The Asia Outlook: 2026
As the global community enters 2026, it does so amid a rapidly shifting international order defined less by continuity than by disruption. The Indo-Pacific remains central to global politics, but the assumptions that governed the region for much of the past decade no longer hold. In 2025, the return of a transactional, power-forward U.S. foreign policy under the Trump administration upended established diplomatic rhythms, reshaped alliance expectations, and accelerated strategic recalculations across Asia. Long-standing questions about deterrence, economic security, and political alignment have become more immediate and more consequential.
The region’s defining challenges are increasingly structural rather than episodic: weaker growth models, sharper demographic decline, and tightening constraints on technology, trade, and capital are forcing hard choices at home. At the same time, security competition is intensifying across air, sea, space, and the information domain, raising the stakes of deterrence and crisis management. Domestic politics are ever important as elections, legitimacy fights, corruption scandals, and institutional deadlock threaten to warp strategic outcomes. In short, Asia is entering a year where internal capacity and external pressure are converging, leaving less room for improvisation and more risk that small shocks become major tests.
Looking ahead through 2026, The Asia Cable remains committed to providing clear, grounded analysis of the forces shaping this critical region. The following outlook is the result of a collective effort by our staff to identify the trends, risks, and inflection points that will define Asia’s role in a more fragmented and unpredictable world. In a moment when the international system itself feels in flux, informed perspective matters more than ever. We are grateful for your continued readership and engagement, which make this work possible, and we are proud to present The Asia Outlook: 2026.
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Table of Contents
Much Ado About Population - Alex Gintz
Building a New Security Posture - Alex Gintz
Military Modernization - Alex Gintz
Renewed U.S.-North Korea Diplomacy? - Alex Gintz
Philippines Grapples With Government Accountability - Nattan Casey Plewissara
Vietnam Navigates a Brave New World - Nattan Casey Plewissara
An EU-India Diplomatic Alignment? - Sapna Suresh
A Breakup Between Islamabad and Kabul - Sapna Suresh
Partisan Gridlock - Alex Benetos
The Trump Factor - Alex Benetos
Special thanks to Rachael Rhine Milliard and Kathryn Kremp for their editorial contributions.
China
The 15th Five-Year Plan
As 2026 begins, Beijing is moving from diagnosis to marching orders with the 15th Five-Year Plan for 2026 to 2030. The Party set the political frame in late October 2025, when it released its recommendations for drafting the plan. The formal moment to watch is March 5, 2026, when the 14th National People’s Congress opens its fourth annual session and is expected to approve and implement the plan. Beijing’s direction is clear even before the final text. Beijing is signaling high-quality development built on innovation and national security, with a heavy emphasis on tech self-reliance and “new quality productive forces.” Early 2026 investment approvals also point to a plan that pairs growth support with security and resilience goals. The key thing to watch is whether the plan puts real weight behind household demand, or whether it stays centered on supply-side upgrading and manages weak consumption with targeted fixes.
U.S.-China Relations
Coming off a year of ups and downs, the U.S.-China relationship heads into 2026 looking, for the moment, stable. Both sides have reasons to keep it that way. On the U.S. side, President Donald Trump has turned attention elsewhere, and the Maduro episode is a reminder that the White House is willing to spend political and operational bandwidth in the Western Hemisphere instead of picking a new fight with Beijing. On China’s side, stability matters because exports are doing more of the heavy lifting for growth while domestic demand stays weak, and Beijing wants a calm external backdrop as it locks in the 15th Five-Year Plan in March.
But both sides also face structural forces that could break the truce. For China, large trade surpluses and export pressure are not going away soon, and that keeps feeding Washington’s case that Beijing is undercutting American manufacturers and distorting competition. For the U.S., the truce depends on internal politics as much as diplomacy, with hawks and doves pulling Trump in different directions, and with competing priorities inside the administration over whether trade enforcement, technology controls, or crisis deterrence should come first. The clearest early sign for how 2026 will go is the possible meeting between Trump and Xi Jinping in April, because it will show whether both sides can extend the pause and set rules for the next phase, or whether they slide back into escalation once the crisis comes.
Worsening EU-China Relations
In the second half of 2025, relations between the European Union and China worsened. One primary sticking point between the two sides is China’s ongoing support for the Russians in Ukraine. According to Kaja Kallas, it is in China’s interest that the war continue so that American attention does not turn to the Indo-Pacific. On the economic front, tensions have escalated considerably, particularly due to Brussels’s growing trade deficit with Beijing. In an article for the Financial Times, French President Emmanuel Macron reiterated that Europe is eager to resolve its disputes with China. He warned that if Beijing does not change course, the EU will have no choice but to implement protectionist trade policies. As the new year begins, an important area to watch for rising tensions will be the Europeans’ reactions regarding the escalation of Sino-Japanese tensions over Taiwan.
Strides in Defense Development
China’s military modernization accelerated through 2025, with major leaps in airpower and autonomous systems. The People’s Liberation Army (PLA) conducted its first sixth-generation fighter test flights, trialing two stealth demonstrators (unofficially dubbed J-36 and J-50) that mark a progression from concept to prototype stage. At the same time, the new J-35 stealth fighter, a fifth-generation jet designed for aircraft carriers, made its public debut as an operational platform, even performing catapult launch trials that signal its integration into China’s naval air arm. Beijing also unveiled advanced unmanned aircraft: at a September parade, the PLA showcased several new drones – including large “loyal wingman” UAVs meant to fly alongside piloted fighters – revealing rapid strides in autonomous combat aviation. Moreover, the military is investing heavily in artificial intelligence for battlefield use, enabling swarms of drones to coordinate targeting and maneuvers with minimal human intervention. These developments point to a force increasingly equipped with cutting-edge, AI-enabled capabilities to contest the skies.
On the maritime front, 2025 brought historic milestones for the Chinese Navy. China commissioned its third and largest aircraft carrier, Fujian, in November – the country’s first supercarrier outfitted with electromagnetic catapult launch systems (EMALS) comparable to U.S. carriers. By year’s end, Beijing also staged its most extensive war games around Taiwan to date: the “Justice Mission 2025” drills saw dozens of PLA warships, aircraft and missile units encircle the island in a simulated blockade, demonstrating an ability to cut off Taiwan’s ports and airspace. Meanwhile, China’s shipyards continued pumping out modern naval vessels at an unprecedented rate. In 2025 alone, the Navy added seven new Type 052D guided-missile destroyers – around 54,000 tons of advanced warships – sustaining the world’s highest naval shipbuilding pace and far outpacing Western navies’ output. Taken together, these advances from carrier-based stealth jets and drone swarms to electromagnetic catapults and a record launch of warships highlight Beijing’s concerted drive to sharpen its military edge and bolster its coercive power in the Asia-Pacific.
Evolving Demographic Policy
Demographic concerns will be high on the list of priorities for policymakers through 2026, and the government is already moving to build an effective response. China’s population fell for a third straight year in 2024, with only 9.54 million births recorded against nearly 10.93 million deaths. Even a slight uptick in births hasn’t budged China’s ultra-low fertility rate, which remains around one child per woman – roughly half the 2.1 needed to sustain the population. The causes behind this baby bust are familiar and formidable. Raising a family in China is prohibitively expensive. One report found the average cost of a child to age 18 is over six times the country’s per-capita GDP. Further, young adults face insecure jobs and a slowing economy that make them think twice about marriage or parenthood. Marriage rates have plummeted in recent years, and recovery is slow and uncertain. Because many benefits from paid maternity leave to IVF are reserved for married couples, single women have little incentive or support to become mothers. On top of that, women still shoulder most childcare duties and often pay a career price for motherhood, further discouraging births. The result is a generation increasingly choosing not to start families – and a population that has begun to shrink.
Beijing is responding with an all-out pro-natalist push. The 2025 government work report, presented in March, and the National Security White Paper, released in May, both explicitly listed promoting childbirth and childcare as major priorities. In 2025, authorities rolled out China’s first national childcare subsidy and even made it tax-exempt, while instructing universities to promote “positive” views on marriage and childbearing to their students. Starting in January 2026, China’s tax code flipped priorities: childcare and eldercare services will be free from value-added taxes (VAT), whereas condoms and birth-control pills just lost a three-decade tax exemption and will now incur the standard 13% VAT. Officials have also expanded parental leave and childcare services in hopes of making family life more feasible. Still, experts are skeptical that financial perks can reverse these entrenched trends.
Japan
Much Ado About Population
Like China, Japan enters 2026 grappling with an intensifying demographic crisis as its population both shrinks and ages at unprecedented rates. In 2024, births fell to roughly 720,000, a record low, while deaths totalled around 1.6 million, more than two deaths for every baby born. Japan’s economy is already under stress from this demographic slide. Surveys indicate pervasive labour shortages. A Reuters poll in January 2025 found that two‐thirds of companies were hit by worker scarcities, even as Japan has pushed women and seniors into the workforce. In response, Tokyo has quietly begun to open its doors: the number of foreign residents jumped ~10% in 2024 to about 3.8 million (≈3% of the population). The government is now overhauling its immigration regime to sustain this trend. For 2026–2028, it has capped “specified skilled worker” visas at roughly 820,000 and will replace the old technical‐intern program with a new scheme targeting about 1.2 million foreign workers in total.
However, immigration policy proved itself to be a somewhat sensitive issue last year, and the government’s accounting for this discrepancy between public sentiment and the benefits of immigration is less than clear. Analysts caution that even these figures leave Japan far short of its needs, as foreign employees remain only ≈3% of the workforce, and some forecasts project an 11 million‐worker gap by 2040 unless migration increases or productivity rises dramatically. In short, managing population decline through labour and immigration policy will dominate Japan’s agenda into 2026.
Building a New Security Posture
Tokyo is also rapidly shifting its security posture in response to a more volatile region. In December 2025, the cabinet greenlit a record defense budget for the 2026 fiscal year, totalling over 9 trillion yen. That marked the fourth straight year of steep increases under a five‑year plan to raise outlays to 2% of GDP. This arms buildup goes hand‑in‑hand with a doctrinal pivot: Japan’s 2022 National Security Strategy explicitly names China as “the greatest strategic challenge” and calls for new strike capabilities and tighter U.S. alliance ties. In a reflection of this position, Japan joined the Balikatan exercises, held annually between the U.S. and the Philippines, for the first time. Importantly, officials now emphasize unmanned systems and other force multipliers to compensate for an aging Self‑Defense Force. As one senior diplomat bluntly put it, Japan faces “the most severe and complex” security environment it has seen since World War II, so bolstering deterrence with allies and new capabilities is a top priority going into 2026.
South Korea
Yoon Suk Yeol Trial: A Lesson in Democratic Retribution
It took only three hours for 190 members of South Korea’s parliament, some of whom had to physically fight their way back into the National Assembly, to overturn President Yoon Suk Yeol’s surprise martial law declaration in December of 2024. For a nation with a long history of authoritarian rule, it was a pivotal moment in its decades-long democratic experiment — a triumph of safeguards, institutions, and republicanism. However, for an unpopular Yoon desperately trying to revive a floundering presidency, it was the final blow to a storied political career.
Now, one year later, Yoon’s actions could cost him not just his personal freedom, but perhaps his life.
On December 26th, prosecutors announced they would be seeking a 10-year prison sentence for the former President, despite accusations of a political witch hunt from Yoon Suk Yeol’s legal camp. A former prosecutor himself, Yoon’s arraignment on multiple counts, including abuse of power and destruction of evidence, is just the beginning of the long legal battle that lies ahead. In South Korea, the trial of a former president is a political spectacle to which many have become accustomed.
In 2018, South Korea’s first female President, Park Geun-hye, was sentenced to 24 years in prison on an array of charges, including abuse of power. It marked the end of a political scandal that had rocked the nation, culminating in her use of the presidency to pressure businesses to make generous donations to a foundation run by her close friend, Choi Soon-sil. That same year, former President and Hyundai CEO Lee Myung-bak was also sentenced to prison for charges including embezzlement and abuse of power. Although both were later pardoned, the episode marked a notable uptick in corruption cases in a nation whose recent political history has already been marred by political scandals. Former President Roh Moo-hyun, fearing prosecution stemming from his acceptance of bribes while in office, famously took his own life in 2007.
Still, Yoon’s situation stands as unique in the annals of South Korean presidential trials. Firstly, Yoon is actually facing several charges in connection with four separate trials. Prosecutors are seeking to convince criminal courts that Yoon, who barricaded himself in his residence for weeks after impeachment in an attempt to avoid a search warrant, hindered authorities in their duties and destroyed evidence regarding his attempted coup. Notably, prosecutors have also used Yoon’s orders to fly a drone over North Korea as evidence of an attempt to stoke tensions with the hope of sparking a national security crisis. Finally, Yoon is facing charges of rebellion in the most serious of the four trials, carrying a sentence of either life in prison or execution.
The outcome of Yoon’s four trials remains muddled by a variety of factors, not the least of which includes the fact that the attempted coup did not result in any widespread violence, which is a key component of the rebellion charge. However, it is notable that during Yoon’s impeachment trial, the Constitutional Court was overwhelmingly convinced by the prosecution’s argument that the martial law declaration was illegal and presented a unique threat to the republic. This, combined with the South Korean judicial system’s long history of aggressive sentencing of political leaders, suggests that Yoon will most likely be found guilty on at least some counts. However, the greater question of how Yoon’s actions will ultimately impact South Korea and its democratic future as a whole is something that will take decades to answer.
North Korea
Military Modernization
Headlines relating to North Korea in 2025 were dominated by talk of Pyongyang’s ambitions to modernize the Korean People’s Army (KPA), while typical news tracking the status of the country’s nuclear ambitions went comparatively quiet. With Russian capital flowing into North Korea since the signing of a security and defense pact in June 2024, new life has been breathed into Pyongyang’s defense industry, which has stepped up production of weapons systems both for export to Russia and for domestic use.
In 2025, Kim Jong Un’s messaging and factory visits increasingly framed conventional firepower and industrial throughput as core to deterrence. Reuters reported Kim ordering higher output of multiple rocket launchers as the backbone of “modernised long-range artillery,” explicitly tied to munitions goals that will be set at the Workers’ Party Congress expected as early as January 2026. The regime’s modernization drive has expanded beyond nuclear/missile work into conventional systems, production innovation, and AI, especially as Russia’s cooperation mitigates North Korea’s bottlenecks. In the near future, the Workers’ Party Congress will be the formalization moment for a conventional + industrial modernization package.
On capability integration, sources point to drones/EW as the clearest bridge into 2026. Kim has called AI-enabled drone development a “top priority” and is pushing serial production capacity. An air force anniversary display in November showcased unmanned aircraft, and that mass production is underway for FPV and battlefield drones. DPRK forces are also gaining practical exposure to counter-drone measures and electronic warfare in the Russia-Ukraine context, shaping “future warfare tactics.” Assuming the current trajectory holds, expect more evidence of drone units, EW integration, and operational concepts.
At sea and in the air, 2025 delivered the hardware signals that point forward. A38 North assessment describes North Korea’s new Choe Hyon-class destroyers with vertical launching systems for multiple missile types and argues the program’s trajectory matters more than a single failed launch, especially if Russian assistance accelerates learning curves. Kim has promised “new strategic assets” for the air force while showcasing unmanned systems and other equipment, hinting that air modernization is a priority area for 2026, rather than a neglected branch. For 2026, the regime will be looking to check off more ship/air milestones, but will also have to confront visible limits; industrial capacity and complexity constraints will show up in delays, accidents, and partial capability rollouts.
Renewed U.S.-North Korea Diplomacy?
Heading into 2026, both Washington and Pyongyang have signaled interest in renewed diplomacy, but with very different definitions of what that would look like.
In the U.S., the return of Donald Trump has introduced new variables. The 2025 National Security Strategy omitted any mention of denuclearization, a notable omission that suggested a shift in priorities. Trump later told reporters he would meet Kim Jong Un “without preconditions,” and referred to North Korea as a “big nuclear nation,” fueling speculation that Washington could pursue arms control rather than full disarmament. At the same time, joint U.S.–South Korea statements reaffirmed the goal of “complete denuclearization of North Korea,” leaving it unclear how far the administration is willing to shift its baseline.
Pyongyang, for its part, has already rewritten the rules. In a September 2025 policy speech, Kim Jong Un declared denuclearization a “dead issue” and made future engagement conditional on the U.S. abandoning its “absurd obsession” with disarmament. Kim said he would consider talks only if Washington accepts “peaceful coexistence” between nuclear states — a position repeated by his sister, Kim Yo Jong, who warned that a summit “could not be realized solely on personal ties.” State media later dismissed joint U.S.–ROK language on denuclearization as proof that the “hostile policy” remains in place.
Still, there are reasons to watch for movement. The Institute of Foreign Affairs and National Security assessed that “the likelihood of a renewed leader-level meeting has increased,” pointing to overlapping political incentives and the possibility of a summit on the sidelines of Trump’s expected visit to Beijing this spring. While no formal track is underway, North Korea’s decision to refrain from missile or nuclear tests in late 2025 may have been a deliberate choice to preserve space for diplomacy, according to Seoul-based analysts.
The most likely outcome, if talks proceed, is narrow risk management. A Sejong Institute forecast in December noted that “even if a summit occurs, the outcome is more likely to be limited to risk management and incremental exchange rather than complete denuclearization.” Step-by-step proposals — freeze, reduction, dismantlement — have resurfaced, but there’s no clear evidence that either side has endorsed one. Trump has floated “bringing the number down” when asked about nuclear weapons more broadly, and some U.S. officials have suggested that arms control could be a more realistic path than the now-defunct model of complete, verifiable, and irreversible dismantlement.
North Korea’s red lines remain unchanged. Kim has tied any future deal to sanctions relief, security guarantees, and nuclear recognition — none of which are currently on offer. In November, the regime rejected a U.S. overture as “foolish” and vowed to take “proper measures to counter” any further pressure. The same month, Pyongyang institutionalized South Korea as a “hostile state” in law, signaling that inter-Korean ties are unlikely to serve as a diplomatic bridge.
There’s little expectation that 2026 will produce a breakthrough. But for the first time in several years, both sides appear willing to talk.
Southeast Asia
Thailand’s Elections
As 2025 proved to be one of the most volatile years in modern Thai history, 2026 will prove even more critical for Thailand and its path forward. This includes its ongoing, open armed conflict with Cambodia along its eastern border, which displaced well over 300,000 civilians by mid 2025. Early next year, Thailand will hold its long-awaited general election, scheduled for February 8, where the sitting minority government will go head-on with the populist Pheu Thai party and the progressive People’s Party, with the polls undetermined as to who is Thailand’s favorite candidate for this election. This indecisiveness among the Thai public stems from the chaotic political scene of 2025, where Thailand saw changes of premiership three times across two different parties, Pheu Thai and Bhumjaithai, neither of which can claim widespread support from the public. As 2026 begins, attention will focus on the election’s outcome—and on whether the next government can restore calm to the dispute with Cambodia.
Philippines Grapples With Government Accountability
In 2026, the Philippines will assume the ASEAN Chairmanship from Malaysia. Although this is a great opportunity for President Ferdinand Marcos Jr.’s administration to improve its under-the-water public image, this brings an immense crisis of credibility to an administration already struggling with infighting. To the region, Manila must resolve its deadlock on the question of the South China Sea, to which it still possesses overlapping claims with China, a party that claims vast amounts of the sea with its nine-dash line, overlapping with several other ASEAN nations’ claims. While such international issues are concerning, the administration may continue to struggle to cope with the fallout from the “Flood Control” corruption scandal from late 2025 well into 2026. While experts may have commented on how President Marcos’ ability to lead ASEAN forward will prove to be contingent on stabilizing his domestic approval ratings, his failure to swiftly prosecute and address those involved in the flood scandal will continue to pose a negative weight on his presidency for years to come.
Vietnam Navigates a Brave New World
For Vietnam, 2026 is the year of its 14th National Party Congress, the meeting at which General Secretary To Lam is expected to formalize his “institutional revolution.” 2026 can be the year that Vietnam implements an even more aggressive administration consolidation plan while also reducing the number of provinces to streamline its overall governance to boost long-term efficiency. Economically, Vietnam is expected to continue its long-standing “China+1” supply chain, although with more pressure from the United States, as President Trump’s administration has warned through its “Liberation Day Tariffs” in early 2025. Vietnam may, therefore, focus more on perfecting its economic stability to outshine its neighbors, many of whom have seen 2025 as a year of instability, both economically, politically, and socially.
South Asia
An EU-India Diplomatic Alignment?
In September 2025, the European Commission released its strategy to deepen its partnership with India in areas such as trade, technology, and defense. On the trade front, despite some areas of disagreement, both sides remain eager to finalize a free trade agreement by India’s Republic Day. If achieved, the trade agreement would allow Brussels and New Delhi to diversify their export markets, building economic relationships outside those they have with Washington. While India’s relations with Russia continue to be an area of disagreement with the European Union, Brussels nevertheless views India as a crucial strategic partner whose views on strategic autonomy and multilateralism largely align. As the European Union and India head into the new year, both sides will increasingly see themselves as essential partners with shared interests to geopolitically balance the US and China.
A Breakup Between Islamabad and Kabul
When the Taliban took control of Afghanistan in 2021, the view in Pakistan was one of satisfaction, due to the expectation that their “allies” were finally in power in Kabul. However, in recent months, relations between Afghanistan and Pakistan have soured, as the Taliban seeks greater autonomy from Islamabad. Tensions escalated between the two when the Taliban Foreign Minister Abdul Khan Muttawi visited India in October 2025. His visit coincided with tensions on the Afghanistan-Pakistan border, when Islamabad launched airstrikes in Kabul. While their official reason was targeting the TTP, many saw it as Pakistan sending a message that it was not satisfied with Muttawi’s visit to India. In the new year, relations between the two countries are likely to worsen. In particular, one thing to keep an eye on is potential future cooperation among India, Iran, and maybe Taliban-led Afghanistan on the Chabahar Port, which is essential should Afghanistan seek greater economic diversification from Pakistan.
Taiwan
No Good Place to Stand
Taiwan has weathered fierce headwinds as it navigates both domestic and international political uncertainty, a trend that is likely to continue into the new year. At home, partisan gridlock has frustrated several of the Lai administration’s policy goals, complicating efforts to bolster defense spending and fueling a constitutional crisis driven by opposition-led efforts to restrain executive authority. Abroad, the Trump administration’s capricious signaling toward Taiwan has raised uncertainty around the U.S. commitment to the island’s security and heightened concerns that Taiwan could become a bargaining chip in broader U.S.-China relations. At the same time, China’s intensifying military activity around the island, increasing in frequency and scale, further destabilizes Taiwan’s security environment. These compounding uncertainties allow little room for error, leaving the Lai administration walking a tightrope into 2026.
Partisan Gridlock
No love is lost between Taiwan’s two major political parties. Last year, grassroots groups organized a series of recall efforts against predominantly Kuomintang (KMT) legislators in the aftermath of President Lai Ching-te’s election, as the party leveraged its legislative power to pass bills seeking to restrict executive authority and redistribute power to KMT-controlled local governments. These efforts dried up in the summer heat, as all KMT legislators who faced recall retained their seats in the wake of the campaigns.
Since then, the KMT has only been emboldened in its legislative capacity, doubling down on procedural obstruction to constrain the Lai administration’s policy agenda. In November, lawmakers from the KMT and Taiwan People’s Party blocked a proposed $39.8 billion special defense budget from being discussed in the Legislative Yuan’s plenary session, marking the fifth time the measure has been stalled. This obstruction unfolds alongside opposition efforts to initiate impeachment proceedings against President Lai, accusing him of “undermining Taiwan’s constitutional order and democracy.”
While impeachment efforts will likely be unsuccessful, continued obstructionism will further entrench institutional paralysis and make it difficult for meaningful progress to be made on security priorities in the face of rising threats from China.
The Trump Factor
At the international level, the Trump administration’s approach to Taiwan also injects a new layer of uncertainty into its security environment. In December 2025, the Trump administration announced its second arms sale ($11.1 billion) to Taiwan in the last year. Despite this good news for Taiwan, President Trump has also signalled a willingness to adopt a more transactional posture toward Taiwan. Earlier last year, the administration axed a $400 million military aid package to Taiwan in the midst of U.S.-China trade negotiations. In a similar vein, the Trump administration blocked the Taiwanese president’s passage through New York and cancelled military talks with the Taiwanese defense minister last June to avoid provoking China and complicating efforts to secure a trade deal. This inconsistency indicates the possibility for a more conditional U.S. posture toward Taiwan, one that prioritizes political and economic considerations over a commitment to the island’s security.
This unpredictability only accentuates the rising military threat from China. China has continued to intensify military pressure on the island through increasingly impressive, in size and scope, military activities around Taiwan. In December, the People’s Liberation Army conducted its “Justice Mission 2025” military exercises around Taiwan, simulating a blockade around the main island. These exercises followed similar military activities following President Lai’s inauguration and his subsequent National Day speech.
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