A reality check in Taiwan

Lai Ching-te’s first days in power in Taiwan have been a reality check for the US and its allies [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. Lai Ching-te’s presidency is only 10 days old, but already the Taiwanese leader is facing turmoil from a divided parliament and China’s expanding military power. The trouble began from the outset when Beijing blasted [his inauguration speech]( as a “confession of Taiwan independence” and threatened counter measures. China deems the democracy of some 23 million people a breakaway province and has vowed to take it back. Almost immediately, China unleashed [its biggest drills around Taiwan]( in a year, encircling its main and outlying islands in a signal of how the People’s Liberation Army might deploy [in the event of an invasion](. Beijing had been relatively quiet after Lai’s January election win, with analysts saying officials were waiting for his opening speech. If Lai thought the conclusion of those two-day drills would bring respite he was wrong: On Tuesday, his ruling Democratic Progressive Party lost a marathon vote as opposition groups [passed an amended law]( that effectively clipped his presidential authority — and sparked [the biggest street protests]( in years. The reforms give lawmakers enhanced powers to investigate government policies. That has fanned fears the Kuomintang, which favors eventual unification with China, could expose secretive defense deals by demanding access to confidential documents. While the KMT has dismissed such concerns as “fake news,” the debate underscores the sensitivity around the global chip hub’s military sector. It’s important for Lai to keep the trust of foreign friends, as he tries to bolster his island’s ability to build its own defense hardware. Taipei unveiled a prototype last year for its first domestically assembled military submarine, an effort that hinged on help from overseas. If the US and other allies were hoping his presidency would usher in an era of calm, his first days in power have been a reality check.— [Jenni Marsh]( Protesters outside the legislature in Taipei on Tuesday. Photographer: An Rong Xu/Bloomberg Global Must Reads South African voters appeared to punish the ruling party, putting it on course to [lose its parliamentary majority]( for the first time since taking power at the end of apartheid three decades ago. A model developed by a state research agency showed the African National Congress is on course to win 42% of the votes cast in yesterday’s national election. [The rand tumbled]( and banking stocks slumped. The rising costs of the war in Gaza are threatening Israel’s more than two-decade economic growth streak, with the biggest risk a [possible reversal in investment]( to the all-important technology sector. With its security officials believing that fighting in the Palestinian enclave is likely to last [through the end of the year](, Israel is in danger of facing a repeat of “the lost decade” it suffered after the 1973 Yom Kippur War. Rachel Reeves is trying to reassure UK business leaders that a Labour government will [represent economic stability](. The probable next finance minister, Reeves is central to opposition Labour leader Keir Starmer’s efforts to woo the City of London ahead of July’s general election that polls all show the ruling Conservatives — the traditional party of business — will lose. Rachel Reeves. Photographer: Hollie Adams/Bloomberg A Hong Kong court found 14 opposition figures guilty in the city’s largest-yet national security trial that [targeted scores of pro-democracy activists](. Judges in the finance hub convicted the defendants of subversion charges under a 2020 national security law imposed by Beijing in the wake of mass street protests calling for greater freedoms. Two others were acquitted. Ukraine said it downed seven of 11 cruise missiles fired overnight from bombers inside Russia that [targeted military facilities and critical infrastructure](, as well as 32 Shahed drones. Another eight Russian missiles hit the Kharkiv region. The attack came after Sweden announced a $1.3 billion military aid package for Ukraine, its largest yet, including reconnaissance aircraft to be deployed with fighter jets from other European nations. North Korea fired multiple suspected ballistic missiles and attempted to disrupt South Korea’s communications, days after Kim Jong Un’s space program [was dealt a blow]( when a rocket blew up soon after liftoff. Thai courts are set to rule in coming weeks on cases involving Prime Minister Srettha Thavisin, ex-leader Thaksin Shinawatra and the main opposition party, introducing [a new phase of political uncertainty]( that threatens to inflict further damage on fragile financial markets. New Zealand’s center-right government delivered on its election promise to cut taxes [in its first budget]( even as the Treasury Department forecast bigger deficits and a delayed return to surplus. President Javier Milei’s main legislative attempt to deregulate Argentina’s economy [moved closer to a decisive vote]( after weeks of stalemate in the opposition-controlled upper chamber. Washington Dispatch Although many disagreements between the US and China remain far from resolution, delight [spread across Washington]( yesterday with the announcement that pandas would be returning to the Smithsonian Institution’s National Zoo. “This dynamic duo is ready to take on Washington, D.C.” the zoo said in a post on X introducing the new arrivals, two-year-olds Bao Li and Qing Bao. A panda at the Smithsonian National Zoo. Photographer: Anna Moneymaker/Getty Images A previous set of pandas departed Washington in November after the US and China failed to renew an agreement for them to stay. Their absence marked the first time the National Zoo has been without pandas since 1972, when a pair was loaned by Beijing to commemorate President Richard Nixon’s historic visit. The failure to renew that accord generated speculation that China was ending its so-called panda diplomacy after similar deals expired with zoos in Atlanta, Memphis and San Diego. Although both sides denied politics were at play, the loss of America’s pandas coincided with a drastic deterioration in ties. One thing to watch today: First-quarter GDP will likely be revised lower in a second estimate from the Commerce Department’s Bureau of Economic Analysis, suggesting momentum has faded. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television. Chart of the Day Source: Barclays Plc As Prime Minister Narendra Modi prepares for a likely third term in office when India’s mammoth elections end on Saturday, global firms say there’s [still plenty of work]( for the new government to do to attract foreign investment. Challenges are substantial, with often-cited policy flip flops, bureaucratic delays and a lack of land availability. And Finally Telecommunications giants like AT&T, BT Group and Orange are preparing to tap a rich new source of revenue: [their old copper wiring](. In the migration to fiber-optic cable, companies could recover over the next decade as much as 800,000 metric tons of copper — a critical component of electric-vehicle batteries, wind turbines and other clean-energy infrastructure — worth more than $7 billion at today’s prices, according to estimates. A bale of wires from copper cables in a recycling facility in Dallas in April. Source: AT&T Services, Inc. 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