Taiwan: A war is not imminent but the risk is high in the medium to long-term – Danske Bank
Tensions are running high with rising fears over a Chinese invasion of Taiwan in the not too distant future. While risks are rising, economists still see a rather small probability of a Chinese invasion of Taiwan in the next couple of years. However, the risk of war in the medium to longer term is high, in their view.
No immediate risk of a Chinese invasion of Taiwan
“Despite current tensions, we do not see a high risk of war on Taiwan in the near term as all sides have an interest to maintain status quo. However, the risk is real in the medium to longer term as China may eventually choose a path of nonpeaceful reunification if it sees no other way out.”
“A risk within the next couple of years may come around a possible change of government in the US in 2024 if a new US President-elect wishes to change the status quo.”
“We expect tensions to stay elevated for the foreseeable future as we expect the US and EU to continue to expand relations with Taiwan and keep a high military presence around Taiwan and the South China Sea. China in response is set to continue a high-level military drills. This may be a new status quo at a higher level of tension than before.”
“In the end, both sides have a strategy of deterrence. But with tensions running this high, the risk of miscalculations or unintended accidents that trigger a tit-for-tat spiral could also end in military confrontation.”
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FXStreet Insights Team
FXStreet
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