Washington, Beijing and Taipei all finished out the year by making strong moves to bolster their respective positions on Taiwan's sovereignty.

Why it matters: The Chinese government's territorial claims over Taiwan — and the support for the self-governing island that is now coalescing with many democratic nations — is a major geopolitical flashpoint.

What's happening: The U.S. adopted a defense spending bill on Dec. 23 that strengthens military cooperation with Taiwan.

• In response, China sent 71 warplanes and seven warships into waters near Taiwan, the largest Chinese military incursion in months.
• Taiwanese President Tsai Ing-wen announced on Dec. 27 that Taiwan would be extending mandatory military service for citizens from four months to one year, amid calls to strengthen the island's defenses.

Between the lines: In her annual New Year's address on Jan. 1, Tsai exclusively referred to the country as "Taiwan," never as the "Republic of China" — a change from her addresses of past years, when she used both terms, according to local media.

• By exclusively saying "Taiwan," Tsai emphasizes the island's identity as distinct from China and distances it from its government's origins on the mainland. Tsai has embraced the term Taiwan and promoted the 2020 adoption of a new passport that removed "Republic of China" from the passport in favor of 'Taiwan."

The big picture: Cross-Strait tensions have risen in recent years as Chinese President Xi Jinping adopted a harder line on Taiwan. China has persuaded several of Taiwan's few remaining diplomatic partners, including Nicaragua and the Solomon Islands, to switch formal ties from Taipei to Beijing, further isolating the island democracy on the global stage.

• In response, the Trump administration in January 2020 eased some self-imposed restrictions on meetings between U.S. and Taiwanese officials and sought to strengthen unofficial U.S.-Taiwan ties. This trend has continued under the Biden administration.
• Beijing reacted to U.S. House Speaker Nancy Pelosi's visit to Taiwan last summer, the first visit by a House speaker in 25 years, by firing a missile over Taiwan and holding military exercises encircling the island.

What to watch: Former NATO Secretary-General Anders Fogh Rasmussen is visiting Taiwan this week. It's the first official visit to Taiwan by a former NATO leader, underscoring Europe's growing interest in the island democracy amid the looming threat from China.

An enormous wave of COVID infections is straining China's medical facilities, as Chinese state media said authorities had implemented “a planned, science-based approach.”

What's happening: Cases swept through China's cities over the holidays and may have now peaked, but rural areas are starting to see a surge in infections.

• Numerous countries have imposed travel restrictions on incoming Chinese travelers or are requiring COVID tests upon arrival — prompting China's Foreign Ministry to accuse foreign governments of "manipulat[ing] the COVID measures for political purposes."
• The European Union has offered to send free COVID vaccines to China to help fight the outbreak.
• China's manufacturing activity declined in December and its economy slumped.

State of play: China's top health authority stopped publishing daily COVID data last month but a leaked internal memo that estimated 250 million cases that month alone.

• Chen Erzhen, a top administrator at Shanghai's Ruijin Hospital who also serves on the city's COVID advisory board, told Chinese state media that he estimates up to 70% of Shanghai — with a population of around 26 million — had been infected.
• Taiwan's pandemic authorities said 28% of the more than 500 Chinese travelers who arrived in Taiwan on Jan. 1 tested positive.

The big picture: Clinging to the zero-COVID approach was not the most effective solution, Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations, told Axios.

• Chinese authorities spent an enormous amount of money trying to keep out the virus when that money would have been better spent on obtaining better vaccines and treatments and expanding intensive care units, Huang said.

Yes, but: It's far too soon to suggest Xi's power may be jeopardized or that China is in decline, as some Western commentators recently have.

• "Xi very likely is going to muddle through the crisis," Huang said. "The virus will soon peak" and an economic recovery will follow, while the government is already redefining the narrative to deflect blame, he added.
• "There is no clear sign that suggests his power has been undermined."

What to watch: Millions of people will soon be heading home for the lunar new year later this month, likely spreading COVID even further around the country — and most worryingly to rural areas with little health care infrastructure.

• On Jan. 8, China will also end mandatory entry quarantine and open its borders to outsiders for the first time in almost three years.

1. A Chinese navy jet flew within 10 feet of a U.S. aircraft over the contested South China Sea last week, Reuters reports.

• The extremely dangerous encounter has echoes of the Hainan Island incident in 2001, when a U.S. spy plane and Chinese jet fighter collided midair, causing the death of the Chinese pilot and resulting in a volatile dispute between the two countries.

2. Qin Gang, China's ambassador to the United States and Xi Jinping's trusted aide, was appointed as the country's new foreign minister. Go deeper.

• In a former role as Foreign Ministry spokesperson, Qin embraced an aggressive style of rhetoric known as "wolf warrior" diplomacy.

3. Russian President Vladimir Putin called Russia-China relations "the best in history," CNN reports.

4. ICYMI: An internal investigation at TikTok parent company ByteDance found ByteDance employees accessed the data of two U.S. journalists in an attempt to uncover their sources, the New York Times reports.

• Prior to this investigation, TikTok had repeatedly denied that China-based employees can access U.S. user data.

If you and your family celebrate the Lunar New Year, I'd love to hear from you!

• I'll be including a roundup of spring festival traditions from Axios employees and Axios China readers in my Jan. 17 newsletter.
• Send a brief description of your unique family traditions (and even a photo if you like!), along with your name and city (optional), and I'll include a selection of reader stories and photos.

What to watch: 5 predictions for China for 2023 (Foreign Policy)

• FP deputy editor James Palmer predicts many COVID deaths (but no resulting political crisis) in China, a weak economic recovery, a travel boom, relatively stable China-Taiwan relations, and, interestingly, a wave of small protests.
• "After the wave of protests at the end of 2022, China is likely to see more small demonstrations next year. They won’t have a unified narrative like the protests that called for an end to zero-COVID, but it’s now clear that it is possible to put pressure on the authorities — whether to get back stolen money from fraudulent finance companies or to end COVID-19 lockdowns."

Sharing is caring: Hacked Russian files reveal propaganda agreement with China (The Intercept)

• "Since the war broke out in February, experts have been struck by a convergence in Russian and Chinese media narratives. While some of the convergence was likely happenstance, occurring when storylines aided both governments’ goals, documents found in a trove of hacked emails from Russia state broadcaster VGTRK show that China and Russia have pledged to join forces in media content by inking cooperation agreements at the ministerial level."

Taipei comes alive on New Year's Eve. The celebrations center around the city's iconic Taipei 101, which once held the record as the world's tallest building.

• More than 100,000 people packed the streets around the skyscraper to enjoy the fireworks show, which included pyrotechnics set off from dozens of floors, a 360-degree digital display, and musical performances.
• Nearby clubs with a view of the building held special viewing parties.