Tsai said in a National Day address that the international community views stability in the Taiwan Strait as an "indispensable component of global security and prosperity."
China claims Taiwan as its own territory and has been increasingly sending ships and warplanes across the Taiwan Strait in an effort to intimidate the population of 23 million, who strongly favor the status-quo of de-facto independence.
Tsai's Democratic Progressive Party will seek to maintain power in elections next year against the Nationalists, who officially support unification between the sides that divided amid civil war in 1949.
"Let me reiterate that peace is the only option across the Taiwan Strait," said Tsai, who will step down after two terms in office.
"Maintaining the status quo, as the largest common denominator for all sides, is the critical key to ensuring peace."
"Neither side can unilaterally change the status quo.
"Differences across the strait must be resolved peacefully."
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Tsai also referred to Taiwan's recent launch of a home-built submarine as a major breakthrough in efforts to re-energise the domestic arms industry,
"We took a big step forward in our national defence self-sufficiency and further enhanced the asymmetric capabilities of our military," she said.
The Chinese Nationalist Party under Chiang Kai-shek moved the government to Taiwan in 1949 following the takeover of mainland China by the Communist Party under Mao Zedong following a years-long bloody civil war.
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Now in the opposition, the Nationalists continue to support China's goal of eventual unification between the sides.
Former president and party leader Ma Ying-jeou and other Nationalist politicians boycotted this year's ceremonies because the government used the term "Taiwan" rather than the official name of the Republic of China in English references to the occasion.
China cut off most communications with Tsai's government shortly after she took office in 2016.
Vice President William Lai is favored to win the presidential election, potentially laying the groundwork for further tensions between the sides, which retain close economic and cultural ties despite the massive gap between Beijing's authoritarian one-party system and Taiwan's robust democracy.
