/CHINA: Biden To Speak With Xi Thursday As Tensions Over Taiwan Worsen

U.S. President Joe Biden will speak with his Chinese counterpart Xi Jinping on Thursday as tensions over Taiwan escalate, Bloomberg reports citing people familiar with the matter.

• The news come after verbal wrestling between U.S. and Chinese officials over House Speaker Nancy Pelosi's planned visit to Taiwan, which could take place in early August. There has been no official confirmation of the visit as of yet, but Chinese Foreign Ministry spokesman admitted that Beijing was "seriously prepared" for that scenario.
• Recent press reports suggested that there has been opposition to the idea from some corners in the White House, with security officials wary of the risk of aggravating tensions with China. Yet, there has been growing support for Pelosi's possible trip in the Congress, from both sides of the aisle, with some senior lawmakers flagging the need to send a strong message to Beijing.
• China's retaliation for similar visits were usually limited to combative rhetoric and not much more, but some analysts and decisionmakers fear this time might be different. Pelosi's potential visit would happen during a sensitive period for Chinese politics, with the Communist Party expected to grant Xi a convention-busting third term in office this November. Besides that, Pelosi's trip might coincide with the PLA's anniversary on August 1.
• Against this backdrop, there is growing concern that China could deploy military means to interrupt Pelosi's trip. The SCMP cited a Chinese military sources who warned that the PLA could organise a military drill near Taiwan around that time and deploy warships to patrol the Strait, "because the US military might arrange for Pelosi to land on the island on a warship departing from the American naval base in Okinawa." Elsewhere, U.S. sources told a WSJ reporter that China "is planning a potentially destabilizing response," with some analysts suggesting it could involve intercepting Pelosi's plane by Chinese warplanes.
• While it is believed that Beijing would prefer to use diplomatic means, the risk of a military confrontation is pressuring the two leaders to try and defuse the situation. The market will be on the lookout for any trade announcements, as the escalation in tensions occurs at a time when the White House is considering rolling off some Trump-era tariffs on Beijing to curb domestic inflation. National Security Council spokesman said tariffs "would [not] be a major topic of discussion with President Xi," with the two leaders due to talk about Taiwan and ways to manage bilateral competition.