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China’s Global Times recently ran a story, while relying on the People’s Liberation Army (PLA) Eastern Theater Command, that China should strengthen its military capability as the United States (US) increases its military provocations targeting China’s sovereignty over Taiwan, which could increase potential risks of a military conflict.

Key quotes

All movements of US vessel and aircraft are kept under surveillance by the Chinese military, Senior Colonel Zhang Chunhui, spokesperson of PLA Eastern Theater Command said on Wednesday while responding to the transit of US guided-missile cruiser USS Chancellorsville through the Taiwan Straits.

The Chinese military will remain on high alert at all times, and will resolutely safeguard China’s sovereignty and territorial integrity.

The warship’s presence in narrow waters between the island of Taiwan and the Chinese mainland is seen as a provocation given the Taiwan question, and adding interference in  Hong Kong riots, the US wants to pressure China to make concession on other issues such as the ongoing trade war, said Song Zhongping, a military expert and TV commentator.

China has repeatedly said it will not hesitate to use force over the Taiwan question if necessary so the US should not support Taiwan secessionists or underestimate China’s determination and resolve even if it means unimaginable military conflict between China and the US, Song noted.

FX implications

News like this keeps markets on toes, amid US-China trade pessimism, which in turn could weigh on the Antipodeans and the risk-tone. As a result, safe-havens could extend the recent recovery.