Taiwan’s defence chief has warned that a Chinese “blockade” would be an act of war and have far-reaching consequences for international trade after Beijing held military exercises to encircle the self-governed island.

Taiwanese Defence Minister Wellington Koo made his comments on Wednesday as the Chinese People’s Liberation Army (PLA) continued exercises near the democratically-ruled island after last week carrying out war games that included a simulated blockade.

“If you really want to carry out a so-called blockade, which according to international law is to prohibit all aircraft and ships entering the area, then according to United Nations resolutions it is regarded as a form of war,” Koo said in remarks to reporters at parliament.

“I want to stress that drills and exercises are totally different from a blockade, as would be the impact on the international community,” Koo added.

China claims Taiwan as its territory and has said it reserves the right to use force to bring it under its control, with the PLA regularly holding drills – including simulating blockading key ports and assaulting maritime and ground targets – around the island.

Taiwan, also known by its official name the Republic of China, has never been ruled by the People’s Republic of China and rejects Beijing’s sovereignty claims.

Beijing also asserts jurisdiction over the entirety of the Taiwan Strait, a 180km-wide (110-mile) waterway separating mainland China from Taiwan.

Taiwan and other members of the international community reject Beijing’s claim, with the United States, Japan and several European countries asserting its status as an international waterway.

The US navy, in particular, regularly sails through the strait to maintain freedom of navigation rights.

Koo, who noted that one-fifth of global freight passes through the strait, said that the international community “could not sit by and just watch” if China were to impose a blockade.

Taiwan’s defence ministry announced earlier on Wednesday that Chinese aircraft carriers, led by the Liaoning carrier, travelled north through the waterway after passing through waters near the Taiwan-controlled Pratas islands.

During the previous 24 hours, Taiwan’s military detected 15 Chinese military aircraft and six navy vessels in the skies and waters around the island, the defence ministry said.

“The Liaoning is passing through the Taiwan Strait now, sailing north along the west of the median line and we are closely monitoring it,” Koo said.

Taiwan has reported almost daily Chinese military drills around the island for the past five years, but activity has intensified since April’s election of outspoken President William Lai Ching-te, whom Beijing has labelled a “dangerous separatist”.

On October 14, Beijing launched large-scale military drills – code-named “Joint Sword-2024B” and involving the army, navy, air force and rocket force – in the Taiwan Strait and areas to the north, south and east of Taiwan.

Beijing said the drills, which came soon after Lai delivered his National Day speech on October 10, were issued as a “stern warning to the separatist acts of ‘Taiwan Independence’ forces”.

To hear America and other long-established powers tell it, China has unique influence over that region’s worst agents of disorder, starting with Iran, and an unusual need for stability in the Middle East. China is the world’s largest importer of both oil and liquefied natural gas, buying vast quantities from Iran and Arab countries alike. It is a big regional investor, with tens of billions of dollars at stake in such countries as Egypt, Saudi Arabia and the United Arab Emirates.

As the world’s biggest manufacturer, China is exceptionally exposed to spikes in global shipping rates. That is a painful distinction when drone and missile attacks by Iranian-armed Houthi rebels in Yemen have all but closed the Red Sea and Suez Canal to container ships, sending Europe-bound Chinese exports on a costly detour around Africa.

With these arguments in hand, the Biden administration and other Western governments have spent months asking China to lean on Iran and the Houthis. In meetings with Western officials, Chinese diplomats are ambiguous, hinting at messages passed to Iran while playing down their influence in Tehran, and questioning whether Iran has much sway over the Houthis. Far from sending People’s Liberation Army (PLA) warships to join an American-led military coalition that has escorted civilian ships and attacked Houthi radar and missile sites, China’s foreign minister, Wang Yi, has noted that American and British strikes in Yemen lack UN Security Council approval.

In late July leaders from Fatah and Hamas, the rival Palestinian factions, met in Beijing for unity talks that Mr Wang called “an important historical moment”. Others were more sceptical, noting that the resulting Beijing Declaration, signed by Fatah, Hamas and 12 other Palestinian groups, left unresolved the thorniest questions, such as who should control security in post-war Gaza.

In Beijing, Western diplomats murmur that Chinese leaders have no illusions about their ability to solve the Middle East puzzle, but see an easy win in playing the peacemaking host. Meanwhile, China knows that its calls for an immediate ceasefire in Gaza and its vocal support for a Palestinian state align with the views of most countries, notably those in the global south. The most cynical Western voices suggest that, though China would surely prefer a quieter world, today’s disorder does at least keep American aircraft carriers and diplomatic envoys usefully tied up in the Middle East, rather than making trouble in China’s backyard.

To scholars from China’s foreign policy and security establishment, such Western analysis is lamentably crude. “How many US troops can the Houthis in the Red Sea tie down? Not many, that is too simple,” says Hu Bo, a professor of maritime security at Peking University. Yes, Chinese exporters face higher costs with the Red Sea closed, but there is no evidence that their losses are “unbearable”. In the absence of a UN mandate, even escorting ships in the Red Sea “implies China is against the Houthis, or against Iran”, says the professor, and imperils China’s preferred stance of neutrality in the Middle East. Put bluntly, the Red Sea crisis is “not on China’s doorstep”, so Chinese people wonder, “why should we help the United States solve this trouble?” reports the professor.

Zhou Bo, a retired PLA senior colonel, chides Western governments for arguing that, as the largest trading power on Earth, China should be willing to strike Houthi targets or apply pressure to Iran, in the name of upholding freedom of navigation on the high seas. The root cause of the crisis is “because Israelis are bombing and killing in Gaza”, he says. The Houthis have said that Chinese-flagged ships are not their target, he adds, and most Chinese cargoes are already sailing around the Cape of Good Hope. Mr Zhou, now at Tsinghua University’s Centre for International Security and Strategy, cautions that frigates and destroyers—the warships that the PLA would send—have limited air defences. What, he asks, would be the purpose of such ships entering the Red Sea and firing on the Houthis? As for China applying pressure on Iran: “The point is at what cost would you make use of your influence?”

An executive at a multinational company in China goes a step further. He argues that “we should be very careful about assessing disruption as bad for China”. When the covid-19 pandemic wreaked havoc in supply chains and cargo-shipping markets, Chinese firms adapted fast and grabbed business from slower rivals, he notes. “China prefers stability, but when there is chaos they think opportunistically, not defensively.”

China needs no help to calculate its interests

Mr Zhou sees “a grain of truth” in such arguments. He notes that Chinese businesses are active in unstable regions of Africa and the Middle East where profits are hard to come by. Unlike Western companies that need quick returns, Chinese firms will endure hardships to grab market share, he suggests. The aim is to outlast competitors and reap rewards later. He draws a comparison with the Long March of 1934-35, when Red Army troops crossed snow-capped mountains, fast rivers and deadly marshes during China’s civil war, knowing that their foe, the larger, better-armed Nationalist army, would not follow them.

To a striking extent, today’s Chinese diplomats manoeuvre like Red Army guerrillas, warily avoiding crises that might trap and entangle China, while staging quick, showy wins. China is a superpower with global interests. But it is run by the same Communist Party that survived the Long March by picking battles and staging strategic retreats. Remember that history and China’s opportunism makes more sense.

© 2024, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com

 

The US and Canada sent warships through the Taiwan Strait, with China issuing a warning on Monday, claiming such actions “undermine” peace in the region.

According to the US Navy’s 7th Fleet, which operates in the Asia-Pacific, the Arleigh Burke-class guided-missile destroyer USS Higgins (DDG 76) and the Royal Canadian Navy’s Halifax-class frigate HMCS Vancouver (FFH 331) conducted a “routine” transit of the Taiwan Strait on Sunday.

The US 7th Fleet’s statement said the warships navigated through a “high seas corridor in the strait that is beyond the territorial waters of any coastal state.”

The voyage was also described as demonstrating the two nations’ “commitment” to “upholding freedom of navigation for all nations as a principle,” the statement added.

Rejecting any “assertion of sovereignty or jurisdiction that is inconsistent with freedom of navigation, overflight, and other lawful uses of the sea and air,” the US military emphasized that the international community’s rights in the Taiwan Strait “should not be restricted.”

However, China’s military warned that the passage of the US and Canadian warships “disrupted the peace and stability of the Taiwan Strait.”

Li Xi, spokesperson for the Eastern Theater Command of the Chinese People’s Liberation Army (PLA), stated that China is “on high alert at all times and resolutely safeguards national sovereignty and security, as well as regional peace and stability.”

Li added that naval and air forces organized by the command “closely followed and monitored the vessels’ passage through the strait, addressing the situation in accordance with laws and regulations.”

Taiwan’s Defense Ministry also confirmed the voyage, stating that the warships sailed through the Taiwan Strait from south to north on Sunday. The Taiwanese armed forces “maintained full control over the surrounding sea and airspace, with the situation remaining normal,” it said on the social media platform X.

India-China Row: After four years and multiple diplomatic and military talks to end the standoff since the India-China skirmishes began in 2020, External Affairs Minister S Jaishankar announced on Monday that ‘disengagement process with China has been completed’.

Jaishankar said, “…We can say that the disengagement process with China has been completed…We will be able to do the patrolling which we were doing in 2020. I think it’s a good development…”

Foreign Secretary Vikram Misri on Monday informed that New Delhi and Beijing military negotiators have reached an agreement on patrolling arrangement along Line of Actual Control (LAC).

“Over last few weeks, Indian and Chinese negotiators have been in touch.” 

The agreement likely pertains to patrolling in Depsang and Demchok areas.

Foreign Secretary Vikram Misri said, “..As a result of the discussions that have taken place over the last several weeks an agreement has been arrived at on patrolling arrangements along the line of actual control in the India-China border area and this is leading to dis-engagement and eventually a resolution of the issues that had arisen in these areas in 2020.”

The announcement of the pact arrives just before Prime Minister Narendra Modi’s upcoming visit to Russia for the BRICS summit, where he may engage in discussions with Chinese President Xi Jinping on the sidelines.

According to news agency PTI, Modi and Chinese President Xi Jinping are expected to hold a bilateral meeting on the sidelines of the BRICS Summit.

Relations between the two nuclear-capable nations have been tense since 2020, when violent clashes along their poorly defined border resulted in the deaths of 20 Indian soldiers and four from China.

Meanwhile, Beijing is yet to respond to the announcement of Jaishankar. 

India-China Border Dispute: A Longstanding Tension

The ongoing conflict between India and China stems from a poorly defined border that stretches approximately 3,440 kilometers (2,100 miles). Known as the Line of Actual Control, this disputed frontier has become a focal point for both nations as they compete to enhance infrastructure in the region.

India’s efforts to construct a new road leading to a high-altitude air base are viewed as significant provocations, contributing to the deadly clash between troops in 2020.

The Galwan Valley confrontation marked a grim milestone, being the first fatal encounter since 1975, where combatants used sticks and clubs instead of firearms. The altercation resulted in the deaths of at least 20 Indian soldiers and four Chinese soldiers.

De-escalation efforts have occurred since the intense fighting in June 2020, but tensions remain high. In December 2022, troops clashed once again near the Tawang sector of Arunachal Pradesh, resulting in minor injuries among some soldiers.

Historically, Delhi and Beijing fought a single war in 1962, which ended in a significant defeat for India, adding to the complexity of their relationship and ongoing disputes over territorial claims.

Now in their 15th year together, the original BRICS (Brazil, Russia, India, China and South Africa) have achieved little. Yet at this summit Mr Putin hopes to give the bloc heft by getting it to build a new global financial-payments system to attack America’s dominance of global finance and shield Russia and its pals from sanctions. “Everyone understands that anyone may face US or other Western sanctions,” Sergei Lavrov, Russia’s foreign minister, said last month. A BRICS payments system would allow “economic operations without being dependent on those that decided to weaponise the dollar and the euro”. This system, which Russia calls “BRICS-Bridge”, is intended to be built within a year and would allow countries to conduct cross-border settlement using digital platforms run by their central banks. Controversially, it may borrow concepts from a different project called mBridge that is part-run by a bastion of the Western-led order, the Bank for International Settlements (BIS).

The talks will shine a light on the race to remake the world’s financial plumbing. China has long bet that payments technology—not a creditors’ rebellion or military conflict—will reduce the power that America gets from being at the centre of global finance. The BRICS plan could deliver cheaper and faster transactions. 

Those benefits may be enough to entice emerging economies. In a sign the scheme has genuine potential, Western officials are wary that it may be designed to evade sanctions. And some are frustrated by the unintended role of the BIS, a Swiss-based organisation known as the central bank for central banks.

America’s dominance of the global financial system has been a mainstay of the post-war order. It reflects its economic and military heft, but also the fact that dollar-denominated assets such as Treasuries are seen as safe from government confiscation and inflation and are easy to buy and sell. Though central banks have diversified their holdings, including into gold, around 58% of foreign-currency reserves are in dollars (see chart) and the network effects of the dollar put American banks at the centre of the world’s payments systems. Sending money around the globe is a bit like taking a long-haul flight; if two airports are not directly linked, passengers will need to change flights, ideally at a busy hub where lots of other planes connect. In the world of international payments the biggest hub is America, where many of the world’s banks swap foreign currencies from those making payments into dollars and then into the currencies in which the payments are received.

The centrality of the dollar provides what Henry Farrell and Abraham Newman, two scholars, call “panopticon” and “choke point” effects. Because almost all banks transacting in dollars have to do so through a correspondent bank in America, it is able to monitor flows for signs of terrorist financing and sanctions-evasion. 

That provides America’s leaders with an enormous lever of power—one that they have been keen to pull as an alternative to going to war. The number of people under American sanctions has exploded by more than 900% (to around 9,400) in the two decades to 2021. America has demanded that some foreign banks are disconnected from SWIFT, a Belgium-based messaging system used by some 11,000 banks in 200 countries to transfer funds across borders. In 2018 SWIFT cut off Iran.

All this paled in comparison with the ferocity of the financial attack on Russia after its invasion of Ukraine in 2022. The West froze $282bn of Russian assets held abroad, disconnected Russian banks from SWIFT and prevented them from processing payments through America’s banks. America has also threatened “secondary sanctions” on banks in other countries that support Russia’s war effort. Even European policymakers, who support sanctions, were alarmed at how fast Visa and MasterCard—two American firms that the euro zone relies on for retail payments—closed shop in Russia. 

And the tsunami crashing over Russia has prompted America’s adversaries to accelerate their efforts to move away from the dollar, and pushed many other governments to look at their dependence on American finance. China views it as one of its biggest vulnerabilities.

Mr Putin is hoping to capitalise on this dollar dissatisfaction at the BRICS summit. For him creating a new scheme is an urgent practical priority as well as a geopolitical strategy. Russia’s foreign-exchange markets now almost exclusively trade yuan, but because it cannot get enough of this currency to pay for all of its imports, it has been reduced to bartering. In October Russia agreed to buy mandarins (the citrus fruit) from Pakistan paid for with chickpeas and lentils. According to some reports these liquidity strains are growing.

Mr Putin hopes to make life outside the American system more bearable by laying some financial plumbing of his own. BRICS officials have held a flurry of meetings ahead of the summit in Kazan. They have discussed creating a credit-ratings agency to rival the main Western ones, which Russia sees as “susceptible to politicisation”. They also examined creating a reinsurance firm to sidestep Western ones that are blocked from reinsuring some tankers transporting Russian oil, and a payments system to replace Visa and MasterCard. Mr Putin has pushed for creating a common BRICS currency for pricing trade, based on a basket of gold and other non-dollar currencies, but Indian officials objected to this in recent weeks.

By far the most serious initiative is a plan to use digital money backed by fiat currencies. This would place central banks, not correspondent banks with access to the dollar clearing system in America, in the middle of cross-border transactions. In decentralising the financial system, the proposal would mean that no one country could disconnect another. Since commercial banks would transact through their own central banks, they would not need to maintain bilateral relationships with foreign banks, side-stepping the network effects of the current correspondent-banking system.

The “BRICS Bridge” plan was outlined in a report by the Russian finance ministry and central bank in October. Running to 48 pages it critiques Western finance and states that “a new multinational platform for the purposes of cross border settlement needs to be examined in further detail due to its novelty, associated risks, and, potentially, game-changing economics”. With its focus on digital currencies run by central banks it appears to be at least partially inspired by an experimental payments platform called mBridge, which was developed by the BIS alongside the central banks of China, Hong Kong, Thailand and the United Arab Emirates. Chinese state media say that the new BRICS plan “is likely to draw on the lessons learned” from the mBridge project by the BIS.

That BIS experiment was innocent in design and initiated in 2019, before Russia’s full-scale invasion. It has been stunningly successful, according to several people involved in the project. It could cut transaction times from days to seconds and transaction costs to almost nothing. In June the BIS said mBridge had reached “minimum viable product stage” and Saudi Arabia’s central bank joined as a fifth partner in the scheme. Some 31 other members are observers. By creating a system that could potentially be far more efficient than the current one—and which would weaken the dominance of the dollar—the BIS has unwittingly stepped into a geopolitical minefield.

“If someone is transacting outside of the dollar system for political reasons, you want that to be more expensive for them than the dollar system,” says Jay Shambaugh, a senior treasury department official. The efficiency gains of new kinds of digital money may erode the use of the dollar in cross-border trade, according to the Fed. Reciprocally they could boost China’s currency. Speaking to bankers and officials about mBridge in September, a Hong Kong official said it “provides another opportunity to allow the easier use of the renminbi in cross-border payment, and Hong Kong as an offshore hub stands to benefit”.

Is it possible that mBridge’s concepts and code may be replicated by the BRICS, China or Russia? The BIS doubtless views mBridge as a joint project and believes that it has the ultimate say over who can join. Yet some Western officials say that participants in the mBridge trial may be able to pass on the intellectual capital it involves to others, including participants in the BRICS Bridge. According to multiple sources China has taken a lead on the software and code behind the mBridge project. The People’s Bank of China, the central bank, leads the project’s technology subcommittee and, according to comments made by a BIS official in 2023, its digital ledger “was built by” the PBOC. Perhaps this technology and know-how could be used to build a parallel system beyond the reach of the BIS or its Western members. The BIS has declined to comment on any similarities between its experiment and Mr Putin’s plan.

The BRICS’s foray into the payments race reveals the new geopolitical challenges facing multilateral organisations. At a meeting of the G20 group of large economies in 2020, the BIS was given the job of both improving the existing system and, at China’s urging, of experimenting with digital currencies. Earlier this year Agustín Carstens, its boss, called for “entirely new architectures” and a “fundamental rethink of the financial system”. Yet as different members of the organisation have rival objectives, staying above the fray is getting harder. The world has become more difficult to navigate, acknowledges Cecilia Skingsley, the boss of the BIS Innovation Hub. But she says it still has a role to play in solving problems for all countries “almost independent of what other kind of agenda they might have”.

One option for America and its allies is to try to hobble new payment systems that compete with the dollar. Western officials have warned the BIS that the project could be misused by countries with malign motives. The BIS has since slowed down its work on mBridge, according to some former staff and advisers, and is unlikely to admit any new members to the project. Another option is to improve the dollar-based system so that it is as efficient as new rivals. America is already gearing up to compete. 

In April the New York Fed joined six other central banks in a BIS project aimed at making the existing system faster and cheaper. The Federal Reserve may also link its domestic instant-payments system with those in other countries. SWIFT said this month that it plans to conduct trials of digital transactions next year, leveraging some of its incumbent advantages including strong network effects and trust, says Tom Zschach, its innovation chief.

Any rival BRICS payments system will still face huge challenges. Guaranteeing liquidity will be difficult or require large implicit government subsidies. If the underlying flows of capital and trade between two countries are imbalanced, which they usually are, they will have to accumulate assets or liabilities in each others’ currencies, which may be unappealing. Distrust of China runs deep in India, a key BRICS member. And to scale a digital-currency system, countries must agree on complex rules to govern settlement and financial crime. Such unanimity is unlikely to win the day in Kazan.

Yet, for all that, the BRICS scheme may have momentum. There is a broad consensus that the current cross-border-payments system is too slow and expensive. While rich countries tend to focus on making it quicker, many others want to overturn the current system entirely. 

At least 134 central banks are experimenting with digital money, mostly for domestic purposes, reckons the Atlantic Council, a think-tank. The number working on such currencies for cross-border transactions has doubled to 13 since Russia’s invasion of Ukraine. This week’s BRICS summit is no Bretton Woods. All that Russia and its pals have to do is move a relatively small number of sanctions-related transactions beyond America’s reach. Still, many are aiming higher. 

Next year the BRICS summit will be held in Brazil, chaired by its president Luiz Inácio Lula da Silva, who fulminates over the power of the greenback. “Every night I ask myself why all countries have to base their trade on the dollar,” he said last year. “Who was it that decided?”

© 2024, The Economist Newspaper Ltd. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com

Procter & Gamble on Friday reported weaker-than-expected revenue as lower demand in China again weighed on its sales.

The company’s organic sales in Greater China, its second-largest market, fell 15% in the fiscal first quarter. As home prices drop and jobless rates rise in the country, shoppers have pulled back their spending, hurting P&G’s sales for shampoo, diapers and other consumer staples.

While executives maintained their confidence in China long term, demand isn’t expected to recover for at least several more quarters.

“The market continues to be weak and will be weak, we believe, for a number of quarters to come,” CFO Andre Schulten said on a call with the press.

P&G’s outlook for China didn’t take into account the Chinese government’s recently announced plans to boost the country’s economy.

Shares of the company fell roughly 1% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: $1.93 adjusted vs. $1.90 expected
• Revenue: $21.74 billion vs. $21.91 billion expected

P&G’s net sales dropped 1% to $21.74 billion. Organic revenue, which strips out foreign exchange, acquisitions and divestitures, rose 2%, helped by higher prices.

The company reported flat volume for the quarter. The metric excludes pricing, which makes it a more accurate reflection of demand than sales. Like many consumer companies, P&G has seen demand for its products fall after several years of price hikes. Last quarter was the first time in more than two years that its volume increased.

In the U.S., P&G’s volume grew in eight of its 10 categories, and the company isn’t seeing any trade down to private-label products, Schulten said.

But it’s a different story in Greater China, which saw its organic sales worsen compared with the prior quarter. The company called out volume declines in China for both its hair care and oral care segments. Still, Greater China accounts for less than 10% of P&G’s revenue.

“The issues around Asia and execution are pretty minimal compared to some of the other rough spots that the company’s gone through in the past,” said Charles Rinehart, chief investment officer of Johnson Investment Counsel, a longtime shareholder in Procter & Gamble.

P&G’s beauty business, which includes brands like Pantene and Olay, saw volume fall 2% in the quarter. In particular, its skin care segment struggled, with organic sales tumbling more than 20%. P&G blamed the steep decline on lower volume and decreased sales of its pricey SK-II brand, which has struggled ever since pandemic lockdowns. Anti-Japanese sentiment in China has been the latest challenge for the brand; last year, SK-II sales took a hit as Chinese consumers boycotted the brand, fearing that Japan’s release of treated radioactive waste would contaminate the products.

Both P&G’s health care and baby, feminine and family care divisions reported 1% declines in volume for the quarter. But its baby care segment, which includes Pampers diapers, had an even worse quarter, with its organic sales falling by mid-single digits. As the global birth rate continues to drop, P&G has turned to pushing consumers to buy more expensive baby care items, like its Pampers Premium diapers, to grow sales. But that strategy can’t always make up for declining volume.

P&G’s grooming division, which includes Gillette and Venus, reported 4% volume growth. The company credited innovation for its strong performance.

The company’s fabric and home care business saw volume rise 1% in the quarter. The division includes Swiffer, Febreze and Tide products.

P&G reported fiscal first-quarter net income attributable to the company of $3.96 billion, or $1.61 per share, down from $4.52 billion, or $1.83 per share, a year earlier.

Excluding restructuring charges and other items, the company earned $1.93 per share.

P&G reiterated its fiscal 2025 forecast. It anticipates core net earnings per share in a range of $6.91 to $7.05 and revenue growth of 2% to 4%.

China’s coastguard said it ordered a Japanese fishing vessel to leave the country’s territorial waters after it “illegally” entered an area surrounding a disputed group of islands in the East China Sea.

A spokesperson for Beijing’s coastguard said on Thursday it “took necessary control measures in accordance with the law, warned [the ship] and expelled it” during the incursion into waters around the Diaoyu Islands – which Tokyo calls the Senkaku Islands – on October 15-16.

“We urge the Japanese side to immediately stop all illegal activities in these waters,” spokesperson Liu Dejun said in a statement.

Japan has yet to comment on this latest incident near the disputed islands.

Tokyo rejects China’s claim over the tiny, uninhabited islands in the East China Sea but beneath which there are believed to be potential undersea oil and gas reserves.

Japan and China have been involved in several confrontations in the disputed waters in recent months.

In April, China’s coastguard confronted Japanese lawmakers conducting an inspection visit to the area. The lawmakers spent three hours near the islands and used drones to observe the surroundings, in what China called an act of “infringement and provocation”.

In June, Japan lodged a protest against Beijing after it said Chinese vessels, carrying what appeared to be cannons, entered what it claims as Japanese territorial waters surrounding the islands.

China also maintains expansive maritime claims in the South China Sea which overlap with several Southeast Asian nations. Confrontations with the Philippine navy, in particular, have surged over the previous 18 months, raising fears that a miscalculation could lead to an outbreak of conflict in the disputed area.

In 2016, the Permanent Court of Arbitration in The Hague ruled that Beijing’s claim to 90 percent of the South China Sea had no basis in international law.

Beijing’s increasingly assertive stance on Taiwan, resulting in an uptick in military activity in waters surrounding the self-ruled island, which Beijing claims as its own, is also of growing concern in Japan.

China has started military exercises with ships and aircraft near Taiwan, just days after the self-ruled democratic island marked its National Day.

The exercises, dubbed Joint Sword-2024B, began early on Monday and were a “stern warning to the separatist acts of ‘Taiwan Independence’ forces”, said Beijing, which claims the island as its own.

Captain Li Xi, the spokesman for the Chinese military’s Eastern Theatre Command, said the drills were focussed on “sea-air combat-readiness patrol, blockade on key ports and areas” and would also involve an “assault on maritime and ground targets”.

The drills, he added, were a “legitimate and necessary operation for safeguarding state sovereignty and national unity”, and gave no date for their conclusion.

Taiwan’s Ministry of Defence expressed its strong condemnation of China’s “irrational and provocative actions” and said it had “dispatched appropriate forces to respond accordingly to protect freedom and democracy, and defend the sovereignty” of Taiwan.

As of 8am (00:00 GMT), it said some 25 PLA aircraft and a total of 11 ships, including seven from the navy, were found operating around Taiwan.

“I would like to reassure my compatriots that the government will continue to defend the democratic and free constitutional system, protect democratic Taiwan, and safeguard national security,” he wrote on Facebook.

In recent years, China has stepped up its military activity around Taiwan, which it claims as its own. The latest drills come just days after Lai gave his first National Day address on October 10, promising he would resist any “annexation or encroachment” and that Beijing had no right to represent the island’s 23 million people.

China warned on Thursday that “provocations” by Taiwan leader Lai Ching-te, who earlier gave a speech on the self-ruled island’s National Day, would result in “disaster” for its people.

“(Lai’s) provocations in seeking ‘independence’ are the root cause of trouble for peace and stability in the Taiwan Strait and will bring disaster to the people of Taiwan,” said Chen Binhua, a spokesman for China’s Taiwan Affairs Office.

China has not ruled out using force to bring the democratic island under its control, which Lai and his government oppose. Lai pledged in his speech to defend the island’s “national sovereignty”.

But he also said Taipei’s efforts to preserve the “status quo of peace and stability in the Taiwan Strait remain unchanged”.

Beijing has ramped up pressure on Taiwan to accept its territorial claims and relations have remained tense under Lai, who took office in May.

China’s foreign ministry spokeswoman Mao Ning told a regular news briefing that Lai’s speech “exposed his hell bent position on Taiwan independence and his sinister intention to escalate tensions in the Taiwan Strait for political self-interest”.