Defense Budget — NT$780B Passed; HIMARS Deadline at Risk

The Legislative Yuan passed an opposition-backed NT$780 billion (US$24.8 billion) special defense budget on May 8, 59 votes to 51. DPP abstained rather than voting against. Budget covers 2026–2033 in two tranches:

NT$300B: covers the five LOA packages approved by Washington on Dec 17, 2025
NT$480B: pre-authorized ceiling for anticipated future US arms package

The bill restricts all spending to US arms purchases, explicitly excluding the NT$300B+ the DPP earmarked for domestic production (naval vessels, domestic aircraft, drones, missiles). A procedural clause mandates the Executive Yuan submit a detailed LOA report to the legislature before any disbursement.

President Lai warned May 9 that the procedural requirements may cause Taiwan to miss the May 31 down-payment deadline for the HIMARS procurement. A missed deadline cancels the procurement case outright; restart would require initiating the process from scratch.

The White House expressed concern that the NT$780B figure (vs. the NT$1.25T executive proposal) sends a negative signal to Beijing ahead of the May 14–15 summit. Taipei Times editorial (May 10) characterized the passed bill as "facing paralysis."

PLA Activity — Elevated Tempo, May 7 Peak

Sortie counts remained elevated following the May 2 period high of 29:

May 7: 22 sorties (18 crossed median line), 6 PLAN vessels, 1 official ship
May 8: 12 sorties (10 crossed median line), 6 PLAN vessels, 2 official ships
May 9: 8 sorties (all 8 crossed median line), 6 PLAN vessels, 2 official ships
May 11: 7 sorties (5 crossed median line), 5 PLAN vessels, 1 official ship

May 7 was the highest single-day count since the May 2 spike. April 2026 total: 169 ADIZ incursions — above March but below the 300+/month baseline recorded across 2024–early 2025.

CCG Kinmen — May 8 Intrusion (5th Since Apr 21)

Four Chinese Coast Guard vessels in two groups entered Taiwan's restricted waters near Kinmen at 14:50, exiting at 17:03 (2 hours 13 minutes). Taiwan CGA pre-positioned patrol boats shadowed throughout; radio warnings issued in Mandarin and English. Fifth documented CCG Kinmen intrusion since April 21.

40-Day NOTAM — Expired May 6, No Extension

The ~73,000 sq km Yellow Sea + East China Sea airspace reservation (SFC-UNL, filed March 27) expired on schedule May 6. No extension or renewal filed as of May 11. No exercise was formally declared for the duration. Lapse occurred 8 days before the Trump–Xi summit, as previously noted by analysts.

Trump–Xi Summit (May 14–15) — Taiwan at Top of Agenda

Beijing summit confirmed for May 14–15. China has explicitly positioned Taiwan as its top agenda item — Secretary Rubio confirmed May 7 that Taiwan will be raised.

Beijing's stated demands: (1) language shift from "does not support" to "opposes" Taiwan independence; (2) no new arms approvals announced around the visit; (3) reaffirmation of One China policy. FM Wang Yi called Taiwan "the biggest risk factor" in US–China relations (late-April call with Rubio).

Trump has indicated he will discuss the paused ~$13–14B arms package directly with Xi — a step analysts at Brookings, CSIS, and Center for American Progress characterize as unprecedented and potentially violating the 1982 Reagan Six Assurances to Taiwan. No formal US policy shift is expected, but risk of damaging language changes on Taiwan's status is flagged.

US–Taiwan Arms: Package Paused, Backlog Persists

The ~$13–14B advanced interceptor package remains suspended since February 2026, held pending the summit. Separately, ~$21.5B in previously approved but undelivered arms to Taiwan remains in the backlog. No resumption announced as of May 11.

Market Assessment

Polymarket (May 11, 2026):
"Invade before 2027": 7.5% ($23.4M+ volume) — up from 7% (May 4)
"Invade in May 2026": 0%

Assessed Invasion Probability

Summit dynamics suppress near-term kinetic risk (both sides prefer negotiation posture) while introducing medium-term uncertainty via potential US policy degradation and Taiwan's scaled-down defense signaling.

1 month (by ~Jun 11): 1–2% — No operational indicators; summit period reduces near-term action probability.

6 months (by ~Nov 11): 4–7% — Slight upward revision from prior 4–6%; post-summit uncertainty and defense budget signals are negative factors.

1 year (by ~May 2027): 7–11% — Slight upward revision from 6–10%; cumulative US policy ambiguity and Taiwan defense investment gap.

5 years (by 2031): 15–22% — 2027 Party Congress, PLA modernization trajectory, and US extended deterrence credibility remain dominant variables.

Upcoming Inflections

May 14–15: Trump–Xi summit, Beijing
May 31: HIMARS down-payment deadline — cancels if missed
June 30: Taiwan Talent Act Articles 28–29 activate
2027: CCP Party Congress