Posted originally on Jan 2, 2026 by Martin Armstrong |  

While the world has focused on Russia/Ukraine, the tensions are rising between the US and China. Let’s face reality. China could move so fast against Taiwan that any hope of U.S. military intervention might arrive way too late to make a difference. China launched a surprise multiday military exercise completely surrounding Taiwan dominating Taiwan’s air space, naval space, and ground forces in an exercise that simulated a total blockade of Taiwan and attacks on its critical infrastructure.

As far as the share market is concerned, 2025 should prove to be the highest annual closing after a 17-year rally. The year 2026 is a Directional Change. We still see January as a Panic Cycle so caution is advisable for a turn back to the downside.

China has adopted what is known as the “All-Dimensional Deterrence outside the island chain.” This is a very clear reference to intercepting any U.S. military forces in the Western Pacific Ocean that might attempt to intervene in Taiwan’s defense against an actual attack.

The State Department has come out and stated for the New Year:

“China’s military activities and rhetoric toward Taiwan and others in the region increase tensions unnecessarily. We urge Beijing to exercise restraint, cease its military pressure against Taiwan, and instead engage in meaningful dialogue,” said State Department spokesperson Tommy Pigott on Thursday. He also added: “The United States supports peace and stability across the Taiwan Strait and opposes unilateral changes to the status quo, including by force or coercion.”

It was the Neocons who were in charge of the Biden Administration even sent Pelosi to Taiwan to instigate a confrontation with China in 2022 as they did in Ukraine to start the war with Russia.

The One China policy in the context of U.S. diplomacy refers to the United States’ acknowledgment of the position held by the People’s Republic of China (PRC) that there is only one China and that Taiwan is part of China. The U.S. does not explicitly endorse the PRC’s claim but “acknowledges” it.

The policy was formally adopted during the process of normalizing relations between the United States and the People’s Republic of China in the 1970s. The first policy was issued By President Nixon known as the Shanghai Communiqué (February 28, 1972). This was issued during President Richard Nixon’s historic visit to China; this is the foundational document. The U.S. side declared:

“The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China. The United States Government does not challenge that position.“

Later under President Jimmy Carter, the U.S. switched diplomatic recognition from the Republic of China (Taiwan) to the People’s Republic of China. This became known as the Joint Communiqué on the Establishment of Diplomatic Relations (January 1, 1979). The U.S. “recognizes the Government of the People’s Republic of China as the sole legal Government of China” and “acknowledges the Chinese position that there is but one China and Taiwan is part of China.”

Then in 1979, Congress passed by the following normalization known as the Taiwan Relations Act (April 10, 1979). This act provides a legal framework for continuing unofficial relations with Taiwan and commits the U.S. to providing Taiwan with defensive arms. It creates a persistent tension with the commitments in the Joint Communiqués.

Then the U.S. stated it “does not seek to carry out a long-term policy of arms sales to Taiwan” and intended to reduce arms sales gradually. This was the August 17 Communiqué (1982).

Consequently, the U.S. One China policy was articulated in the 1972 Shanghai Communiqué and cemented in the 1979 Normalization Communiqué. It is based on the Three U.S.-China Joint Communiqués and is fundamentally different from the PRC’s One China Principle, which insists Taiwan is an inalienable part of China. The U.S. policy is a deliberate, strategic ambiguity that acknowledges the Chinese position without endorsing it, while maintaining substantive unofficial ties with Taiwan.

The Pelosi visit Taiwan in August 2022 was a serious violation of the One-China principle and the provisions of the three U.S.-China joint communiqués. It infringed upon China’s sovereignty and territorial integrity, and sent a severely wrong signal to the “Taiwan independence” separatist forces. The Chinese government firmly opposes any form of official exchanges and military contacts between the U.S. and Taiwan, and has taken necessary measures to resolutely safeguard national sovereignty and territorial integrity. Taiwan has been an inalienable part of China’s territory since ancient times, and the Chinese government is unwavering in its commitment to achieve complete national reunification.

Pelosi went to Taiwan as a symbolic confrontation to boost Taiwan Independence like John McCain went to Ukraine to inspire that revolution in 2014. In both cases, it appears that these were deliberate actions to instigate confrontation on both side of the world and have driven China and Russia together reversing the Objectives of Nixon’s policies from the start. What if a Russian politicians stood on the steps of Capit0l Hill and declared Russia is behind you, overthrow your government? But the Western Press looks the other way when Pelosi and McCain deliberately seek to usurp American foreign policy.

Pelosi’s trip on 2022 has definitely set in motion rising tensions in 2023 which will escalate into 2027.