KAOHSIUNG, Taiwan (Reuters) - As China staged a second day of "punishment" drills on Friday in response to Taiwan's new President Lai Ching-te, some residents of the democratically governed island told Reuters they would carry on with their normal lives despite Beijing's pressure.

China staged mock missile strikes in waters east of Taiwan and dispatched fighter jets carrying live missiles, state media reported, as Beijing tested its ability to "seize power" and control key areas of Taiwan.

But on the island of 23 million people, life has continued as normal, with no overt sign of worry, the Taiwanese having gotten used to decades of living with Chinese threats.

China's military exercises "don't really affect our daily lives. We still have to work to make money," said Chen Sian-en, a tyre repair shop owner in the southern city of Kaohsiung, home to a major Taiwanese navy base.

"From childhood to adulthood, it means that we've gotten used to (China's) threats," said Chen, 66, adding that the drills were "some kind of intimidation tactic" and a "show of force" from Beijing to Taiwan's new leader.

"They've talked about it so many times, but there hasn't been any real action. If they wanted to take over Taiwan, they would have done it already."

While Taiwanese media has covered the drills, a lot of their focus has actually been on continuing protests against efforts by the opposition to push legislative reforms, and occasional fighting by lawmakers on the floor of the chamber.

"I feel no reason to be scared," said Taipei taxi driver Chuang Jun-sung. "If China really attacks Taiwan, there's nothing Taiwan can do but deal with it. But we should still have the guts to fire our missiles back at them."

The drills are being conducted all around Taiwan, as well as areas close to the Taiwan-controlled islands of Kinmen, Matsu, Wuqiu and Dongyin next to the Chinese coast.

China has been infuriated by Lai's inauguration speech on Monday in which he said the two sides of the Taiwan Strait are "not subordinate to each other", which Beijing has viewed as implying China and Taiwan are two separate countries.

Kinmen resident Tim Chang, 52, said that Beijing has been threatening war for decades.

"If war is bound to happen, if they planned to attack, they would have struck 20, 30 years ago," he said.

Taiwan's benchmark index is at a historic high, scarcely impacted by China's drills. The market closed down 0.2% on Friday; on Thursday, the day the drills began, it closed up 0.3%.

The stock of Taiwan's TSMC, the world's largest contract chip maker and a major Nvidia supplier, is also at a historic peak.

"The drills will have a short-term psychological impact, but won't reverse the long-term upward trend of Taiwan stocks," said Alex Huang, vice president of Mega International Investment Services.

Vasu Menon, managing director of investment strategy at OCBC in Singapore, said that investors were not expecting any dramatic escalation in tensions.

"China's military has over the past few years carried out regular activities near Taiwan, making investors less sensitive to such drills," he added.

Still, Kaohsiung resident Angeline Liao said that she was personally "very worried" about the drills.

"If, hypothetically, there were some military (war) activities today, I think I would be the first one to wave the white flag," said the 36-year-old insurance agent.

(Reporting by Joyce Zhou in Kaohsiung, Jeanny Kao, Faith Hung and Ben Blanchard in Taipei, Ankur Banerjee in Singapore; writing by Laurie Chen in Beijing; editing by Mark Heinrich)