By Yimou Lee and Bernard Orr

TAIPEI/BEIJING, May 23 (Reuters) - Taiwan's military

mobilised its forces and said it was confident it could protect

the island, after China started two days of "punishment" drills

around Taiwan on Thursday in what it said was a response to

"separatist acts".

The exercises, in the Taiwan Strait and around groups of

Taiwan-controlled islands that sit next to the Chinese coast,

come just three days after Lai Ching-te took office as Taiwan's

new president, a man Beijing detests as a "separatist".

China, which views democratically governed Taiwan as its own

territory, has denounced Lai's inauguration speech on Monday, in

which he called on China to stop its threats and on Tuesday

Chinese Foreign Minister Wang Yi called Lai "disgraceful".

Lai has repeatedly offered talks with China but been

rebuffed. He says only Taiwan's people can decide their future,

and rejects Beijing's sovereignty claims.

The Eastern Theatre Command of the Chinese People's

Liberation Army (PLA) said it had started joint military drills,

involving the army, navy, air force and rocket force, in areas

around Taiwan at 7:45 a.m. (2345 GMT).

The drills are being conducted in the Taiwan Strait, the

north, south and east of Taiwan, as well as areas around the

Taiwan-controlled islands of Kinmen, Matsu, Wuqiu and Dongyin,

the command said in a statement.

Taiwan's defence ministry condemned the drills, saying that

it had dispatched forces to areas around the island, that its

air defences and land-based missile forces were tracking

targets, and that it was confident it could protect its

territory.

"The launch of military exercises on this occasion not only

does not contribute to the peace and stability of the Taiwan

Strait, it also highlights (China's) militaristic mentality,"

the ministry said.

Taiwan's presidential office expressed regret that China was

threatening the island's democratic freedoms and regional peace

and stability with its "unilateral military provocations", but

said people could rest assured Taiwan could ensure its security.

NO SURPRISE

A senior Taiwan official, speaking anonymously given the

sensitivity of the matter, told Reuters that the drills are part

of a scenario Taiwan had anticipated and that the island's

government had a "comprehensive grasp" of Chinese military

movements.

Taiwanese officials had said in the run-up to the

inauguration they were keeping watch for Chinese military

movements. China last staged large-scale war games near Taiwan

in 2023 and 2022.

The drills focus on joint sea-air combat-readiness patrols,

precision strikes on key targets, and integrated operations

inside and outside the island chain to test the "joint real

combat capabilities" of the forces, China's military said.

"This is also a strong punishment for the separatist acts of

Taiwan independence forces and a stern warning against the

interference and provocation by external forces," the command

added.

Chinese state media published a map of the drills zones, in

five areas all around Taiwan and the islands Taiwan controls

near the Chinese coast.

Taiwanese officials told Reuters those areas were outside

Taiwan's contiguous zone, which is 24 nautical miles from the

main island's coast.

One of the officials said China has not announced any

no-fly zones, nor has Taiwan observed any large-scale movements

of China's ground and rocket forces.

Su Tzu-yun, a research fellow at Taiwan's top military think

tank, the Institute for National Defence and Security Research,

said that although the drills would only last two days, the

scope is large relative to previous exercises, as they included

Taiwan's outlying islands.

This is designed to demonstrate China's ability to control

the seas and prevent the involvement of foreign forces, he

added.

"The political signals here are greater than the military

ones," he added.

There was no sign of alarm in Taiwan, where people are long

used to Chinese military activity. The benchmark stock index

, currently at a historic high, was up 0.2% on Thursday

morning.

"The drills will have a short-term psychological impact, but

won't reverse the long-term upward trend of Taiwan stocks," said

Mega International Investment Services vice president Alex

Huang.

In August 2022, China launched live-fire military exercises

around Taiwan immediately after a visit, much condemned by

Beijing, by former U.S. House speaker Nancy Pelosi. That series

of exercises, the scale of which was unprecedented, lasted for

four days, followed by several days of additional drills.