Xi’s Taiwan test

The visit by Taiwan’s leader to US will test Beijing’s ability to show restraint. [View in browser]( [Bloomberg]( China predictably warned of unspecified retaliation if Taiwan President Tsai Ing-wen meets US House Speaker Kevin McCarthy in the US. But Beijing has some good reasons to act with more restraint than it did last year. Tsai left Taipei today for New York, where she’s expected to give a speech and hold some other events before flying on to Guatemala and Belize — two of the 13 diplomatic partners that Taiwan has left after Honduras formally switched recognition to Beijing this month. Key reading: - [Biden Aide Speaks With China Counterpart as Tension Spikes]( - [China Warns Taiwan Leader to Avoid McCarthy as She Visits US]( - [Foxconn Founder to Visit US to Rev Up Taiwan Presidential Bid]( - [Alibaba’s $32 Billion Day Signals Breakups for China Tech]( The meeting with McCarthy is likely to come next week when Tsai stops in Los Angeles on the way back to Taiwan. While Beijing will certainly react, Chinese President Xi Jinping also must think carefully about whether he wants to replicate the unprecedented military exercises he ordered after former House Speaker Nancy Pelosi visited Taiwan last August. Those drills, in which China fired missiles over Taiwan and simulated a naval blockade of the entire island, which Beijing claims as part of its national territory, only boosted support for Tsai’s ruling party. And this year the stakes are higher, with Taiwan preparing for an election in early 2024 that could determine whether Taipei moves even closer to Washington or veers back toward Beijing. In Taipei, Tsai’s Democratic Progressive Party sees any major Chinese aggression as helping boost its poll numbers over the opposition Kuomintang, which favors more engagement with Beijing. In the past few months, Xi’s government has shown signs it’s aware of this dynamic, welcoming several key Kuomintang figures — including Ma Ying-jeou, the first former Taiwanese president to visit China — and pledging better cross-straits ties. Still, it remains to be seen whether China will actually restrain itself. As Taiwanese Foreign Minister Joseph Wu told reporters on board Tsai’s plane today: “China sees everything as provocative.” — [Daniel Ten Kate]( Tsai visits troops on March 25. Photographer: Sam Yeh/AFP/Getty Images Tune in [here]( for our Twitter Space on China, the US and the latest flashpoints in a strained relationship. And if you are enjoying this newsletter, sign up [here](. Global Headlines Spiraling crisis | Escalating [violence]( in cities across France is spreading alarm through President Emmanuel Macron’s coalition, with some leading supporters fretting the situation is spinning out of control. [Ania Nussbaum]( reports that Macron’s allies in the National Assembly are still backing his controversial pension reform but many are urging him to find a way to take the heat out of the demonstrations. Watch as French police use tear gas to disperse crowds protesting against pension reforms in Paris yesterday. Source: Bloomberg Shrinking pool | President Vladimir Putin’s drive to expand Russia’s armed forces is [intensifying]( labor shortages in the economy as his war in Ukraine draws in hundreds of thousands of workers to the military amid already record-low unemployment. More than 500,000 may have entered military service last year, according to estimates by Bloomberg Economics, and the Kremlin is seeking 400,000 more contract recruits this year. - Follow our rolling coverage of the war [here](. The cause of the latest US banking crisis may surprise anyone still thinking in terms of the crash of 2008. It wasn’t dodgy loans to impecunious homebuyers that sank Silicon Valley Bank. It was a stash of what are thought to be the [safest securities]( on Earth: US Treasuries. As interest rates rose, bond prices declined, causing huge losses. Plan demand | US President Joe Biden challenged Republicans to produce a public budget plan in response to their demand to begin negotiations over the debt ceiling. In a letter to McCarthy before lawmakers’ two-week Easter recess, Biden said such a plan would help generate a “productive” conversation by clarifying each party’s [goals](. - A long-term deal to raise the debt ceiling may be [unreachable]( as the Republicans’ attempt to extract promises of fiscal belt-tightening faces a defiant White House. 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Here’s What Dealers Know]( Probing the president | Prosecutors in Peru say they have opened an investigation into [money laundering]( allegations against President Dina Boluarte and her predecessor Pedro Castillo. The new probe comes the same week congress is set to decide whether to launch impeachment proceedings against Boluarte, who came to power just three months ago after Castillo was ousted and arrested for trying to dissolve the legislature and rule by decree. Watch Bloomberg TV’s Balance of Power at 5pm to 6pm ET weekdays with Washington correspondents [Annmarie Hordern]( and [Joe Mathieu](. You can watch and listen on Bloomberg channels and online [here](. 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And finally ... After the world failed to boost targets for cutting emissions at last year’s climate summit, the South Pacific atoll of Vanuatu is turning to the International Court of Justice to underpin commitments to curb greenhouse gases. Vanuatu and other nations want the court to rule on what countries are obliged to do to ensure the global temperature rise is below the Paris Agreement target of 1.5 degrees Celsius, and thus create the most authoritative legal [assessment]( on where nations are falling short. Port Vila, Vanuatu. Photographer: Mario Tama/Getty Images Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Bloomberg Politics newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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