Military Pressure on Taiwan

Timeline of Sydney Incidents

Assessed escalation scenarios

Deployment of Military Assets / Sustained Military Incursions


Air Traffic Disruptions: PLA designation of "danger zones" during previous military drills have caused major disruptions to air travel, cutting off 11 of Taiwan’s 14 international air travel routes and impacting over 100,000 passengers. Similar disruptions are likely if renewed air incursions or large-scale exercises continue with limited warning.

Shipping Route Disruptions: Previous PLA exercises have forced commercial shipping vessels to reroute, causing delays. Insurance providers have previously raised rates and cut the amount of cover offered for risks involving Taiwan, particularly for shipping. Such disruptions are likely to continue in 2026.

Regional Implications: It is also possible that the China’s Coast Guard (CCG) will increasingly use unannounced inspections to delay specific cargo vessels, testing corporate and international tolerance for a quarantine. The shipping route in the Taiwan Strait accounts for a significant share of global trade; any escalation would likely disrupt regional economies, particularly those of Japan, South Korea and the Philippines.


Gray Zone Tactics

Cyber and Infrastructure Risk: Cyberattacks targeting Taiwan’s critical infrastructure saw a 6% rise in 2025 and are likely to continue. Disruptions to power, financial systems and communications remain probable. 

• Undersea cables are a key vulnerability; documented cases of Chinese-linked activity targeting these systems indicate risks to regional connectivity. Continued attacks will likely destabilize investors’ confidence in the Taiwan market and further deplete foreign direct investment.

Regulatory and Lawfare Risk: 
China’s use of lawfare across the Indo-Pacific reinforces contested sovereignty claims and increases regulatory pressure on businesses. Compliance with Chinese maritime or administrative requirements may create legal and reputational exposure while complicating operations in disputed areas and key trade routes.

Semiconductor Risk: As of 2023, over 70 percent of the world’s semiconductors and around 90 percent of the most advanced chips were manufactured in Taiwan. While some companies adopt the Taiwan Plus One model to diversify production and mitigate Taiwan’s dominance, it remains irreplaceable in the near term. 

• Production disruptions are almost certain to affect electronics, automotive, defense, and telecommunications industries globally.


• Companies reliant on advanced chips will likely face immediate production shortages and long-term price volatility.


• Protest Risk: A wider conflict will also likely trigger protests globally, especially in the US and other countries that host a large number of Taiwanese refugees and migrants. Anti-war movements will also likely hold protests, posing further travel risks in major urban cities. Protests targeting Chinese embassies would be probable.




Escalating Military Pressure

Deployment of Military Assets / Sustained Military Incursions


Sustained Chinese military pressure around Taiwan is almost certain in the near term, and clients should expect a sustained environment of volatility marked by air and maritime incursions and rapid-onset military drills

• Since 2024, China has conducted frequent air and naval incursions, live-fire drills and joint military exercises into Taiwan’s Air Defense Identification Zone and across the Taiwan Strait Median. PLA operations have also increasingly expanded beyond the First Island Chain of the South China Sea, with documented military maneuvers near Japan, Australia and New Zealand territory.

• In 2025, China conducted two major military exercises near Taiwan:

• July 11, 2025: “Strait Thunder-2025A” involved 135 aircraft and 38 naval vessels, featuring live-fire rocket drills on simulated liquefied natural gas (LNG) terminals.

• December 30, 2025: “Justice Mission 2025” drills simulated a naval blockade of mainland Taiwan, conducting live-firing drills into Taiwan’s Contiguous Zone and deploying new amphibious landing technology. 

• The PLAAF recently resumed activity near Taiwan after a temporary tactical pause, during which they had significantly reduced activity since late February. Official Chinese statements indicate a hardening of China’s policy towards "separatist forces” in Taiwan, and reduced PLAAF operations may indicate Beijing is freeing up resources for enhanced training operations. 

• It is possible that China will reduce the average volume of its air and maritime incursions in the short to medium-term, due to stressed military capacity or a deliberate attempt to reset China’s baseline level of military pressure for future escalations. 

• China may be preparing the CCG to conduct increased boarding and inspections of vessels transiting to and from Taiwan. Such actions would likely be framed as civilian law enforcement and could signal preparations for a coercive maritime quarantine.

• A maritime quarantine has the capacity to impose significant shipping and trade disruptions, and would pressure Taiwan economically, given its import dependence on LNG and defense equipment, and its semiconductor exports. 

• A full naval blockade, involving a military-led effort to seal the island, remains unlikely due to the high risk of regional conflict and global supply chain disruption. A quarantine involves the use of non-kinetic measures, and is therefore assessed as possible. 

Gray Zone Tactics


Maritime and Gray-Zone Pressure


China is almost certain to continue relying on hybrid “military operations other than war” to pressure Taiwan while avoiding direct conflict. This approach integrates military, paramilitary, cyber, and civilian tools under plausible deniability, allowing Beijing to sustain pressure while managing escalation risk. 

• Drone Incursions: Low-cost unmanned aerial vehicles (UAVs) are increasingly used for intelligence, surveillance, and reconnaissance (ISR) and harassment. Their small size and low-altitude flight paths make them difficult to detect and intercept, forcing disproportionate defensive resource allocation. UAV activity is expanding beyond offshore islands toward the main island, increasing exposure of military and civilian infrastructure. Notable incidents include:

• November 24, 2025: Drone activity near Taiwan

• January 17, 2026: Chinese surveillance drone over Pratas Island

• Electronic Interference: GPS interference and Automatic Identification System (AIS) manipulation degrade situational awareness and complicate maritime and airspace monitoring. In September 2025, Chinese fishing vessels in Taiwan’s Exclusive Economic Zone spoofed AIS signals, impersonating foreign and domestic vessels, increasing operational ambiguity.

• Maritime Militia and Fishing Fleets: Dual-use vessels such as fishing vessels and militia ships maintain a persistent presence around Taiwan, supporting ISR under civilian cover.

• Disinformation campaigns such as DRAGONBRIDGE and “spamouflage” target public opinion and political processes, undermining confidence in institutions and amplifying narratives favorable to Beijing. 

• Legal tools reinforce gray-zone tactics by legitimizing Chinese claims and shaping international perceptions. Chinese military operations around the disputed Scarborough Shoal demonstrates how Beijing combines lawfare with operational pressure to normalize control despite adverse legal rulings.

Military Intervention

Full-scale invasion

A full-scale invasion of Taiwan by China in 2027 remains unlikely, despite ongoing Chinese military pressure. Beijing's long-term strategy aims for "full modernization" by 2035 and establishing a “world-class military” by 2049. Under this framework, Beijing is developing the capabilities required for a large-scale campaign, without immediate intent to launch one.


• The current US administration’s "America First Trade Policy” complicates deterrence dynamics. Its transactional, tariff-driven approach toward allies and adversaries has created ambiguity around Taiwan policy. Key regional actors, such as Japan, South Korea and the Philippines, remain aligned with US security interests, which largely depend on US leadership in a conflict.  


• Taiwan’s domestic politics restrain its response. While the Democratic Progressive Party holds the presidency, the opposing Kuomintang and Taiwan People's Party restrain the legislature, stalling defense spending and security reforms, reinforcing a cautious posture. 


• Conversely, decision-making within China’s leadership has become increasingly centralized under Xi Jinping, particularly through the Central Military Commission. Authority is highly concentrated, which may increase strategic rigidity in crisis decision-making. Sustained defense spending since 2012 has strengthened the PLA’s naval and joint capabilities, indicating gradual preparation for a potential invasion rather than immediate intent.