Xi’s calculation

After Russian President Vladimir Putin invaded Ukraine in late February, many people in Asia wondered if China might seize the moment to fol [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( After Russian President Vladimir Putin invaded Ukraine in late February, many people in Asia wondered if China might seize the moment to follow suit and attack Taiwan. Nancy Pelosi’s trip this week to Taiwan, the first by a US House speaker in 25 years, provided a firm test for Chinese President Xi Jinping. Ahead of her visit, he warned Joe Biden’s administration would get “burned” while nationalist Chinese commentators suggested her stopover would “ignite the powder keg.” Key reading: - [China Hits Taiwan With Trade Curbs Amid Tensions Over Pelosi]( - [China Warns Airlines to Avoid ‘Danger Zones’ Around Taiwan]( - [China Disappointment Over Taiwan Response Puts Pressure on Xi]( - [Here Are All the Ways China’s Hitting Back Against Pelosi’s Trip]( - [Pelosi Knocks Out China’s Weibo as Millions Track Taiwan Trip]( China quickly announced plans for missile tests, as well as military drills starting tomorrow that show a capability of surrounding the main island of Taiwan. It also halted trade in some areas with the island, which Beijing claims but has never controlled. Still, the failure to deter Pelosi from visiting in the first place left some of China’s most outspoken hardliners disappointed. While Beijing is clearly in a stronger position than the last major cross-strait crisis in the mid-1990s, it’s also far from being able to push the US around. Despite the bellicose rhetoric, Xi and other officials are much more concerned about keeping the Communist Party in power and eliminating risks to their rule. The leadership wants to look tough, but it doesn’t want to take any steps that could unleash a conflict where there is any doubt about the outcome. It will bear in mind that while the US was never going to send troops into Ukraine, Taiwan could be another matter. Foreign Ministry spokeswoman Hua Chunying today appealed for patience while vowing that China would follow through on its threats to make the US and Taiwan pay. So far, however, Xi appears to view the costs of outright military confrontation as too high to bear. — [Daniel Ten Kate]( Soldiers set up barricades during a military exercise in Miaoli, Taiwan, on July 26. Photographer: Lam Yik Fei/Bloomberg Click [here]( to follow Bloomberg Politics on Facebook and share this newsletter with others. They can sign up [here](. Global Headlines Taiwan vow | Pelosi met with Taiwanese President Tsai Ing-wen today and pledged the US wouldn’t abandon her democratically elected government despite fresh trade curbs and military actions by Beijing. Her promise to stand by Taiwan comes amid long-running uncertainty over whether Washington would help Taipei if China attacked the island. The US has faced calls for a clearer commitment to [defend Taiwan]( following Russia’s invasion of Ukraine. Pelosi with Tsai Ing-wen. Source: Getty Images Buffer zone | It’s “wishful thinking” to expect relations between Russia and the West to return to their pre-war status soon after the fighting stops in Ukraine, Romanian Prime Minister Nicolae Ciuca said in an interview. Russia’s invasion has [re-opened]( a rift between democracies and autocratic countries akin to the Cold War that will require NATO to maintain an expanded troop presence on its eastern frontier for at least the medium term, he said. - Putin’s war in Ukraine is triggering the worst [rift]( in relations between Russia and Israel since the Soviet Union’s collapse. - German Chancellor Olaf Scholz [blamed Russia]( for a delay in shipping a turbine for the key Nord Stream 1 gas pipeline. Water levels on the Rhine River are set to fall [perilously close]( to the point at which it would effectively close, putting the trade of huge quantities of goods in jeopardy. Europe is already facing its worst energy-supply crunch in decades and governments are trying to avert a recession as Russia chokes off natural gas, stoking inflation, with climate change adding to the continent’s woes. Effective protest | In a country that only tolerates dissent in small doses, a mortgage boycott by hundreds of thousands of middle-class homebuyers has become one of the most [effective]( protests China has seen. With social stability a must ahead of this year’s Communist Party Congress, Xi’s Politburo has asked local officials to “ensure the completion” of housing projects, and state-owned banks are being strong-armed to finance the work. - China has made nearly $26 billion in short and medium-term loans to Pakistan and Sri Lanka over the past five years as its [overseas lending]( shifts from funding infrastructure to providing emergency relief. - As omicron sub-variants become ever-more infectious, Xi’s [resolve]( to avert virus fatalities is growing, leading experts to warn the Covid Zero policy could continue for years. Best of Bloomberg Opinion - [The Importance of Pelosi and Taiwan on Bond Swings: John Authers]( - [Zawahiri Killing Was a Great Success of a Bygone Era: Hal Brands]( - [Pelosi’s Taiwan Trip Is Only Start of US Headaches: Minxin Pei]( Shaky ground | Libya’s oil production has risen in the past two weeks, bringing hope the OPEC member’s exports can provide relief to a tight global market. Yet as [Salma El Wardany]( writes, anyone looking for signs of how sustainable the rebound is should consider the catalyst: the [gunpoint ouster]( by government troops of the state oil company’s chairman. Explainers you can use - [Understanding Monkeypox and How Outbreaks Spread]( - [World’s Food Supply Faces Threat as India Rice Crop Falters]( - [Epic Bank Scandal in China Adds to Social Tensions Over Finance]( Fellow travelers | Former US President Donald Trump called Hungarian Prime Minister Viktor Orban his friend as he welcomed him to one of his luxury golf resorts barely a week after remarks by the Central European leader about a “flood” of migrants drew comparisons to Nazi [rhetoric](. Both men are due to speak to the Conservative Political Action Conference in Dallas, Texas. Tune in for our weekly Twitter Space global politics chat today at 8 a.m. ET. We’ll be dissecting Pelosi’s trip to Taiwan with reporters from both Asia and the US. You can listen [via this link](, and the recording will be available for a week afterward. News to Note - Australian Prime Minister Anthony Albanese is on the brink of a major policy victory for [tougher]( action on climate change after securing crucial support from the Greens to strengthen the country’s carbon emissions cuts. - Liz Truss [extended]( her poll lead over leadership rival Rishi Sunak among Conservative Party members, suggesting she’s on track to succeed Boris Johnson as UK prime minister. - Kansas voters [opposed]( changing the state Constitution to declare there’s no right to an abortion, the first referendum on the issue since the US Supreme Court said each state can set its own policy. - The US Senate passed legislation giving [expanded]( health benefits to military veterans exposed to toxic burn pits after an outcry from supporters and comedian Jon Stewart, who camped out on the Capitol steps since Republicans blocked the bill last week. - The US announced it had approved the [potential sale]( of additional Patriot missiles and related equipment to Saudi Arabia in a $3 billion deal, just weeks after Biden visited. And finally ... China’s announcement of military drills around Taiwan — one of the world’s busiest waterways — is creating [ripple effects]( across global supply chains, prompting detours and delaying energy shipments. Gas suppliers are rerouting or reducing speed on some liquefied natural gas vessels en route to North Asia, sources say, and shipments to Taiwan and Japan this weekend will be affected. Polygons show military drill areas. The colored dots represent vessel positions as of today. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022