Taiwan Strait Tensions 2026: Record Chinese Ship Presence, Energy Pressure and a Stalled US Arms Deal

WHAT CHANGED SINCE APRIL

The April edition of this briefing described near-daily Chinese air and naval pressure as the main feature of the Taiwan Strait. Five months later the pattern has shifted. The People's Liberation Army (PLA) is flying far fewer aircraft into Taiwan's Air Defense Identification Zone (ADIZ), while China's coast guard and other government ships have taken over much of the day-to-day presence. At the same time, three developments outside the strait have altered Taiwan's position: the closure of the Strait of Hormuz, which exposed how little energy the island holds in reserve; the Trump–Xi summit in Beijing in May, after which Washington put a major arms sale on hold; and a domestic political fight in Taipei that cut the government's special defence budget by more than a third.

The overall picture is of a Chinese strategy that relies less on military display and more on legal, economic and political pressure, with the military option kept visible in the background.

TIMELINE: DECEMBER 2025 TO SEPTEMBER 2026

• November 2025: President Lai Ching-te proposes a NT$1.25 trillion (about $40 billion) special defence budget, including an integrated air defence network called T-Dome, and pledges defence spending of 3.3% of GDP in 2026 and 5% by 2030.
• 29–30 December 2025: China holds the Justice Mission-2025 exercise after a US arms sale worth more than $11 billion and during a diplomatic crisis with Japan. It involves 89 warplanes, 14 warships and 14 coast guard vessels. The PLA fires 27 rockets into waters north and southwest of Taiwan, and its live-fire zones cross into Taiwan's territorial waters. More than 850 international flights are disrupted.
• January 2026: A further US arms package worth about $14 billion is announced. PLA air activity begins to fall back towards the level seen before Lai took office in May 2024.
• 28 February: The Iran war begins and traffic through the Strait of Hormuz largely stops.
• 18 March: Beijing offers Taiwan guaranteed energy supplies in return for accepting "peaceful unification". Chinese social media accounts spread false claims that Taiwan will run out of LNG within two weeks. On 21 March Lai calls for two closed nuclear plants to be restarted.
• 8 May: Taiwan's opposition-controlled legislature passes a special arms budget capped at NT$780 billion ($24.8 billion) for 2026–2033. The vote is 59–0, with 48 abstentions.
• 13–15 May: Donald Trump and Xi Jinping meet in Beijing. Xi calls Taiwan "the most important issue in China–US relations". Trump says the pending arms package is "a very good negotiating chip". Later in May a US Navy official confirms to the Senate that the $14 billion sale is paused.
• May: China begins permanent patrols east of Taiwan, according to Taiwan's Coast Guard Administration.
• July: A record 244 Chinese government vessels are counted in waters around Taiwan. Suspected Chinese hackers target seven Taiwanese energy companies.
• 27–28 August: Taiwan's legislature passes a NT$240 billion supplemental budget for unmanned systems. China revises its National Defense Mobilization Law and removes generals Zhang Youxia and Liu Zhenli from the state Central Military Commission.
• 5–6 September: The PLA conducts a "joint combat readiness patrol". Taiwan reports 20 and 21 aircraft on the two days, with 12 and 13 crossing the median line, along with up to 15 navy and coast guard ships.

FEWER AIRCRAFT, MORE SHIPS

PLA aircraft made 3,764 incursions into Taiwan's ADIZ in 2025, a rise of 22.4% and an annual record. After Lai's inauguration in May 2024 the monthly total regularly exceeded 300. In 2026 the numbers have dropped back to the earlier baseline. The AEI–ISW China & Taiwan Update counted 125 incursions in August 2026, less than half the figure for August in either of the two previous years, and recorded eight days in July with no median-line crossings at all. The update assesses that this "likely reflect[s] an adjustment in the PRC's coercion strategy" and not a reduction in intent.

The maritime figures point the other way. Taiwan's Coast Guard Administration reported 244 Chinese government vessels in Taiwan's waters in July, about eight a day, compared with 58 in July 2025. It has counted 1,247 since the permanent patrols began in May, and around 60% of the non-warship vessels seen in August were coast guard ships. The China Coast Guard has entered restricted waters around Kinmen four times a month since February 2024, each time for about two hours. On 18 August two of its ships entered restricted waters at Pratas Island, one of them for roughly nine and a half hours and the other with its AIS transponder switched off.

There are several plausible reasons for the shift. Coast guard operations present Chinese activity as domestic law enforcement, which supports Beijing's legal claim and is harder for other governments to answer with military deployments. Reduced air activity also fits the diplomatic calendar, with Xi scheduled to make a state visit to Washington on 23–25 September. A third factor may be disruption inside the PLA itself: after the August dismissals the Central Military Commission has only two of its seven members left, Xi included.

ENERGY: THE LESSON FROM HORMUZ

The Iran war did more to show Taiwan's vulnerability to blockade than any Chinese exercise. Taiwan produces only 4.2% of its own energy. Gas generates about 48% of its electricity, and the island holds roughly 12 days of LNG in storage, with a target of 14 days by 2027. It has about 40 days of coal and 140 days of crude oil. Before the war, 70% of its crude and about a third of its LNG, mostly from Qatar, came through Hormuz, according to CSIS.

Taipei adapted quickly on oil. By April the Middle East share of crude imports had fallen to 40% and the United States had become the largest supplier at 60%. LNG is harder to replace because of limited storage and a tight spot market. TSMC alone uses about 9% of the island's electricity, and that share is expected to reach 15% by 2030.

Beijing moved to exploit the shortage. Its 18 March offer of energy security in return for unification was accompanied by a disinformation campaign on LNG stocks, and Chinese state media had already published footage of missile strikes on mock LNG storage tanks in 2025. The political effect in Taiwan has been a reversal on nuclear power. The last reactor, at Maanshan, shut in May 2025. A referendum on repealing the "nuclear-free homeland" policy, proposed by the opposition Kuomintang (KMT) and backed by the Taiwan People's Party, will now be held alongside local elections in November. CSIS puts the earliest possible restart at 2028.

DEFENCE SPENDING AND THE LEGISLATURE

Taiwan's defence plans have been slowed by divided government. The KMT and the Taiwan People's Party, which together control the legislature, blocked committee review of the Cabinet's NT$1.25 trillion special budget ten times from late November 2025, arguing that its contents were opaque. The version passed on 8 May authorises up to NT$780 billion over eight years for US equipment, including HIMARS rocket launchers, M109A7 howitzers, Javelin and TOW 2B missiles and Altius loitering munitions, with further categories for air defence and counter-drone systems. It removed funding for domestic defence industry programmes, including the expansion of drone production.

Part of that gap was closed on 27 August, when the legislature approved NT$240 billion (about $7.5 billion) for unmanned systems and the domestic drone industry, with annual spending caps and yearly reviews. Other programmes remain behind schedule. The first indigenous Hai Kun-class submarine, due in November 2025, has still not been delivered. Two older Hai Lung-class boats are being upgraded with Mk-48 torpedoes and Harpoon missiles. The National Chung-Shan Institute has shown a hypersonic missile interceptor intended for T-Dome, but AEI–ISW notes that legislative gridlock has delayed advanced air defence work.

Taiwanese prosecutors are also dealing with a Chinese espionage network that paid military personnel to record "surrender videos". An indictment on 31 August charged a health ministry researcher with collecting damaging information on the government for a Chinese handler. The purpose of such material is to weaken public confidence in the armed forces before any crisis begins.

THE UNITED STATES: ARMS SALES AS A BARGAINING CHIP

US policy is formally unchanged. Secretary of State Marco Rubio said after the Beijing summit that "US policy on the issue of Taiwan is unchanged", and Washington did not alter its language on independence. What has changed is practice. Trump said in Beijing that he and Xi had discussed Taiwan at length, that the $14 billion package was being held "in abeyance", and that whether it proceeds "depends on China". He also told Fox News that the odds would be against Taiwan in a conflict. Discussing arms sales with Beijing runs against the Six Assurances that the US gave Taiwan in 1982.

Four months later the package has not been released. Unconfirmed media reports in mid-September said that Beijing had warned it would cancel Xi's Washington visit if the sale were approved beforehand; neither government has confirmed this. Whatever the truth of those reports, the visit gives Beijing leverage over the timing. Analysts quoted by Defense News expect the pause to push Taiwan further towards cheaper asymmetric systems that it can build itself, which is one reason the August drone budget matters.

The Mainland Affairs Council in Taipei has said that Washington made "no promises" to China. President Lai's response on 17 May was that Taiwan "is the maintainer of the status quo of peace and stability".

JAPAN AND THE REGION

China's dispute with Japan, which began in November 2025 over Tokyo's statements on a Taiwan contingency, has not eased. On 2 September China's foreign ministry invoked the "enemy state" clauses of the UN Charter against Japan and said they hold "particular significance" because of Japanese "remilitarization". Beijing had previously supported deleting those clauses. Justice Mission-2025 was explicitly aimed at deterring "external forces", and Japan, the Philippines, Australia, the EU and the UK all criticised it.

Elsewhere, China objected to Taiwan's participation in the 2026 Pacific Islands Forum and protested against Vice President Hsiao Bi-khim's visit to Italy in September. US officials told Reuters that vessels of the state shipping company COSCO carry hidden signals-intelligence equipment. Damage to subsea cables around Taiwan remains a separate concern, covered in our undersea cable briefing.

WHY SEMICONDUCTORS STILL DEFINE THE STAKES

Taiwan manufactures more than 60% of the world's contract-made semiconductors and around 90% of the most advanced chips, almost all of them at TSMC. A blockade lasting weeks would stop deliveries to the automotive, electronics, cloud computing and defence industries worldwide. The Hormuz closure is a useful comparison: it removed a large share of one commodity from the market and pushed oil above $100, but oil has alternative suppliers. Leading-edge chips have none at comparable scale.

OUTLOOK: WHAT TO WATCH

• The Xi visit and the arms package. If the $14 billion sale is still frozen after 23–25 September, Beijing will have shown that it can influence the timing of US support. If it is released, a Chinese military response on the scale of Justice Mission-2025 is likely.
• Coast guard behaviour. Boarding or diverting a merchant ship bound for Taiwan would be the clearest sign of a move from presence to quarantine. The 1 October start of the revised mobilization law is a date to note.
• The November vote. Local elections and the nuclear referendum will test whether the energy shock has moved Taiwanese opinion, and will shape the 2028 presidential race.
• PLA leadership. The purge of the Central Military Commission may reduce the readiness of the PLA for a complex operation in the short term. It also concentrates decisions in fewer hands.

The most likely course for the rest of 2026 remains pressure without war. The form of that pressure has changed, though, and the ships now stationed around Taiwan give Beijing an option that it did not have in place a year ago.

FREQUENTLY ASKED QUESTIONS

What is the current situation in the Taiwan Strait in September 2026?

There is no open conflict. Chinese air incursions have fallen to about 125 a month, but a record 244 Chinese government vessels were counted around Taiwan in July, and China has kept permanent patrols east of the island since May 2026.

Is China planning to invade Taiwan in 2026?

No invasion is assessed as imminent. Analysts regard a coast guard-led quarantine or blockade as the more likely form of escalation, because it carries lower military risk and exploits Taiwan's dependence on imported energy.

Why have Chinese ADIZ incursions decreased in 2026?

The AEI–ISW update assesses that China has adjusted its coercion strategy and is relying more on coast guard and other government ships. Diplomacy with Washington and a purge of senior PLA commanders may also be factors.

Did the United States pause arms sales to Taiwan?

Yes. A package worth about $14 billion, announced in January 2026, was put on hold after the Trump–Xi summit in Beijing on 13–15 May. President Trump described it as "a very good negotiating chip". US officials say overall policy on Taiwan has not changed.

How did the Iran war affect Taiwan?

The closure of the Strait of Hormuz cut off routes that carried 70% of Taiwan's crude oil and about a third of its LNG. Taiwan holds only about 12 days of LNG. It switched most crude purchases to the United States, and a referendum on restarting nuclear power will be held in November 2026.

What was the Justice Mission-2025 exercise?

It was a Chinese military exercise around Taiwan on 29–30 December 2025 involving 89 warplanes, 14 warships and 14 coast guard vessels. The PLA fired 27 rockets into nearby waters, and its live-fire zones crossed into Taiwan's territorial waters.

How much is Taiwan spending on defence?

The government plans to spend 3.3% of GDP in 2026 and 5% by 2030. The legislature cut a proposed NT$1.25 trillion special budget to a ceiling of NT$780 billion ($24.8 billion) in May 2026, then added NT$240 billion for drones and unmanned systems in August.

What percentage of global semiconductors does Taiwan produce?

Taiwan makes more than 60% of the world's contract-manufactured chips and around 90% of the most advanced ones, mainly through TSMC. A blockade would disrupt electronics, automotive and defence supply chains worldwide.

AUTHOR

SOURCES AND REFERENCES

• AEI–ISW – China & Taiwan Update, 1 September 2026
• AEI–ISW – China & Taiwan Update, 4 September 2026
• AEI–ISW – China & Taiwan Update, 15 September 2026
• Taiwan Ministry of National Defense – PLA activities around Taiwan
• CSIS – The Iran Conflict Illuminates Taiwan's Unique Energy Security Challenge
• Focus Taiwan (CNA) – Taiwan passes US arms bill with spending ceiling of US$24.8 billion
• Global Taiwan Institute – How Taiwan Fared during the 2026 Trump–Xi Summit
• Washington Post – US pauses $14 billion Taiwan arms sale after China summit
• Defense News – Arms sales pause would push Taiwan toward asymmetric-defense tech
• Taiwan Security Monitor (George Mason University) – Arms sale backlog updates