China considers democratic Taiwan as part of its own territory and calls President Lai Ching-te a "separatist".
Taiwan's government disputes China's claim.
Speaking to the Taiwan Foreign Correspondents' Club in the capital Taipei, Hsiao said Chinese pressure on Taiwan had only escalated in the past few years but the island's people were peace-loving.
"We do not seek conflict; we will not provoke confrontation," she said on Friday, reiterating Lai's offer of talks between Taipei and Beijing.
For decades, Taiwan's people and business had contributed to China's growth and prosperity, which had only been possible under a peaceful and stable environment, Hsiao said.
"Aggressive military posturing is counterproductive and deprives the people on both sides of the Taiwan Strait of opportunities to pursue an agenda of growth and prosperity," she said.
"Defending the status quo (with China) is our choice, not because it is easy, but because it is responsible and consistent with the interests of our entire region."
In 2023, China put sanctions on Hsiao for the second time, but they have little practical effect as senior Taiwanese officials do not travel to China and Chinese law has no jurisdiction on the entirely separately governed island.
Lai has repeatedly offered talks with China, but has been rebuffed.
China has staged at least six rounds of major war games around Taiwan since 2022.
In Beijing, Chinese foreign ministry spokesman Lin Jian said that whatever Taiwan's governing Democratic Progressive Party said or did, both sides of the strait belonged to "one China".
5°C