We have written frequently about possible confrontations between the U.S. and China in the South China Sea. International law recognizes claims of six separate nations to parts of that sea, and the U.S. is treaty partners with one of them (the Philippines). China claims the entire sea (except for a narrow shoreline stretch near each surrounding country), while the U.S. and the other nations involved reject those claims and insist on rights of passage and free navigation and sharing of natural resources (oil, natural gas, undersea mining and seafood among others).

The risks are not limited to intentional combat but include accidental shootings and collisions, which are not uncommon at sea, especially when two vessels are shadowing each other. But the South China Sea is not the only body of water where the conflicts and risks exist. An even greater conflict, as reported in this article, lies in the Strait of Taiwan, which separates the island of Formosa from the mainland of Red China.

The article describes how two U.S. warships recently passed through the strait as a reaffirmation of rights of free passage and a show of support for Taiwan. China claims Taiwan as a “breakaway province” and part of China. The Taiwanese government claims that it is the lawful government of all of China, although there is a strong independence movement there also.

China regards the passage of U.S. vessels as highly provocative and has threatened to block such transits with force. The South China Sea is a problem, but the Taiwan Strait is viewed in existential terms by China. Investors can never be certain that conflicting naval activities in both bodies of water will not result in a violent incident or even war.

Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.