Taiwan's President Lai Ching-te delivers an address. AFP
Lai, a staunch defender of Taiwan's sovereignty and detested by Beijing, delivered remarks on the need "to prepare for war to avoid war" and also bolster the island's economic resilience.
After promising to stand up to China and defend democracy at his inauguration, Lai insisted Taiwan was "willing" to communicate with Beijing if there was "parity and dignity".
China said on Tuesday it was "willing to engage in dialogue" with Taiwan but on condition.
Chen Binhua, a spokesperson for Beijing's Taiwan Affairs Office, also slammed Lai's "separatist position" that promoted "economic decoupling" across the Taiwan Strait, according to CCTV.
Lai called peace "priceless" in his speech but added "we cannot have illusions" and vowed to continue strengthening defence.
Taiwan will "actively cooperate with international allies, shoulder to shoulder to exert the power of deterrence, to prepare for war to avoid war, and to achieve the goal of peace," Lai told journalists.
China has held several rounds of large-scale military drills around the island since Lai took office.
Taiwan's coast guard warned Monday that China may use "cognitive warfare" to "disrupt public morale" around Lai's anniversary.
As Taiwan comes under pressure from Washington to move more factories to US soil and reduce their trade imbalance, Lai said Taiwan would not "put all our eggs in one basket".
Taiwan would increase its economic resilience by diversifying markets and boosting domestic demand.
Lai also announced plans to set up a sovereign wealth fund to "boost Taiwan's economic momentum", but did not provide details about its size.
The president has seen his first term in the top job engulfed in domestic political turmoil as opposition parties, which control the parliament, seek to stymie his agenda.
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