Michael DeSombre, the U.S. assistant secretary of state for East Asian and Pacific affairs, said investors are overestimating the risk of a conflict in the Taiwan Strait.
DeSombre made the remarks in a CNBC interview on Oct. 8 on the sidelines of the Milken Institute Asia Summit in Singapore.
"I actually think the most mispriced thing is Taiwan," he said. "People are overestimating the risk of something happening in the Taiwan Strait."
DeSombre says both Washington and Beijing want to avoid conflict
DeSombre said, "China and the United States do not want conflict, and we have the ability to deter conflict. Concerns about this may be priced too high."
CNBC said he stressed that deterrence and "significant consequences" could keep Beijing from taking Taiwan before 2027.
When asked whether a plan by Beijing to "unify Taiwan" before 2027 was a cause for concern, DeSombre described Xi Jinping as a "very rational actor." He said it would not happen "as long as he realizes this cannot be done, or that doing it would come at significant cost."
He added that this is why deterrence must be maintained together with allies and partners.
Beijing has never publicly confirmed the 2027 timeline
The U.S. government has repeatedly said Beijing wants the People’s Liberation Army to be ready for military action against Taiwan by 2027, but Beijing has never publicly confirmed that timeline.
Last month, Donald Trump and Xi Jinping held a summit, but the two sides did not reach any public agreement on Taiwan.
Trump is currently delaying approval of a $14 billion arms sale to Taiwan. An earlier $11 billion sale drew a strong reaction from Beijing in December last year.
Other developments cited by CNBC
CNBC also noted that Reuters, citing a monitoring report, said August marked the first time one Chinese warship and two other vessels were seen off Taiwan’s Pacific coast.
Several days after the summit ended, Foreign Minister Lin Chia-lung traveled to Phoenix, Arizona, for the opening of a newly established representative office there.