Taipei fires howitzers and target flares as part of the military exercise in the island's southernmost county of Pingtung, says army.
China's latest official document on Taiwan vows zero tolerance for "separatist activities" and reaffirmed that it would take the self-ruled island by force if necessary.
Joseph Wu, speaking at a press conference in Taipei, offered no time-table for a possible invasion of Taiwan, which is claimed by China as its own.
Taipei's drills, taking place on Tuesday and Thursday, will include the deployment of hundreds of troops and about 40 howitzers, the army said.
China is continuing military exercises surrounding Taiwan that have disrupted shipping and air traffic and substantially raised concerns about the potential for conflict in the region.
Taiwan says it has observed "multiple" Chinese planes and ships operating in the Taiwan Strait, believing them to be simulating an attack on the self-ruled democracy's main island.
Pelosi, who visited Seoul earlier this week, became the highest-ranking US official to visit the Joint Security Area between the two Koreas since Donald Trump met North Korea's Kim Jong Un there in 2019.
The measures, which come amid cratering ties between China and the US, are the latest in a promised series of steps intended to hit back at the US for allowing House Speaker Nancy Pelosi's visit to Taiwan.
China has encircled Taiwan with a series of huge military drills — now into their second day — that have been condemned by the United States and other Western allies.
US House Speaker Nancy Pelosi holds talks with Japanese officials during the last leg of her controversial tour to Asia that has drawn Beijing's fury and led to outsized military exercises around Taiwan.
Washington and Seoul agree to maintain a strong and extended deterrence against North Korea, expressing concern over rising threats posed by the isolated nation's nuclear programme.
Beijing launches its largest manoeuvres aimed at the island state in more than a quarter of a century following senior US politician Nancy Pelosi's controversial visit to Taipei.
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