mainland in 1949. However, for much of the time since, the possibility of U.S. intervention has helped maintain the status quo.
U.S.-China relations have reached their lowest point in years since the coronavirus pandemic that began in China hit the United States hard. Further worsening following China’s move to implement security legislation in Hong Kong. Lastly, most recently, it is suggested that China is failing behind presently on their obligations of the phase one deal signed in January.
What does this mean for the market?
It is yet another risk on the geopolitical front, if the activity from China persists it could provoke the United States. The growing risk factors do provide more reasoning for safe-haven FX flows; USD, JPY, which have recently managed to gain some momentum, due to the second wave of Covid19 signs. In cases of these noted tensions, it would force riskier FX; AUD, NZD, CAD and other assets stocks, oil under pressure. Certainly a development worth keeping an eye on.
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