Lai casts Taiwan's record NT$1.12 trillion defence budget as deterrence against Beijing

Each government named a condition for talking, and the other has refused each one. "We are open to exchanges, but we will not accept subordination," Lai said ^[3]. He also said Taiwan is "strengthening our self-defense capabilities not to abandon dialogue, but to ensure that dialogue can take place on a footing of equality and dignity" ^[7]. Zhang Han's starting point was that "there is only one China in the world and Taiwan is part of China, and that is the real status quo in the Taiwan Strait" ^[12], and he said Beijing would uphold the one China principle and the 1992 Consensus ^[10]. That formula rests on the Kuomintang's account of a 1992 understanding in which both sides acknowledged "one China" and each interpreted it in its own way ^[14]. Beijing calls it the political foundation for cross-strait relations. Lai's Democratic Progressive Party does not accept it ^[11].

The cash is easier to follow than the diplomacy. Next year's defence budget is NT$1.1225 trillion, a record ^[4]. Lai tied it to defence reform and to building up a domestic defence industry through advanced technology ^[5]. "The purpose of increasing investment in defense is not provocation but deterrence of war," Lai said ^[6]. Zhang described the same posture as "seeking independence by relying on force and outside powers" ^[9].

From here, the case that cross-strait tension stays high, and that holders of Taiwan's chip supply chain should keep that risk in their prices, can go two ways. The exchange can stay at the level of words, as it did on the day: a speech in front of the Presidential Office in Taipei, answered by a written response that Xinhua relayed [c1, c8]. Or Beijing can back its pledge to strike firmly against independence forces with more of the military and gray-zone pressure that Lai says is already under way [c10, c2].

We think the first half of that case holds on this evidence. Lai describes the pressure as continuing ^[2], and Beijing answered with the conditions it presents as the foundation for any relationship [c10, c11]. The second half cannot be tested on this evidence: the report does not mention semiconductors or include any market data. The view that tension stays high would be wrong if the military and gray-zone activity Lai describes eased, or if either government dropped the condition the other refuses.