Artillery and assault helicopters fired at targets off the west coast city of Taichung, while Mirage fighter jets took off amid rainy conditions from the air base at Hsinchu to the north.
Earlier this month Xi called on Taiwan to reject independence and embrace "peaceful reunification" with China in a conciliatory speech that nevertheless took a hard line on the self-governing island's political sovereignty and freedoms.
China is rapidly modernizing its military, and may be preparing for its first military operation in 40 years in Taiwan, according to a new report, published on January 15, by the Defense Intelligence Agency (DIA).
China has repeatedly sent military aircraft and ships to circle the island on drills in the past few years and worked to isolate the island internationally, whittling down its few remaining diplomatic allies.
"Brutal behaviors" such as forcing the "one country, two systems" model on Taiwan, using politics to affect other nations' economies or threatening foreign enterprises to alter references to Taiwan are all efforts by Beijing to interfere in the domestic affairs of other nations, he said.
M110A2 self-propelled howitzers fire during a military exercises. China considers Taiwan, which split from the mainland amid civil war in 1949, as an integral part of Chinese territory.
"As these technologies mature, as their reorganization of their military comes into effect, as they become more proficient with these capabilities, our concern is we'll reach a point where internally, within their decision-making, they will decide that using military force for a regional conflict is something that is more imminent", the senior official said.
In a January 2 speech, on the anniversary of a Chinese Communist Party (CCP) policy statement on cross-strait relations, Xi said "China must and will be united" with Taiwan.
"Now that [China has] built out this infrastructure down there, they're able to be present in a more persistent manner than they might have been before if they had to come all the way down from the mainland ... to get into some conflict with a regional claimant or with the US", the official said.
Soldiers from Taiwan's special forces move through colored smoke during a military exercise in Taipei, Taiwan.
"These bases, and other improvements to the PLA's ability to project power during the next decade, will increase China's ability to deter the use of conventional military force, sustain operations overseas, and hold strategic economic corridors at risk", it says. US President Donald Trump imposed tariff increases of up to 25 per cent on US$250 billion of Chinese imports over complaints Beijing steals or pressures companies to hand over technology. Xi responded by imposing penalties on $110 billion of American goods. This is still significantly lower than the USA military budget of $700 billion, but the DIA noted Beijing has committed less to research and development funding because it has bought or stolen the best technology developed in other nations.
It also mentions how China has "closed numerous gaps in key warfare areas" in recent years, through building or acquiring advanced platforms such as submarines, missile patrol crafts and land-based systems that carry antiship cruise missiles, in order to deter Taiwanese independence or provide "a range of tailored military options against Taiwan and potential third-party military intervention" if an attack were deemed necessary.