Key Takeaways
Victory for independence-leaning candidate Lai Ching-te
in Taiwan’s presidential election will likely mean
cross-strait tensions remain somewhat elevated over
the next few months.
However, Lai’s Democratic Progressive Party failed to
win a majority in the legislature, tempering the election
outcome from Beijing’s perspective as the more
Beijing-friendly opposition parties can potentially
curtail some aspects of Lai’s agenda.
Both Lai and the US have sought to de-escalate
tensions with Beijing, emphasising the maintenance of
the status quo. Beijing’s relatively muted reaction to
the election result and the visit to Taipei by an
“unofficial” US delegation should limit any spillover
effect to the recent modest improvement in US-China
relations.
Taiwanese politics is unlikely to be the main driver of
tensions and conflict risk over the coming 12 to 18
months. The US election potentially threatens to
introduce significant policy uncertainty and
inconsistency, potentially leading to a de facto end of
“strategic ambiguity”, which has been a key pillar of
deterrence for the past 50 years.
Indeed, in part reflecting the increased chances of a
Trump presidency, we decreased the probability of the
status quo persisting (40%, -5ppts) and increased the
prospect of Taiwan risks becoming front-and-centre
within China-US tensions (35%, +5ppts). We continue
to judge that the risk of conflict remains low (10%)
even if rhetoric often veers into the incendiary.