The island of Taiwan is marked with a red pen on the map.


Yevhenii Orlov

Taiwanese leader Tsai Ing-wen greeted U.S. House Speaker Nancy Pelosi at the presidential office on Wednesday in a high-stakes visit that has enraged Beijing. Pelosi reaffirmed a pledge that the U.S. wouldn’t abandon Taiwan, saying solidarity was more important than ever in a “world [that] faces a choice between autocracy and democracy.” The two also discussed deepening economic cooperation and supply chain resilience, while indexes in Asia rebounded somewhat amid fading risks that the visit will result in a major conflict.

Quote: “The U.S. will certainly shoulder the responsibility and pay the price for undermining China’s sovereignty and security interest,” declared Hua Chunying, spokeswoman at China’s foreign ministry.

Within minutes of Pelosi’s arrival, the People’s Liberation Army announced six exclusion zones encircling Taiwan to facilitate live-fire military drills from Thursday to Sunday. While the size and scope of the areas could disrupt traffic and shipping in the Taiwan Strait – one of the world’s busiest trade routes – the exercises would come after Pelosi’s scheduled departure. Cyber warfare also hit Taiwan before the visit, with the presidential office going dark for 20 minutes due to an alleged distributed denial-of-service attack.

Sanctions: Beijing has moved to ban imports of various goods from Taiwan, from fruit and fish to baby food and cookies. According to Chinese customs data, China’s imports from Taiwan reached $122.5B in the first half of the year, up 7.3% from a year earlier. Exports of natural sand to Taiwan – that are widely used for construction and in concrete – were also banned, while China vowed to take “disciplinary actions” against Taiwanese foundations that aggressively engage in pro-independence or separatist activities.

Related ETFs: iShares MSCI Taiwan ETF (EWT) and Franklin FTSE Taiwan ETF (FLTW).


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