US-made F16s, French Mirage 2000s and Taiwanese Indigenous Defence Fighters (IDFs) intercepted incoming warplanes and fired top-of-the-range missiles to counter a mock invasion on Thursday.
President Chen Shui-bian, who is seeking re-election next year, and 500 guests watched the war games from a podium on a hill as the army, navy and airforce combined to create great clouds of black smoke in the Pacific Ocean.
"In recent years, communist China has actively expanded its military equipment and is fully developing its air and sea fighting capabilities in an attempt to break our frontline defence, posing a serious threat to our national security," Chen said after the exercises.
The 90-minute air, sea and anti-landing drills involved all three branches of the armed forces, with more than 6000 soldiers taking part on the island's scenic northeastern coast of Ilan.
The show was the biggest in Taiwan in terms of the number of people that took part, and used the most extensive and advanced weapons, including 40 types of aircraft, warships, missiles and tanks, and 400 pieces of artillery.
The annual Han Kuang, or Chinese Glory wargames are designed to test Taiwan's combat-readiness in the event of an invasion by China.
Usually held in the summer, this year’s exercise was delayed by the SARS outbreak and by a typhoon earlier this week.
"China ... is fully developing its air and sea fighting capabilities in an attempt to break our frontline defence"
president of Taiwan
China maintains the self-governed island is a breakaway province that must be united with the mainland, as it has been through most of recorded history.
The exercises came after a Pentagon report said in July that China was preparing for a possible conflict across the Taiwan Strait, aimed at taking back control of the island of 23 million before the United States had time to intervene.
With the US increasingly tied down in Iraq, the drills come amid concern over China's growing military might and a US warning that Taiwan is not spending enough on its own defence.
The government plans to buy or lease eight second-hand submarines and acquire the Patriot anti-missile system from America to boost its defences, according to the defence ministry.
But Defence Minister Tang Yiau-ming estimates China's defence budget at $65 billion next year compared to Taiwan's $7.4 billion, and said last week the island would not compete with China in terms of quantity, but rather quality.