The Taiwan issue stokes strong emotions on each side, making it potentially explosive. The fundamental problem is that China sees Taiwan as an integral part of the Chinese mainland, while most Taiwanese do not want to be part of China.
Concerns of potential political turbulence in the region have heightened due to China’s dissatisfaction with Taiwan’s recent elections. Our view is that this risk should not be overstated.
While China may exert somewhat more pressure on Taiwan, the resulting frictions are likely to be episodic and mostly in line with China’s past approach. Over time, it is more likely that the main political actors on both sides of the Taiwan Strait will start to rethink their strategies, given the results, giving rise to new political dynamics and a better risk profile in the region.
