U.S. diplomat says markets mispricing Taiwan

Michael DeSombre, U.S. assistant secretary of state for East Asian and Pacific affairs, told CNBC investors are overestimating conflict risk across the Taiwan Strait.

“I actually think the most mispricing is with regard to Taiwan, where actually I think people are overpricing the risk of something happening across the Taiwan Strait.”

DeSombre: deterrence will prevent conflict

Both China and the U.S. do not want conflict and are able to deter it, DeSombre said. Concerns about Taiwan are priced at too high a level.

“Both China and the U.S. don't want conflict, and we're able to deter conflict.”

Beijing's twenty twenty-seven timeline unconfirmed

The U.S. government has indicated Beijing's directive for the People's Liberation Army to be ready for military action in Taiwan by twenty twenty-seven, though Beijing has never publicly confirmed this timeline.

Xi is rational, DeSombre argues

Asked about plans to reunify Taiwan by twenty twenty-seven, DeSombre said Xi is a very rational actor who will realize it cannot be done without substantial consequences.

“To the extent that he realizes that it can't be done, or it can't be done without substantial consequences, it won't happen.”

China increases military presence near Taiwan

Beijing has sought to solidify its military presence near the island. A Chinese military boat was spotted with two vessels off Taiwan's Pacific coast for the first time in August.

Taiwan's chip industry at stake

Taiwan is the world's leading manufacturer of cutting-edge computer chips. TSMC, the world's largest contract chipmaker, has invested tens of billions of dollars in facilities in Phoenix.