Threading the needle on Taiwan

After China’s military drills following House Speaker Nancy Pelosi’s visit to Taiwan, the ball was back in US President Joe Biden’s court to [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( After China’s military drills following House Speaker Nancy Pelosi’s visit to Taiwan, the ball was back in US President Joe Biden’s court to respond. His military generals did so by sending two guided-missile cruisers through the Taiwan Strait yesterday, in what the US Navy’s Seventh Fleet called a “routine” trip. In many ways, it was: US warships regularly transit the waterway every few months on average. Key reading: - [US Sends First Warships to Taiwan Strait Since Pelosi Visit]( - [Japan Will Monitor China, New Economic Security Minister Says]( - [Japan Set to Become One of World’s Biggest Defense Spenders]( - [Why US-China Rivalry Is Heating Up in Pacific Islands]( - [China Urges NATO Allies to Abandon ‘Cold War Thinking’]( The difference this time, however, was that the US sent two vessels at the same time, and they can hold more missiles than the destroyers that are typically used in transiting the Taiwan Strait. The move indicated the Biden administration was seeking to send China a message without provoking Beijing into an escalatory response. While former President Bill Clinton sent aircraft carriers to the Taiwan Strait in the 1990s, this time around the USS Ronald Reagan carrier strike group monitored the drills from afar. China’s response was relatively muted. The Foreign Ministry made a comment about how the US ships were sabotaging peace, and the Communist Party-backed Global Times newspaper said the “old warships” couldn’t “deter the PLA at all.” At a time when hawks in both countries are pushing for ever-tougher responses, any bit of restraint is notable. Still, it’s hard to see the status quo returning to what it was even a year ago. The next few months will be crucial to see if Biden and President Xi Jinping, who faces a leadership reshuffle in the next few months, can put the US-China relationship on a more stable footing. One sign will be whether they hold their first face-to-face meeting at the Group of 20 summit in Bali in November. Even if they do meet, it’s looking harder than ever for the two sides to find common ground on Taiwan over the long term. — [Daniel Ten Kate]( A Chinese military helicopter flies past Pingtan island, one of mainland China’s closest points to Taiwan. Photographer: Hector Retamal//AFP/Getty Images Click [here]( to sign up for The Readout with Allegra Stratton, your guide to the stories that matter for the UK. And share this newsletter with others. They can sign up [here](. Global Headlines Plant inspection | International Atomic Energy Agency Director General Rafael Mariano Grossi said he’ll lead an inspection of the Russian-occupied Zaporizhzhia nuclear power plant in Ukraine this week. The visit to Europe’s biggest atomic station will take place amid almost-daily reports of new [shelling]( and damage to infrastructure surrounding its six reactors. - Follow our rolling coverage of the Russian invasion of Ukraine [here](. Loan forgiveness | Not all Democrats support Biden’s student-loan forgiveness program, underscoring divisions and [worries]( that the issue may become a vulnerability in the November midterm elections. While some Democratic lawmakers are expressing their opposition in the face of tight races, others say holding onto Congressional majorities could allow the party to more broadly address the soaring cost of higher education. Although global inflation is finally coming off the boil as economic growth slows, it’s set to remain far [too hot]( for the liking of the world’s policy makers. Prices for key raw materials — from oil to copper and wheat — have cooled in recent weeks, taking pressure off the cost of manufactured goods and food. But the major central banks, which failed to see the pandemic price shock coming, are set to press ahead with interest-rate increases. Nuclear impact | Progress toward an Iranian nuclear deal has thrown the spotlight onto a cache of more than 90 million barrels of crude held offshore by Tehran that could be [dispatched]( if an agreement is reached. The potential of the US lifting sanctions and letting the oil flow into global markets may help reduce the price of the fuel and fill the void as an European Union ban on Russian supplies starts to come into force. Best of Bloomberg Opinion - [Tory PM Race Is UK’s ‘House of the Dragon’: Adrian Wooldridge]( - [Texas May Get to Carbon-Free Power Before New York: Justin Fox]( - [Marcos Brings Myth-Making to the Silver Screen: Clara F. Marques]( Head-to-head | Brazilian President Jair Bolsonaro and his main challenger, former leader Luiz Inacio Lula da Silva, [clashed]( in a televised debate yesterday, their first in-person encounter ahead of the Oct. 2 election. Bolsonaro called Lula’s government “the most corrupt in history” and his rival accused the incumbent of “destroying Brazil,” in a set piece that otherwise lacked policy specifics or surprises. The presidential debate in Sao Paulo yesterday. Photographer: Jonne Roriz/Bloomberg Hard times | The strikes that erupted across Britain’s railways and airlines this summer are about to [spread]( to public services amid anger over pay as the highest inflation in 40 years erodes wages. The most active run of industrial action since the early 1970s is part of the bleak backdrop that will greet the next prime minister when Boris Johnson steps aside on Sept. 6. - Liz Truss, the front-runner, faced fresh criticism from opponent Rishi Sunak amid reports she’s [weighing]( a move to cut the VAT sales tax by as much as 5 percentage points to help tackle the cost-of-living crisis. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1pm ET, with a second hour on Bloomberg Radio from 1 to 2pm ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Floods in Pakistan are expected to cause at least $10 billion in damages and continue to [threaten lives]( in the world’s fifth most populous nation, with more than 1,000 people killed since June. - Argentina’s Vice President Cristina Fernandez de Kirchner called for a halt to [mass protests]( after her supporters clashed with police near her residence in downtown Buenos Aires. - China is enforcing [restrictions]( in areas around Beijing more intensively, and will mass test the port city of Tianjin, stepping up a quest to wipe out Covid-19 ahead of a key meeting of the Communist Party’s top leaders. - Quebec Premier Francois Legault called an [election]( yesterday, triggering a 36-day campaign to convince voters in Canada’s second-largest province to give him another four years in power. - A Supreme Court ruling in India affirmed that same-sex couples and other non-traditional families are [entitled]( to social benefits. Thanks to the 30 people who answered Friday’s quiz and congratulations to Bill Peterson, who was the first to name Thailand as the country whose constitutional court ordered the prime minister to stop performing his duties temporarily until it rules on a petition seeking his removal. And finally ... Russia’s war in Ukraine spooked Japan into boosting defense spending. Now, as tensions rise over the Taiwan Strait, calls are growing to address another [security threat](: shriveling rice paddies. For decades, Japanese consumers have been eating less rice and fish in favor of more bread, meat and edible oil, leading the country’s food self-sufficiency ratio to slump to the lowest among major economies, report [Isabel Reynolds]( and [Grace Huang](. Rice field in Shizuoka Prefecture. Photographer: Toru Hanai/Bloomberg Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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