China - Taiwan Risk Scenarios Update

Long-standing tensions around the sovereignty of Taiwan escalated again in the last quarter of 2025 and brought renewed focus to the possibility of open conflict between China and Taiwan. 

Political tensions started to rise in November after newly elected Japanese Prime Minister Sanae Takaichi acknowledged that a Chinese naval blockade or invasion of Taiwan could constitute justification for Japanese military involvement.  

The comments drew criticism from government officials in China and caused tensions between both countries to spike. The comments were followed by the unveiling of a supplemental NT$ 40 billion ($1.27 billion / €1.08 billion) defense budget by the government of Taiwan, as part of a larger strategy to defend itself against alleged threats from China, and a $11 billion (€9.3 billion) arms deal with the United States.  

In the aftermath of these events, the Chinese military conducted large-scale military drills in the Taiwan Strait and just south of Japan that included Chinese aircraft locking fire-control radar onto Japanese military assets. The most recent development in this heightened period of tensions was the commencement of China’s largest ever war game drills around Taiwan on December 29. 

Japan’s Prime Minister’s comments increase tensions with China 

In the aftermath of Japanese Prime Minister Takaichi’s comments, Japanese officials have clarified that the comments should not be taken to indicate any formal policy change, however, no apology or retraction of the statement has followed. Japan has long been friendly to Taiwan and viewed the island’s independence as critical to ensure that China does not seek to gain control over other islands in Asia. Takaichi’s comments indicate that Japan could be actively involved in any conflict in the area should tensions between China and Taiwan escalate to open military conflict.  

In response to Takaichi’s comments, Chinese officials issued a ban on all seafood imports from Japan, as well as a travel warning for citizens traveling to Japan, but seafood producers do not expect a significant impact from the newly imposed ban. Seafood exports from Japan to China had only resumed on November 5 after being suspended in 2023 over Chinese concerns with nuclear waste discharge off the coast of the Fukushima.  

Since the beginning of the year, Chinese officials have also launched an investigation into Japanese semiconductor chemical exports to China and announced a ban on Chinese exports of dual-use items to Japan. Chinese authorities have also reportedly started to restrict the export of rare earths and magnets to Japanese companies, putting operations in the country’s electronics, automotive, and defense industries at risk of manufacturing disruptions and delivery delays. 

In 2024, total trade between China and Japan amounted to around ¥44,2 trillion ($292 billion / €249 billion), with China ranking as Japan’s largest trading partner and Japan ranking as China’s third largest trading partner. Japan’s major imports from China included telecommunications and computer equipment, as well as clothing. The mutually beneficial economic relationship between both countries means that a total ban on trade is unlikely; however, further targeted responses such as the ones announced in January are possible. 

China responds to political tensions with major military drills near Japan and Taiwan 

Under the United Nations Law of the Sea Treaty, the Taiwan Strait is considered international waters; however, China has repeatedly claimed that the strait is within its territorial inland waterways. An unofficial median line divides the waterway between China and Taiwan, although China does not formally recognize the line.  

In November alone, Taiwan’s Ministry of National Defense tracked over 299 Chinese People’s Liberation Army Air Force (PLAAF) aircraft and 151 People’s Liberation Army Navy (PLAN) ships operating in the airspace and waters around Taiwan. The vessels and aircraft routinely make incursions over the median line and into Taiwan’s asserted territory. China has officially called these operations “joint combat readiness patrols,” while Taiwan has scrambled aircraft and launched ships to monitor their movements.  

On December 29, China launched “Justice Mission 2025,” it’s largest ever military drills around Taiwan in terms of total coverage, with a record seven zones around the island designated for live fire drills and exercises specifically designed to simulate a blockade of Taiwan’s major ports. The drills led to dozens of flight cancelations at airports in Taiwan and involved at least 89 PLAAF aircraft, 14 PLAN vessels, and 14 Chinese coast guard boats. The government of Taiwan strongly condemned the drills and stated that it was deploying military forces to monitor the exercises and minimize disruption on shipping and fishing operations. 

Alongside the operations around Taiwan, China also initiated several military exercises near Japan following the comments of Japanese Prime Minister Sanae Takaichi in support of Taiwan in November, increasing the military tensions between China and Japan.  

Japanese officials accused China of deploying a drone to survey the island of Yonaguni in November. The Japanese military scrambled jets in response. On December 6, PLAAF aircraft locked their fire-control radar for aiming weapons on several Japanese fighter jets off the coast of Okinawa. The aircraft were launched from an aircraft carrier task force that was conducting drills in the area. Japan’s officials have claimed that the PLAN has been unusually active in the international waters off the coast of Japan in recent weeks.  

On December 11, the United States and Japan conducted joint-force air drills over the Sea of Japan that included two United States nuclear-capable B-52 strategic bombers in what was widely viewed as a show of force and statement of solidarity with Japan. Chinese and Russian forces had conducted similar joint-force anti-missile drills in Russia in early December.

Potential Risk Scenarios 

Table 1: Potential China-Taiwan regional risk scenarios (source: Everstream Analytics).

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