The Japanese daily, the Nikkei Asian Review, reported on Wednesday, “the US is in talks with Taiwan to co-produce American weapons.”

Earlier on, the South China Morning Post (SCMP) stated that China’s Defence Minister vowed to be on high alert and ready for war amid mounting tension with the US, on the sidelines of the party congress.

Over the weekend, China’s President Xi Jinping said that Beijing would try its best to bring Taiwan back into the fold by peaceful means, but would not renounce the use of force if needed.

To which, US Secretary of State Antony Blinken responded that China’s government is pursuing its plans to annex Taiwan on a “much faster timeline” under Xi Jinping.

Market reaction

Tensions continue brewing between the US and China over Taiwan but so far it has a little to no impact on risk sentiment. The Chinese proxy, AUD/USD, is trading on the back foot at around 0.6300 amid a broad US dollar rebound.