In this issue:

1. Xi arrives in DC

2. Propaganda ahead of Xi’s visit

3. PRC nuclear weapons

4. PLA Daily editorial on Zhang Youxia and Liu Zhenli

5. 2025 Outbound investment over $200 billion

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Energy, Environment, Science and Health - Education

Today’s top items:

1. Xi arrives in DC - I am watching the arrival ceremony as I write this. The optics so far are quite warm.

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On today's show Andrew and Bill discuss Xi Jinping's visit to the United States and what to expect in Washington D.C. this week. First: Reactions to the meeting between Scott Bessent and He Lifeng in New York City Sunday, including outstanding questions about the "hotline" that was mooted for AI, details that remain fuzzy on the board of trade that's been "operationalized," and lingering rare earths frustration that may or may not delay an extension of the Busan truce. Then: Xi's agenda in D.C., why asymmetric pageantry is fine, the PRC business delegation that failed to materialize, questions about Taiwan, Iran and Chinese automakers, and a note on Min Zin as he remains detained in China. At the end: Protesters and counter-protesters in New York City, the September Politburo brings the official expulsion of Generals Zhang and Liu, and evidently unfounded Xi rumors make their triumphant return at the BRICS Summit in India last week.

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Today’s top items:

1. Li Qiang goes to Shanghai to stress accelerating emerging and future industries and strengthening advanced manufacturing - Less than a week after the National Advanced Manufacturing Conference, Premier Li went on an inspection tour in Shanghai and visited the National Artificial Intelligence Application Pilot Base 上海电气国家人工智能应用中试基地, where he inspected a range of robotic products (including industrial robots) and heard reports on “AI+” applications and the construction of an AI factory. Li called for integrating manufacturing with digital technologies and further advancing “AI+manufacturing”. Li also added that (researchers) should provide solutions to help companies, especially small and medium-sized companies, carry out “smartization” upgrades in an efficient and low-cost way to strengthen their development momentum and competitiveness.

He also visited the Shanghai Future Qidian Community, also called the Shanghai Engine Community, which was established in 2025 to connect scientists, entrepreneurs, professional managers and investors working on disruptive technologies. Its focus includes AI, advanced nuclear energy, life sciences, space computing, brain-computer interfaces, quantum computing and silicon photonics.

From the readout:

The Shanghai Future Qidian Community is a science and technology innovation-incubation platform focused on future industries. Li visited the community to learn in detail about the development of its innovation ecosystem and the operation of the Shanghai Future Industry Fund. He viewed technologies and products in fields including brain-computer interfaces and quantum computing and spoke with science and technology innovators and community staff. Li said future industries are a potential blue ocean for the development of advanced manufacturing. China should strengthen the tracking, analysis and assessment of future technological development, intensify breakthroughs in key and core technologies, consolidate the support provided by basic research, encourage bold exploration and tolerate trial and error, and continuously expand the frontiers of industrial innovation. It should build a first-rate innovation ecosystem, promote deep integration of industry, academia, research and application, strengthen science and technology services, and actively cultivate and open up application scenarios. Given the long growth cycles and high market risks of future industries, China should vigorously develop venture capital, expand patient capital, and establish mechanisms for increasing investment in future industries and sharing risks. Li stressed that talent is the primary resource and that possessing talent is essential to winning the future. China should strengthen the functions of research institutions, innovation platforms, enterprises and science and technology programs in attracting and cultivating talent; explore new models for training top innovative talent; and strive to produce more highly qualified personnel.

上海未来启点社区是一个专注于未来产业领域的科创孵化平台。李强来到这里，详细了解社区创新生态建设、上海未来产业基金运行等情况，察看脑机接口、量子计算等领域技术产品，与科创人员、社区工作人员亲切交流。李强指出，未来产业是先进制造业发展的潜在蓝海。要加强对未来技术发展的跟踪分析和研判，强化关键核心技术攻关，筑牢基础研究支撑，鼓励大胆探索、包容试错，不断拓展产业创新前沿。要构建一流创新生态，推动产学研用深度融合，做强科技服务，积极培育和开放应用场景。针对未来产业成长周期长、市场风险大的特点，要大力发展创业投资，壮大耐心资本，建立未来产业投入增长和风险分担机制。李强强调，人才是第一资源，拥有人才才能赢得未来。要强化科研机构、创新平台、企业、科技计划的人才集聚培养功能，探索拔尖创新人才培养新模式，努力造就更多高素质人才。

2. Waiting for Xi - Xi Jinping should land in DC in about 24 hours. We still have little visibility on what the outcomes may be, beyond a reaffirmation of the US and PRC versions of the “constructive relationship of strategic stability”, with the US addition of “on the basis of fairness and reciprocity”. Taiwan will be a focus for Xi, and we should expect continued efforts to get Trump to say he “opposes” Taiwan independence and stop arms sales to Taiwan.

Reuters reports that Xi may “press US President Donald Trump to halt Taiwan arms sales under a 1982 joint statement during a visit to Washington this week, which he could do at the US National Archives”, with the carrot being an offer “to put pressure on Iran over the war in the Middle East”. That would be a bad trade.

3. Propaganda ahead of Xi’s visit - The top three articles on the right side of page 1 of the September 22 People’s Daily are on Xi’s letter to US college students, the announcement of Xi’s visit to the US, and a 5400+ character commentary by “Guoji Ping 国纪平”, a collective pen name used by the People’s Daily International Department for especially important international-affairs commentaries, titled “Anchor the New Positioning and Keep the Constructive China-US Relationship of Strategic Stability Moving Steadily Forward 锚定新定位，推动中美建设性战略稳定关系行稳致远”.

I have posted a translation of the Guoji Ping commentary here.

The commentary is an agenda-setting statement explaining Beijing’s desired framework for the relationship: the “constructive China-US relationship of strategic stability,” its “four stabilities,” the four Chinese red lines, and the claim that “Taiwan independence” is a “common enemy” of China and the United States. They really want President Trump to say he “opposes” Taiwan independence:

Peaceful coexistence is the bottom line that the two major countries must firmly uphold.

和平共处，是两个大国必须牢牢守住的底线。

Conflict and confrontation between China and the United States would be an unbearable catastrophe for both countries and indeed the world. The key to achieving enduring stability with the prospect of peace is to abide by the three China-US joint communiqués and respect each other’s social systems, development paths, core interests, and major concerns. The Taiwan question, democracy and human rights, paths and systems, and development rights are China’s four red lines and must not be challenged. They are the guardrails and safety net of China-US relations.

中美冲突对抗对两国乃至世界都将是难以承受的灾难。实现和平可期的持久稳定，关键在于遵守中美三个联合公报，尊重彼此社会制度、发展道路与核心利益和重大关切。台湾问题、民主人权、道路制度、发展权利是中方的4条红线，不容挑战。这些是中美关系的防护栏和安全网。

The Taiwan question is the most important issue in China-US relations; it affects the entire relationship. Handled well, bilateral relations can remain stable overall. Handled poorly, the two countries could collide or even enter conflict, pushing the entire China-US relationship into an extremely dangerous situation. The one-China principle is the political foundation of China-US relations. “Taiwan independence” is the common enemy of China and the United States, and containing “Taiwan independence” is a key component of building a constructive China-US relationship of strategic stability. The United States must handle the Taiwan question with the utmost prudence and take concrete action to safeguard the stable development of China-US relations and peace and stability across the Taiwan Strait.

台湾问题是中美关系中最重要的问题，牵一发而动全身。处理好了，两国关系就能保持总体稳定。处理不好，两国就会碰撞甚至冲突，将整个中美关系推向十分危险的境地。一个中国原则是中美关系的政治基础。“台独”是中美共同的敌人，管控“台独”是中美构建建设性战略稳定关系的关键一环。美方务必慎之又慎处理台湾问题，以实际行动维护中美关系的稳定发展以及台海和平稳定。

Win-win cooperation is the trend of the times and should also remain the underlying character of China-US relations.

合作共赢是时代潮流，也是中美关系理应葆有的底色。

Is “containing ‘Taiwan independence’ is a key component of building a constructive China-US relationship of strategic stability” language to which Trump and his team have agreed?

The Ministry of Foreign Affairs has put out a short video on “constructive strategic stability”:

4. AI - I recommend this post by a US VC with long experience in China about his recent visit to China and meetings with AI labs and founders. It is written by AI but the substance is worthwhile - Involution Without Export Is Wasted Effort - by David Cheng. Two sections in particular stood out:

Every single meeting, be it labs, investors, media, all independently, without my prompting, described domestic competition as more brutal than competing with American labs. When I described the US framing of Chinese AI as a coordinated bloc moving at the direction of the state, people laughed. Not defensively. They found it funny. I was called a stupid ABC (American-born Chinese) more than once because of this…

The most bearish person I met on Chinese AI is someone who built one of China’s largest AI apps.

His argument: Chinese model gains lean heavily on distilling American frontier models, so the gap is structural rather than temporary. As US labs increasingly withhold their best models from public access, the distillation source dries up and American companies compound the edge. Chinese capital markets demand early monetization, so nobody is funded for long-horizon foundational R&D. And the chip performance gap is insurmountable in the near term.

China’s counter, in his view, is brute force: abundant power plus a command economy stacking enormous volumes of inferior chips until per-chip efficiency stops mattering.

He conceded two strengths: Chinese labs are world-class at post-training, and world-class at on-prem deployment because that was the only way software was ever bought.

His conclusion was that China’s AI sector is built on a poor foundation and, on its current trajectory, has no way of catching the frontier US labs.

The Information reports that the recent Anthropic threat report may have gotten DeepSeek and Moonshot in trouble, as the Cyberspace Administration of China is now investigating them. Anthropic must have known there would be a backlash from their allegations of illegal data transfer overseas and queries to a US model that clearly had national security implications. I doubt though that any punishment will be particularly harsh, but it is also useful for the relevant organs to have a pretext to remind everyone of the rules.

5. Japanese PM on “enemy state” clauses - Bloomberg reports that in her speech to the UN General Assembly, Japan’s Prime Minister Takaichi will call for the UN to remove the clauses in the UN charter that refer to Japan and Germany as “enemy states”. China once supported their removal, the process was never completed, and now the PRC, along with Russia, are ramping up criticism of Japan’s “new militarism” as violations of those clauses.

I wrote about these clauses in the September 10 newsletter:

The PLA Daily is back on the UN Charter’s “enemy-state clauses” (敌国条款). A Wuhan University professor argues in the September 10 edition that the clauses are still valid law, and that with Japan’s “new militarism” (新型军国主义) on the march, saying so out loud is overdue. The peg is a recent Foreign Ministry line, plus Lavrov, who has been making the same argument from Moscow. I have posted a full translation here.

The clauses are obsolete, and the countries who said so include China. In 1995 the General Assembly called them exactly that and set out to delete them, and Beijing voted for it. The 2005 world summit reaffirmed the point, again with China signed on. Neither deletion happened, because amending the Charter needs all five permanent members to ratify and that never happened.

Now as part of the campaign to punish Japan for Prime Minister Takaichi’s Taiwan-related comments last November, we are hearing a lot more about the “enemy-state clauses” and why their existence should prevent Japan from re-arming. Russia has also weighed in on the PRC’s side.

Today’s installment reiterates the veiled threat that somehow the PRC and other founding members (Russia) can take enforcement action against Japan:

Article 53 fortifies the security line: addressing the risk that an enemy state might renew expansion or breach military restrictions, it authorizes UN founding members, when necessary, to take enforcement action without the Security Council’s ordinary authorization, providing direct legal grounds and authorization for action to prevent the revival of militarism. The system as a whole targets the root causes of war and is a core legal barrier through which the international community punishes aggression and protects peace and justice.

第53条筑牢安全防线，针对敌国重启扩张、突破军事限制的风险，授权联合国创始成员国在必要时可不经安理会常规授权采取强制措施，为防范军国主义复辟提供了直接的法律依据和行动授权。整套制度直击战争根源，是国际社会惩戒侵略、守护和平正义的核心法治屏障。

And in spite of previously agreeing they were obsolete, now China’s position is they are not:

In terms of present-day value, the balancing role of the “enemy-state clauses” remains indispensable. Japan’s right-wing forces now vigorously deny aggression, falsify history, and glorify war. At the same time, Japan continues sharply increasing its defense budget, vigorously developing offensive weapons, repeatedly breaching postwar military constraints, and accelerating “remilitarization.” Japan’s “new militarism” has bared its fangs and grown into a menace. Amid a complex and severe geopolitical environment, the clauses’ value as a constraint and counterweight has not diminished but grown more prominent. They are by no means obsolete.

从现实价值看，“敌国条款”的制衡作用至今不可或缺。当前，日本右翼势力极力否认侵略、篡改历史、美化战争。同时，日本持续大幅增加防卫预算、大力发展进攻性军备，不断突破战后军事束缚，加速推进“再军事化”，日本“新型军国主义”已露出獠牙、成势为患。在复杂严峻的地缘政治形势下，“敌国条款”的约束与制衡价值非但未减，反而愈发凸显，绝无过时可言。

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The PRC officially confirmed that Xi will travel to the US to meet with Trump from September 23-25. Trump will greet Xi on arrival at Andrews Air Force Base, host him for meetings and a state dinner Thursday, and then Xi will leave Friday. So much for those rumors about Xi last week…

Friday is the 中秋节 Mid-Autumn Festival, so will the White House chef try to make mooncakes for the Thursday State Dinner?

Today’s top items:

1. September Politburo meeting and Fifth Plenum dates - The readout from the September 21 Politburo named only one agenda item - “to study major issues concerning persistently advancing full and rigorous Party self-governance” - announced that the Fifth Plenum will convene October 26-29 and that it will deliberate (and of course pass) the “Decision of the CPC Central Committee on Several Major Issues Concerning Persistently Advancing Full and Rigorous Party Self-Governance 中共中央关于持之以恒推进全面从严治党若干重大问题的决定”.

Xi Thought on Party Building is a centerpiece of that draft, based on the Plenum readout, translated here:

The meeting noted that this consultation process promoted democracy and drew on collective wisdom. All regions, departments, and sectors expressed strong approval of the draft decision. They considered that the draft provides a fact-based review of the achievements and experience of full and rigorous Party self-governance in the new era, offers an in-depth analysis of the circumstances and tasks facing Party building at present and for some time to come, and sets out strategic arrangements for persistently advancing full and rigorous Party self-governance. It reflects the historical initiative of the Party Central Committee with Comrade Xi Jinping at its core in strengthening the Party and the country. It has major practical significance and provides long-term guidance for advancing the great new project of Party building in the new era, and for uniting and leading the people of all ethnic groups across the country in comprehensively advancing the building of a strong country and the great cause of national rejuvenation through Chinese modernization.

会议指出，这次征求意见发扬民主、集思广益，各地区各部门各方面对决定稿给予充分肯定，认为决定稿实事求是总结新时代全面从严治党的成就和经验，深刻分析当前和今后一个时期党的建设面临的形势和任务，对持之以恒推进全面从严治党作出战略部署，体现了以习近平同志为核心的党中央强党强国的历史主动，对于推进新时代党的建设新的伟大工程，团结带领全国各族人民以中国式现代化全面推进强国建设、民族复兴伟业，具有重大现实意义和长远指导意义。

The Politburo meeting readout concluded with the usual “the meeting also studied other matters 会议还研究了其他事项.”

2. Zhang Youxia and Liu Zhenli Expelled from Party and PLA - “Other matters” included deliberating on and adopting the Central Military Commission's "Report on the Results of the Review of Zhang Youxia's Problems and Recommendations for Handling" and "Report on the Results of the Review of Liu Zhenli's Problems and Recommendations for Handling." Zhang and Liu were officially expelled from the Party and the PLA today, per an announcement soon after the Politburo meeting, translated here. The upcoming Plenum will ratify the decision.

According to the announcement of their expulsions:

The investigation found that Zhang Youxia and Liu Zhenli betrayed their original aspiration and mission, became estranged from the Party in heart and in deed, lost their Party spirit and principles, and crossed red lines and bottom lines. They seriously violated political discipline and political rules, formed cliques and factions, and were disloyal and dishonest to the Party; seriously violated organizational discipline, using the convenience of their positions to help others with promotions and other matters and accepting huge sums of money; seriously violated integrity discipline, accepting gifts and cash gifts in violation of regulations; seriously violated work discipline, failing to fulfill their political responsibility for full and rigorous Party self-governance; and seriously violated life discipline, failing to educate and manage their relatives and the staff around them.

经查，张又侠、刘振立背弃初心使命、与党离心离德、丧失党性原则、逾越红线底线，严重违反政治纪律和政治规矩，搞团团伙伙，对党不忠诚不老实；严重违反组织纪律，利用职务便利为他人职务晋升等提供帮助，收受巨额钱款；严重违反廉洁纪律，违规收受礼品礼金；严重违反工作纪律，不履行全面从严治党政治责任；严重违反生活纪律，对亲属和身边工作人员失教失管。

Zhang Youxia and Liu Zhenli seriously violated Party discipline and are suspected of serious duty-related crimes. Their political problems and economic problems were intertwined, graft and money-grabbing coexisted with dereliction of duty and malfeasance, the sums involved were especially huge, the nature of the case extremely serious, and the impact extremely vile.

张又侠、刘振立严重违反党的纪律，涉嫌严重职务犯罪，政治问题和经济问题交织，贪腐敛财与失职渎职并存，涉案金额特别巨大，性质极其严重，影响极为恶劣。

I think “formed cliques and factions, and were disloyal and dishonest to the Party” is more about “using the convenience of their positions to help others with promotions and other matters and accepting huge sums of money” than trying to organize any sort of resistance against Xi. “Their political problems and economic problems were intertwined” reinforces my view.

3. Xi’s US visit confirmed as negotiators meet in New York - The US and China negotiating teams met in New York Sunday at the headquarters of JP Morgan. Scott Bessent and Jamieson Greer led the US side, He Lifeng and Li Chenggang, newly promoted to the title of PRC International Trade Representative (中华人民共和国国际贸易谈判代表), led the PRC side. According to the Financial Times’ report on the meeting, they agreed to set up an AI dialogue mechanism, though it will not be called the Strategic AI Dialogue (SAID) as I proposed last week, but they have yet to agree on extending the one-year trade truce that expires November 10:

“The truce does not end until November 10, so it was not critical that it be extended today,” said a second senior US official.

In addition to disagreements about the length of an extension, the US believes China has not fully lived up to the commitment it made on rare earths in Busan to ensure the flow of the metals to the US and its allies.

The first US official said China was fulfilling two-thirds of those commitments. The official also said that the US had proposed extending the truce for six months, but China wanted the extension to last for the rest of Trump’s presidency.

The official added that Bessent and Greer were “encouraged” by what He Lifeng had said on Sunday and that they believed he was “working very hard” to understand why the Chinese system was not fully complying with the Busan deal.

“We don’t know whether it’s a glitch in the system . . . or an intentional haircut,” the official added.

That seems charitable given this has issue has been ongoing for months.

Not agreeing to extend the truce for the rest of Trump’s term is smart, as it is an important piece of leverage for the US side.

The two sides also have “operationalized” the Board of Trade, according to Bessent and Greer in remarks to the media after the meeting.

It is hard to get excited about what we hearing so far about the US-China talks, as President Trump has yet to weigh in.

The PRC side issued a brief statement on the Sunday talks:

On September 20 local time, He Lifeng, China’s lead official for China-U.S. economic and trade affairs and vice premier of the State Council, held economic and trade consultations in New York with the U.S. leads, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer. Guided by the important common understandings reached by the two heads of state, and adhering to the principles of mutual respect, peaceful coexistence, and win-win cooperation, the two sides engaged in candid, in-depth, and constructive exchanges on important economic and trade issues of mutual concern, including implementing the agreements reached in previous consultations and promoting bilateral trade and investment. They also held a dialogue on issues related to artificial intelligence.

当地时间9月20日，中美经贸中方牵头人、国务院副总理何立峰与美方牵头人、美国财政部长贝森特和贸易代表格里尔在美国纽约举行经贸磋商。双方以两国元首重要共识为引领，秉持相互尊重、和平共处、合作共赢的原则，围绕落实历次经贸磋商共识、促进双边贸易投资等双方共同关心的重要经贸问题，进行了坦诚、深入、富有建设性的交流，并就人工智能有关问题举行对话。

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Today’s top items:

1. National Advanced Manufacturing Conference - Xi issued “important instructions” on developing advanced manufacturing, conveyed at a two-day National Advanced Manufacturing Conference in Beijing that wrapped up Thursday, Xinhua reports (translation here). Li Qiang spoke, Zhang Guoqing gave the closing remarks, and the meeting included participants via videoconference from every province, relevant central ministries, some centrally managed financial institutions and SOEs, CMC organs, and manufacturing firms.

Xi’s instructions are short, with this being the core message:

coordinate high-quality development and high-level security; adhere to the direction of making development smarter, greener, and more integrated; continue to expand and strengthen advanced manufacturing; enhance the independent and controllable capacity of industrial chains; accelerate the…

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I believe the most amplification came from this X account, which does not have a track record that makes it worth believing without other, much more credible sourcing:

The good news is we will have an answer soon enough. Xi should be arriving in DC in a week, and as a friend who follows these things closely just said to me, there is no way He Lifeng comes to the US this weekend for talks with Bessent and Greer if Xi is sick as the rumors suggest.

We had a good discussion of AI and the upcoming Xi visit, among other topics, in this week’s episode of Sharp China - The Limited Potential for a Pacing Deal; MSS on PRC AI Risks; Distillation and Data Security; The Party’s Approach to Social Media:

On today’s show Andrew and Bill look at several dimensions of the PRC’s approach to AI. First: The various reasons a push for an agreement with U.S. labs to “pace” AI development is unlikely to bear fruit and the history of the CPC’s approach to control over technology. Then: The head of the MSS offers a view into CPC concerns around political security risks and data risks, while Anthropic CEO Dario Amodei proposes a misguided framework for forcing Chinese compliance with a slowdown agreement. From there: The U.S. reiterates its complaints about Chinese companies conducting “industrial-scale” distillation of U.S. AI models, while Anthropic suggests sensitive PRC data was shared with Claude. At the end: A law broadening exit bans goes live, the New York Times reports Chinese social media “getting dark,” while the Wall Street Journal highlights an influencer scandal captivating netizens.

You can listen to it here.

Today’s top items:

1. Wang Yi meets Iran FM - Iranian Foreign Minister Abbas Araghchi met with Wang Yi in Beijing. According to the readout, translated here, Wang told his counterpart:

We encourage Iran and the United States to remain rational and restrained, return as soon as possible to the Islamabad memorandum of understanding, rebuild the negotiation mechanism on the basis of the consensus reached so far, and hold substantive consultations on the issues of concern to each side. We support Iran in conducting dialogue with the Gulf states, respecting each other’s territorial sovereignty and national security, and safeguarding the region’s common interests in a constructive manner. We urge all parties to take effective measures to reopen the Strait of Hormuz at an early date, keep international shipping lanes open and safe, and maintain the stability of international energy transport and industrial and supply chains. We do not want regional tensions to spill over further toward Yemen and the Red Sea. We call on all parties to stop further complicating the situation and to resolve issues through dialogue and negotiation.

The latest Middle East supply disruption after the attack on the Saudi pipeline has pushed Chinese crude prices to record levels at the same time China is drawing down inventories more rapidly. The spike raises the risk that the exit from deflation becomes increasingly cost-push “bad inflation”, and that further complicates the case for conventional PBOC easing. And the global economic impact of another huge petrochemical price surge would damage the export markets the PRC economy needs. The PRC increasingly needs this conflict to end.

2. US-China meetings - Demetri Sevastopulo at the Financial Times has confirmed that He Lifeng is meeting with Scott Bessent and Jamieson Greer this weekend in New York, ahead of Xi’s visit to Washington next week. From his article:

US Treasury secretary Scott Bessent will meet his Chinese counterpart He Lifeng in New York on Sunday as the two sides try to bridge differences ahead of next week’s summit between Donald Trump and Xi Jinping in Washington…

Ahead of the summit in Washington, China has pushed to extend the Busan truce for the rest of Trump’s term. But several people familiar with the talks said the US was insisting on a six-month extension, partly because it believes China is not fully living up to the commitments on rare earths reached in Busan.

The US has also been pushing China to ease restrictions on rare earth exports to Japan, in pressure partly designed to help an ally but also because the restrictions are having a knock-on impact on US supply chains.

It is good news that the US is speaking up about the treatment of Japan, and only agreeing to a six-month extension would be disappointing to the PRC side, but as we have discussed multiple times here, the Chinese side has been underdelivering on the rare-earths deal and the US side has gotten very frustrated.

3. AI - The Zhong Sheng commentator at People’s Daily weighed in Wednesday on the US accusations that PRC AI firms are distilling US models. I have translated the full commentary here. Some highlights:

By elevating a common industry practice into a national-security issue, the United States is using the pretext of combating distillation to pursue industrial monopoly. Some U.S. artificial-intelligence companies have long abused their competitive advantages, inserting overbroad geographic restrictions and other onerous terms into their user agreements in an attempt to exclude competitors from countries including China from the global technology ecosystem and monopolize the gains from artificial-intelligence development. In this instance, U.S. security agencies directly issued the advisory, binding the interests of particular companies and capital to national security and using coercive state institutions to interfere in normal commercial activities. This unquestionably amounts to an endorsement of those onerous terms. For some time, the U.S. executive and legislative branches have repeatedly threatened sanctions and suppression against Chinese companies, with restrictions extending step by step from chip controls and computing-power blockades to areas such as model access. The United States is willing to mobilize state power to preserve technological hegemony and a monopoly over computing power. At root, this reflects deep anxiety over the possible loss of its technological hegemony and the same hegemonic logic that “only the United States may win alone; humanity may not win together.”..

美方将行业通行做法上升为国家安全问题，是以打击蒸馏为名，行产业垄断之实。长期以来，美国个别人工智能企业滥用竞争优势地位，在用户协议中设置宽泛的地域限制等霸王条款，试图将中国等国家的竞争者排除在全球技术生态之外，独占人工智能发展红利。此次美方由安全部门直接发布公告，将个别企业和资本利益与国家安全相捆绑，动用国家强权机构干涉正常商业活动，无疑是为这些霸王条款背书。一段时期以来，美国行政、立法机关频频发出对中国企业的制裁打压威胁，限制措施从芯片管制、算力封锁一步步延伸到模型访问等领域。美方不惜动用国家力量维护科技霸权和算力垄断，根源在于对自身技术霸权旁落的深层焦虑，奉行的依然是“只能美国独赢，不能人类共赢”的霸权逻辑。

It is hoped that the United States will meet China halfway, manage risks through dialogue and communication, and work together to create an open, equal, fair, and nondiscriminatory environment for artificial-intelligence development, so that artificial-intelligence technology benefits all humanity. But if the United States uses combating distillation as a pretext to take action to contain and suppress Chinese artificial-intelligence companies and harm China’s legitimate and lawful rights and interests, China will resolutely adopt countermeasures.

希望美方与中方相向而行，通过对话和沟通管控风险，共同营造开放、平等、公平、非歧视的人工智能发展环境，推动人工智能技术造福全人类。但如果美方以打击蒸馏为名，实施遏压中国人工智能企业的行动，损害中方正当合法权益，中方必将坚决采取措施予以反制。

The commentary was at the bottom of page 3:

The US and China should be talking about AI safety and governance, and while I am skeptical this can happen given the politics I thought it is still constructive to make some suggestions. I created this proposal with Astra after much back and forth. If the two sides are going to dialogue about AI, the AI should have a say - US-China Strategic AI Dialogue (SAID) Proposal.

4. PBoC Governor Pan Gongsheng in Qiushi - Pan Gongsheng has an essay in the new Qiushi, “Gain a Deep Understanding of Changes in China’s Financial Structure and Make Financial Services Better Suited to the Real Economy 深刻认识中国金融结构变迁 提升金融服务实体经济适配性.” Most of it expands his June Lujiazui Forum speech, updated with first-half 2026 data and a section on implementing the new 15th Five-Year Plan for Building a Financial Power. I have posted a translation here.

This line from Pan is getting the most attention:

Slower but higher-quality lending may become one of the new normal features of macroeconomic operations.

贷款降速提质或将成为宏观运行的新常态之一.

Pan writes that monetization of the economy is “basically complete,” that the financing market has moved from supply constraints to demand constraints, and that letting aggregates outrun the real economy would push up leverage and prevent the clearing of “backward production capacity and inefficient enterprises”.

He said much of this in Shanghai three months ago, so this is the new normal, and those trying to argue credit is too tight are not convincing the people that matter.

Read more

On today’s show Andrew and Bill look at several dimensions of the PRC’s approach to AI. First: The various reasons a push for an agreement with U.S. labs to “pace” AI development is unlikely to bear fruit and the history of the CPC’s approach to control over technology. Then: The head of the MSS offers a view into CPC concerns around political security risks and data risks, while Anthropic CEO Dario Amodei proposes a misguided framework for forcing Chinese compliance with a slowdown agreement. From there: The U.S. reiterates its complaints about Chinese companies conducting “industrial-scale” distillation of U.S. AI models, while Anthropic suggests sensitive PRC data was shared with Claude. At the end: A law broadening exit bans goes live, the New York Times reports Chinese social media “getting dark,” while the Wall Street Journal highlights an influencer scandal captivating netizens.

Read more

In this issue:

1. More weak August data

2. Advance work for Xi-Trump meeting

3. ICBC documents leak

4. New exit-entry rules go into effect

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health

Today’s top items:

1. More weak August data — The NBS released more mostly weak data for August. Two reactions from respected market participants sum up the challenges well.

Economist Hao Hong:

A macro strategist:

Read more

Executive Summary

The United States and the People's Republic of China should establish a Strategic AI Dialogue (SAID): a permanent, senior-level government-to-government mechanism focused on managing the most consequential risks arising from increasingly capable artificial intelligence.

SAID should be led on the U.S. side by Treasury Secretary Scott Bessent and on the PRC side by Vice Premier He Lifeng. The White House Office of Science and Technology Policy (OSTP), led by Michael Kratsios, should be a standing senior participant on the U.S. side and should coordinate much of the scientific and technical work on frontier models, AI evaluation, biotechnology, standards, and AI-enabled scientific research. Their involvement would give the process sufficient political and technical weight while connecting AI risks to the broader economic and strategic relationship.

SAID should meet quarterly in a neutral country, preferably Switzerland, with working groups operating continuously between meetings. Its objective would not be to resolve the larger technological competition between the United States and China, nor should cooperation require either side to compromise legitimate national-security, economic, or technological interests.

Instead, SAID should concentrate on a narrower proposition: there are AI risks for which the United States and China are mutually vulnerable, cannot fully protect themselves acting alone, and have a shared interest in preventing even while remaining strategic competitors.

The initial agenda should emphasize nuclear command and control, catastrophic biological risks including mirror life, frontier-model safety, AI incident notification, financial stability, employment disruption, cyber risks, AI-enabled crime, and other areas where limited but meaningful cooperation is realistic.

1. Purpose

Artificial intelligence is becoming a central arena of U.S.-China strategic competition. That competition will encompass advanced semiconductors, computing infrastructure, models, military capabilities, industrial applications, standards, talent, and global influence. Neither country is likely to abandon policies designed to preserve its technological and national-security advantages.

But intense competition does not eliminate common interests. Some AI risks would harm both countries regardless of which side initially developed or deployed the relevant technology. These include accidental nuclear escalation, AI-assisted biological catastrophe, destabilization of financial markets, large-scale fraud, uncontrolled autonomous systems, and potentially severe labor-market disruption.

There is already a foundation for such an effort. The two governments held the first meeting of their intergovernmental AI dialogue in Geneva in May 2024. In November 2024, the two presidents publicly affirmed the need to maintain human control over the decision to use nuclear weapons and to approach military AI risks prudently and responsibly. SAID would institutionalize and significantly broaden that risk-reduction logic.

The purpose of SAID should therefore be to identify areas of mutual vulnerability and establish mechanisms for regular strategic communication, technical exchanges, joint research where appropriate, crisis notification, development of shared terminology and measurement, narrowly tailored bilateral understandings, and eventual multilateralization of successful norms.

SAID should be designed as a risk-reduction mechanism rather than a comprehensive AI-governance negotiation. The United States and China do not need a common political system, common regulatory philosophy, or high levels of strategic trust to recognize that some outcomes would be disastrous for both.

2. Political Leadership

United States

The U.S. lead should be Treasury Secretary Scott Bessent. Treasury is an appropriate institutional anchor because AI competition increasingly intersects with macroeconomic policy, investment, financial stability, capital markets, employment, export and investment controls, and the wider structure of the U.S.-China economic relationship.

Bessent would chair the senior U.S. delegation. The National Security Council should coordinate national-security participation, the State Department should manage the diplomatic process, and the White House Office of Science and Technology Policy should serve as the principal science and technology policy node.

Michael Kratsios, Assistant to the President for Science and Technology and Director of OSTP, should be a standing senior participant. OSTP should lead or co-lead the technical work on frontier-model evaluation, scientific risk assessment, AI for science, biotechnology, standards, research security, and engagement with U.S. frontier AI laboratories and the scientific community.

People's Republic of China

The PRC lead should be Vice Premier He Lifeng. His portfolio and political standing make him an appropriate counterpart to Bessent and give the Chinese side the authority necessary to convene economic, financial, security, technological, and regulatory agencies.

The Ministry of Foreign Affairs should manage the diplomatic channel, while relevant Party and State Council bodies coordinate specialized participation.

Why senior leadership matters

The Bessent-He structure would help avoid one of the principal weaknesses of previous U.S.-China dialogues: discussions migrating downward into bureaucratic processes without sufficient authority to produce decisions. The principals should personally attend at least two SAID sessions each year and review the conclusions of all four quarterly meetings. A standing deputies process should operate between principals' sessions.

3. Structure

SAID should meet four times per year in a neutral country. Geneva, Switzerland would be the logical default: politically neutral, accessible to both sides, home to relevant international institutions, and already associated with U.S.-China AI discussions.

Meetings should normally last two days and contain three levels:

• Principals session: Bessent, He Lifeng, and a small number of senior officials review strategic issues and approve decisions.

• Senior officials session: Interagency representatives negotiate proposals, review working-group findings, and prepare recommendations.

• Technical sessions: Scientists, regulators, military specialists, economists, cybersecurity experts, biotechnology specialists, and other experts address specific risks.

Not every discussion should be public. Some issues, particularly nuclear command and control, cyber operations, and frontier-model vulnerabilities, will require confidential or classified channels if the dialogue is to produce meaningful results.

4. Participants

Core U.S. participation

In addition to Treasury, the U.S. side should draw participants as appropriate from:

• White House Office of Science and Technology Policy (OSTP), with Michael Kratsios as a standing senior participant

• National Security Council

• Department of State

• Department of Defense

• Department of Energy and National Nuclear Security Administration

• Department of Commerce

• National Institute of Standards and Technology

• Department of Homeland Security

• Department of Justice and FBI

• U.S. intelligence community

• Federal Reserve

• Securities and Exchange Commission

• Commodity Futures Trading Commission

• Department of Labor

• Department of Health and Human Services

• Centers for Disease Control and Prevention

• National Institutes of Health

Core PRC participation

The Chinese side should include, depending on the agenda:

• Office of the Central Cyberspace Affairs Commission / Cyberspace Administration of China

• National Development and Reform Commission

• Ministry of Foreign Affairs

• Ministry of Science and Technology

• Ministry of Industry and Information Technology

• Ministry of Public Security

• Ministry of State Security

• Central Military Commission / People's Liberation Army

• Central National Security Commission

• National Financial Regulatory Administration

• People's Bank of China

• China Securities Regulatory Commission

• Ministry of Human Resources and Social Security

• National Health Commission

• National Data Administration

The inclusion of MPS, MSS, the PLA, and the Central National Security Commission is particularly important. A dialogue limited to civilian AI regulators would be unable to address some of the most consequential potential AI risks. Not every institution needs to participate in every session; SAID should have a relatively compact permanent core while specialized officials join relevant working groups.

5. External Expert Participation

Each side should maintain a Strategic AI Technical Advisory Group composed of experts from influential organizations. These should include leading AI laboratories, universities, national laboratories, biotechnology institutes, financial institutions, cybersecurity organizations, labor-market research institutions, and standards organizations.

Participants should be drawn from organizations that have genuine access to frontier capabilities and influence over policy. Private companies should advise governments rather than negotiate government commitments themselves.

The dialogue must avoid becoming either a diplomatic talking shop disconnected from the technology or an industry forum dominated by the commercial interests of AI companies.

6. Initial Agenda

6.1 Nuclear weapons, AI, and strategic stability

This should be SAID's highest-priority national-security issue. The United States and China have already endorsed the basic principle that humans should retain control over decisions to use nuclear weapons. SAID should seek to operationalize that principle.

The initial objective should be agreement that nuclear-release authority will never be delegated to an artificial intelligence system, and an AI system will never be permitted autonomously to execute a decision to employ nuclear weapons.

This formulation is preferable to a blanket prohibition on AI in nuclear command and control, because both sides are likely to use AI somewhere in the broader nuclear enterprise. The crucial issue is where to draw the red line.

SAID should examine AI-generated false warnings; manipulation of early-warning data; excessive reliance on AI-generated assessments during crises; autonomous escalation; AI-generated decision recommendations; cyberattacks on nuclear command, control, and communications; human verification requirements; and fail-safe mechanisms.

An early practical measure should be a joint tabletop exercise involving a false nuclear warning generated or amplified by AI during an international crisis. The exercise would not require either side to reveal operational nuclear procedures. Its purpose would be to identify escalation pathways and potential safeguards.

A longer-term objective should be discussion of restraints on autonomous cyber operations against nuclear command-and-control and strategic early-warning systems.

6.2 Catastrophic biological risk and mirror life

AI is rapidly increasing scientists' ability to design proteins, biological systems, and potentially pathogens. The same tools that accelerate medicine and biotechnology could lower barriers to catastrophic biological misuse.

A particularly suitable subject for early cooperation is mirror life: self-replicating organisms built from biological molecules with the opposite chirality from existing terrestrial life. Because such organisms could potentially evade important natural biological defenses, their consequences could be unusually difficult to predict or contain.

The United States and China should seek an early bilateral understanding that neither government will fund, direct, or knowingly support efforts whose objective is the creation of self-replicating mirror organisms unless compelling new scientific evidence demonstrates that the catastrophic risks can be adequately controlled.

A broader AI-biosecurity working group should examine AI-assisted pathogen design, automated laboratories, synthesis screening, model access controls for especially dangerous biological capabilities, AI-enabled biological threat detection, and international incident notification. Cooperation should focus on reducing risk and should not involve exchanges of technical information that themselves facilitate dangerous biological engineering.

6.3 Frontier-model safety and evaluation

The United States and China share an interest in knowing whether increasingly capable AI systems possess dangerous capabilities. SAID should establish a technical working group on frontier-model evaluation.

Possible areas for common measurement include autonomous replication; long-horizon autonomous behavior; deception; circumvention of safeguards; cyber capabilities; biological and chemical assistance; ability to acquire resources; ability to persist after attempted shutdown; and manipulation of human operators.

The objective initially should not be a common regulatory system. The more achievable objective is agreement on measurement. If U.S. and Chinese scientists can develop broadly comparable methods for testing dangerous capabilities, both governments will have a better understanding of emerging risks without requiring either side to reveal proprietary models, training data, or national-security information.

6.4 AI incident notification

SAID should create a direct AI Incident Hotline and Notification Protocol. The system should apply only to serious incidents with plausible international or catastrophic consequences.

Potential notification events could include unauthorized proliferation of a highly dangerous frontier model; loss of control over an advanced autonomous system; evidence that an AI system materially enabled a major biological attack; an AI-enabled cyber event affecting strategically sensitive infrastructure; compromise of a frontier model in a manner that creates transnational risk; or an AI-generated military event that could be misinterpreted as intentional state action.

The mechanism should include designated 24-hour government points of contact. The threshold should deliberately be high: routine commercial failures or ordinary cybersecurity incidents should remain outside SAID.

6.5 AI and financial stability

AI will increasingly influence algorithmic trading, investment management, credit decisions, insurance, fraud detection, financial regulation, payment systems, and bank risk management. Both countries therefore face the possibility of new forms of systemic instability.

Treasury, the Federal Reserve, and U.S. financial regulators should establish a working group with the People's Bank of China, NFRA, and CSRC. Potential subjects include correlated AI trading strategies, machine-speed market cascades, model concentration, dependence on common foundation models, autonomous financial agents, AI-generated market manipulation, synthetic-identity fraud, and failures of AI risk-management systems.

A useful early initiative would be a joint financial-stability tabletop exercise simulating an AI-driven market disruption spreading between major markets. The working group should remain separate from broader disagreements over sanctions, exchange rates, financial restrictions, and market access.

6.6 AI, employment, and social stability

The effects of artificial intelligence on employment may become one of its most consequential political and economic effects. Both governments want the productivity gains created by AI, and both also have an interest in avoiding large-scale structural unemployment, severe wage disruption, geographic concentration of job losses, sudden labor-market shocks, and social instability.

SAID should establish a U.S.-China AI and Employment Research Initiative. Government statistical agencies, labor economists, and research organizations should jointly develop methodologies for studying occupational displacement and augmentation, wage and productivity effects, sectoral and regional changes, retraining, education reform, apprenticeship, adjustment assistance, and labor-force participation.

The objective should not be harmonized labor policy. The two countries have different economic and political systems. The goal should instead be to establish comparable evidence about what AI is actually doing to employment. The working group should publish an annual U.S.-China AI and Employment Report.

6.7 AI-enabled cyber operations

This will be a much harder area, but it belongs on the agenda. Neither government is likely to give up offensive cyber capabilities, nor is either likely to accept a broad prohibition on AI-assisted cyber operations.

A narrower discussion may nevertheless be possible around autonomous attacks that could produce catastrophic civilian consequences. Potential areas include requirements for meaningful human authorization before launching high-consequence autonomous cyber operations against nuclear systems, electrical grids, financial clearing systems, hospitals, water systems, or other critical civilian infrastructure.

The objective initially should be dialogue and clarification rather than a formal prohibition. Over time, experience may reveal specific categories of operations suitable for reciprocal restraint.

6.8 AI-enabled fraud and transnational crime

This may be one of the most practical early areas for cooperation. Generative AI dramatically reduces the cost of impersonation, phishing, voice cloning, identity theft, financial fraud, extortion, and criminal automation.

The FBI, Department of Justice, MPS, and other relevant agencies should establish a working channel for major AI-enabled criminal activity. Priority should be given to large-scale financial fraud, organized crime, human trafficking, child exploitation, synthetic identities, and cross-border extortion.

Neither government benefits from permitting non-state criminal networks to exploit AI at scale.

6.9 Preventing terrorist acquisition of catastrophic AI capabilities

The United States and China have a clear common interest in preventing terrorist organizations and other dangerous non-state actors from acquiring AI capabilities that materially increase their ability to conduct mass-casualty attacks.

SAID should examine common thresholds for particularly dangerous AI capabilities, model-security standards, illicit acquisition of advanced models, use of AI for biological or chemical attacks, and AI-assisted terrorist cyber operations. Where bilateral agreement proves possible, Washington and Beijing should consider advancing those principles through the United Nations.

6.10 Safety of autonomous physical systems

As AI moves into vehicles, drones, industrial robots, and other physical systems, failures can produce direct physical harm. SAID should encourage technical cooperation on civilian autonomous-system safety, including fail-safe design, emergency shutdown, human override, industrial-robot safety, autonomous-vehicle incidents, cybersecurity, and accident reporting.

This is an area where technical standards may be easier to negotiate than broader strategic rules.

7. Issues SAID Should Initially Avoid

SAID should not become the forum for resolving every dispute in the technological relationship. Issues such as semiconductor export controls, investment restrictions, sanctions, industrial subsidies, censorship, surveillance, data localization, intellectual-property disputes, and market access will continue to divide Washington and Beijing.

Either side may raise concerns when directly relevant to AI risk, but these disputes should not become conditions for cooperation on nuclear safety, biological risk, financial stability, or other matters involving mutual vulnerability. The governing principle should be compartmentalization: disagreement elsewhere should not automatically shut down communication on catastrophic risks.

8. First-Year Deliverables

SAID should be judged by outputs, not meetings.

First quarter

• Formal launch by Bessent and He Lifeng.

• Establish a permanent secretariat, deputies process, and working groups.

• Create emergency points of contact.

• Reaffirm human control over nuclear-use decisions and begin negotiations over a more specific nuclear-AI red line.

• Launch the AI employment study and expert discussions on mirror life.

Second quarter

• Conduct a joint AI/nuclear false-warning tabletop exercise.

• Develop a preliminary common taxonomy of dangerous frontier-model capabilities.

• Establish mechanisms for scientific consultation on mirror-life risks.

• Begin financial-stability scenario planning.

Third quarter

• Establish the AI Incident Notification Protocol.

• Conduct an AI-related financial-crisis tabletop exercise.

• Publish an interim AI employment assessment.

• Begin cooperation against selected categories of AI-enabled transnational fraud.

Fourth quarter

• Seek a bilateral declaration against delegating nuclear-release authority to AI.

• Seek a bilateral statement opposing creation of self-replicating mirror organisms pending convincing evidence of safety.

• Publish a common framework for frontier-model risk evaluation.

• Agree procedures for notification of serious cross-border AI incidents.

• Identify priorities for multilateral AI risk reduction during the following year.

9. Principles

Mutual vulnerability, not mutual trust. The United States and China do not have to trust each other to recognize that some AI outcomes would harm both.

No grand bargain. Progress in SAID should not require resolution of the broader U.S.-China strategic competition.

No linkage. A dispute over Taiwan, trade, technology, or another bilateral issue should not automatically suspend risk-reduction discussions.

Technical depth. Diplomatic engagement must be informed by people who actually understand advanced AI systems.

Incrementalism. A narrow agreement that changes behavior is more valuable than an ambitious declaration neither side implements.

Multilateralization. Successful U.S.-China understandings should eventually be offered as foundations for wider international agreements rather than treated as a bilateral condominium over global AI governance.

10. Conclusion

The United States and China are likely to remain strategic competitors in artificial intelligence for decades. That is precisely why they need a mechanism for managing the risks created by that competition.

The history of relations between nuclear powers demonstrates that risk reduction does not require friendship. Rivals can remain competitors while recognizing that accidents, misperception, and uncontrolled technological escalation can produce outcomes neither side wants. Artificial intelligence creates a similar requirement.

The purpose of SAID would not be to make the United States and China partners in AI. It would be to ensure that competition between the world's two most consequential technological powers does not prevent them from cooperating when they face the same potentially catastrophic risks.

Under the leadership of Scott Bessent and He Lifeng, with Michael Kratsios and OSTP playing a standing senior role on the U.S. side, SAID could provide a politically authoritative and technically credible mechanism for doing so.

Annex: Prioritizing the SAID Agenda

The dialogue should distinguish between issues that offer a realistic prospect of early agreement, issues that require sustained technical work, and issues that are strategically important but difficult to negotiate. This sequencing is essential. Early successes can build political support, working habits, and technical relationships that may eventually make harder agreements possible.

Tier I - Best prospects for early progress

1. Human control over nuclear-use decisions | Feasibility: HIGH

Initial objective: No delegation of nuclear-release authority to AI and no autonomous execution of a nuclear-use decision.

Why: The underlying principle has already been accepted at the presidential level; it does not require disarmament and need not constrain conventional AI competition.

2. Mirror life | Feasibility: HIGH

Initial objective: A joint declaration opposing creation of self-replicating mirror organisms pending convincing evidence of safety.

Why: The technology is not yet mature, the downside could be global, and precaution does not obviously disadvantage either side.

3. AI and employment research | Feasibility: VERY HIGH

Initial objective: Create common research methodologies and an annual U.S.-China AI and Employment Report.

Why: This offers visible public value with limited national-security sensitivity and does not require agreement on labor policy.

4. AI-enabled fraud and crime | Feasibility: HIGH

Initial objective: Information-sharing and selected joint investigations involving large-scale AI-enabled fraud and synthetic identities.

Why: Both governments face direct losses from transnational criminal exploitation of AI, and cooperation can begin case by case.

5. Civilian autonomous-system safety | Feasibility: HIGH

Initial objective: Technical exchange on safety standards, incident reporting, emergency shutdown, and human override.

Why: Technical standards can reduce accidents and fragmentation without constraining strategic competition.

Tier II - Important and plausible, but technically or politically harder

6. Frontier-model evaluations | Feasibility: MEDIUM-HIGH

Initial objective: Develop common terminology and comparable evaluation methods for dangerous capabilities.

Why: Model access, proprietary information, and strategic advantage make disclosure difficult; cooperation should begin with measurement rather than model sharing.

7. AI incident notification | Feasibility: MEDIUM

Initial objective: Establish emergency contacts and a narrow notification threshold for severe AI incidents.

Why: It could prevent misinterpretation of dangerous events, but defining reportable incidents and exposing vulnerabilities will be sensitive.

8. Financial stability | Feasibility: MEDIUM-HIGH

Initial objective: Conduct joint scenario exercises examining AI-related financial instability.

Why: Regulators have a shared interest in systemic stability, but broader financial tensions could contaminate the discussion.

9. AI biosecurity beyond mirror life | Feasibility: MEDIUM

Initial objective: Compare safeguards around AI-assisted biological design, screening, and defensive monitoring.

Why: Biotechnology has major commercial and national-security implications; initial cooperation should emphasize defensive risk reduction.

Tier III - Strategically important but difficult

10. AI-enabled cyber operations | Feasibility: LOW-MEDIUM

Initial objective: Explore whether high-consequence autonomous cyber operations should require meaningful human authorization.

Why: Both sides rely on cyber capabilities and will resist limits that might compromise operational freedom.

11. AI in conventional military systems | Feasibility: LOW-MEDIUM

Initial objective: Begin with crisis stability, accident prevention, and human accountability for autonomous weapons and decision-support systems.

Why: Military AI is highly sensitive and deeply entangled with the broader security competition.

12. Highly autonomous or potentially uncontrollable AI | Feasibility: MEDIUM OVER TIME

Initial objective: Develop common terminology for loss-of-control indicators and mechanisms for urgent expert consultation.

Why: Agreement may become more likely as observable evidence of advanced autonomy grows, but present uncertainty makes detailed rules difficult.

Recommended Negotiating Sequence

First: Employment, mirror life, nuclear human control, fraud, and civilian autonomous-system safety. These offer the strongest combination of shared interests and political feasibility.

Second: Frontier evaluations, incident notification, financial stability, and broader biosecurity. These require more trust and technical work but could produce meaningful agreements.

Third: Cyber operations, conventional military AI, and advanced loss-of-control scenarios. These are among the most important issues but should not be allowed to block progress elsewhere.

BUILD COOPERATION FIRST WHERE INTERESTS OVERLAP MOST CLEARLY, THEN USE THE INSTITUTION AND HABITS CREATED BY THOSE SUCCESSES TO ADDRESS PROGRESSIVELY HARDER PROBLEMS.

I hope the US and China do start an AI dialogue, but the two systems are in what political leaders on both sides increasingly see as an existential struggle, not so much for humanity but for their own countries. I do not see how they bridge that gap, even if they wanted to.

Today’s top items:

1. BRICS Summit - Xi was in India for just about twenty-four hours, the summit did not seem to have many concrete deliverables, and his only official bilateral meeting was with Indian Prime Minister Modi. In his speech, Xi proposed five cooperation initiatives:

Open Source AI for All Initiative will establish an open-source zone and promote inclusive sharing of technology;

Trade and Investment Facilitation Initiative will create a partnership among special economic zones and tap new growth drivers for trade and the economy through a services-trade forum;

Digital Industry Cooperation Initiative will build a cloud platform and bridge the digital divide;

Intelligent Manufacturing Cooperation Initiative will help countries build smart factories and advance manufacturing transformation and upgrading;

Sci-Tech Talent Development Initiative will establish an alliance for training engineers, implement a youth sci-tech innovation exchange program, and reinforce the talent foundation.

On the war in the Middle East he had little new to say:

China is ready to work with fellow BRICS members to play its due role in achieving peace and tranquility in the Middle East and the Gulf

2. Xi-Modi meeting - So far the best read on the meeting comes from in Analysis of Modi-Xi Meeting in Delhi & BRICS Declaration:

My nutshell take on the meeting between Modi and Xi is that the meeting largely kept to expectations. No major breakthroughs were expected and none have been announced. Frankly, the fact that Xi Jinping was going to spend less than 24 hours in Delhi was indicative that one should not be expecting major outcomes.

From the Chinese readout, it’s clear that Beijing continues to have deep suspicions of Indian policy. Among the four points that Xi has articulated about the future of the relationship, the first is about strategic cognition, which basically means that India should adjust its approach to China. He wants Delhi to grasp the dynamics of the relationship as cooperative and not competitive, arguing that this judgement has been arrived at “on the basis of the stage of development the two countries are at and the international environment.” Of course, when such frameworks are mentioned around strategic cognition, these are about what the other side needs to grasp rather than what the Chinese system needs to imbibe.

The third point is essentially about the overhang of the US on the bilateral relationship.

3. Speculation about Xi’s visit to DC - Xi will arrive in DC in nine days and we still do not know much about what will be on the agenda. The usual meeting ahead of leader-level talks between the top diplomats and/or the top trade negotiators has not yet happened. The South China Morning Post has a new story suggesting that there will be a He Lifeng-Bessent/Greer meeting before Xi arrives, and that it may include discussion about launching an AI dialogue.

Given the heated rhetoric about AI, especially over the last few days, a dialogue that could agree on participants and perhaps the shape of the table would be a win. But expectations should be very low, as US policy towards AI regulation is incoherently inchoate.

4. AI risks and challenges - The latest issue of China Cyberspace (《中国网信》) magazine carries a signed article by Chen Yixin, Party Secretary and Minister of State Security, translated here. Chen’s essay is an important articulation of official views towards AI governance and risks, but there is not much new in it, beyond updated concerns about cybersecurity in the wake of Mythos. Chen leads with framing that echoes Xi’s comments at the April 2025 Politburo Study Session:

At present, artificial intelligence is leading the new round of scientific and technological revolution and industrial transformation deeper forward. The field of artificial intelligence has become the main battlefield of global scientific and technological competition and a new arena for strategic rivalry among major powers. The Party Central Committee attaches great importance to the development of artificial intelligence. General Secretary Xi Jinping has issued a series of important instructions, stressing the need to “comprehensively advance artificial intelligence technological innovation, industrial development and application empowerment, improve artificial intelligence regulatory systems and mechanisms, and firmly grasp the initiative in artificial intelligence development and governance.” We must thoroughly study and understand the spirit of General Secretary Xi Jinping’s important instructions, unswervingly implement the holistic approach to national security, accelerate the construction of a system for preventing and controlling artificial intelligence security risks, and use high-level security and highly effective governance to promote the healthy and orderly development of artificial intelligence in our country.

当前，人工智能引领新一轮科技革命和产业变革纵深推进，人工智能领域已成为全球科技竞争的主战场、大国战略博弈的新赛道。党中央高度重视人工智能发展，习近平总书记作出系列重要指示，强调要“全面推进人工智能科技创新、产业发展和赋能应用，完善人工智能监管体制机制，牢牢掌握人工智能发展和治理主动权”。我们要深入学习领会习近平总书记重要指示精神，坚定不移贯彻总体国家安全观，加快构建人工智能安全风险防治体系，以高水平安全、高效能治理推动我国人工智能健康有序发展。

He then takes an 8-6-7 approach:

Eight guidances / 八个方面 (Xi’s “fundamental guidance” for AI governance)

1. The strategic positioning of AI — 人工智能的战略定位

2. The development policy for AI — 人工智能的发展方针

3. The value orientation of AI — 人工智能的价值取向

4. The governance philosophy for AI — 人工智能的治理理念

5. The key tasks for AI — 人工智能的重点任务

6. Practical empowerment by AI — 人工智能的实践赋能

7. Supporting guarantees for AI — 人工智能的支撑保障

8. International cooperation on AI — 人工智能的国际合作

Six risks and challenges / 六大风险挑战

1. Systemically affects the political security environment — 系统性影响政治安全环境

2. Disruptively reshapes the cyber offense-defense landscape — 颠覆性升级网络攻防态势

3. Amplifies espionage and leakage risks at scale — 规模性放大窃密泄密风险

4. Monopolistic practices exacerbate imbalances in technological development — 垄断性加剧科技发展失衡

5. Structurally shocks the social governance system — 结构性冲击社会治理体系

6. Fundamentally transforms the form of military struggle — 根本性变革军事斗争形态

Seven key measures / 重点举措

1. Uphold the Party’s overall leadership — 坚持党的全面领导

2. Improve system-wide coordination and joint effectiveness — 提升体系作战合力

3. Strengthen risk sensing and early warning — 强化风险感知预警

4. Intensify scientific and technological innovation — 加大科技创新力度

5. Improve the legal safeguards system — 完善法治保障体系

6. Innovate forms of publicity and mobilization — 创新宣传动员形式

7. Deepen the effectiveness of international cooperation — 深化国际合作成效

Unsurprisingly, AI’s potential impact on political security is the number one risk. The second risk is cyber:

Second, it disruptively reshapes the cyber offense-defense landscape. Marked by the “Mythos” (Claude Mythos) and “Cyber” (GPT-5.5-Cyber) large models recently introduced by U.S. technology companies, artificial intelligence technology is significantly increasing the efficiency of cyber-vulnerability discovery and malware development, as well as their weaponization. Cyber offense and defense are entering a new stage characterized by industrialized vulnerability discovery, fully automated offense and defense, and AI-versus-AI confrontation. Some countries and organizations now have the ability to rapidly discover vulnerabilities in batches, automatically chain together attack paths and complete complex hacking tasks. This substantially lowers the technical threshold and cost of conducting cyberattacks and creates serious risks and hidden dangers for our country’s critical information infrastructure.

He concludes with the vision the PRC has been consistently advocating for global AI governance, a vision that conflicts with the Trump Administration’s:

Seventh, deepen the effectiveness of international cooperation. Uphold the global security governance vision of extensive consultation, joint contribution and shared benefits, deepen international cooperation in scientific and technological innovation, resolutely resist hegemonism, technological barriers and closed exclusion, establish a fair and open international artificial intelligence rules system, promote technological exchange and the open sharing of achievements, advance inclusive and balanced development, bridge the digital and intelligent divide, and guide artificial intelligence to better benefit the people and the world.

七是深化国际合作成效。秉持共商共建共享的全球安全治理观，深化国际科技创新合作，坚决抵制霸权主义、技术壁垒、封闭排他，建立公平开放的国际人工智能规则体系，推动技术交流和成果开放共享，推进普惠均衡发展，弥合数智鸿沟，引导人工智能更好造福人民、造福世界。

With a Trump–Xi meeting expected this month and the Fifth Plenum in October, there will be plenty of China headlines. Understanding what actually changes, and why it matters, takes more work.

The end of summer offer of 33% off your first year of Sinocism ends September 15.

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In this issue:

1. Xi going to India

2. 15th Five-Year Plan for Building a Financial Powerhouse

3. More signs of economic stress

4. Anthropic’s report “Detecting and countering misuse of AI”

5. US-China

6. Japan and the “enemy-state clauses” in the UN Charter

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health

Today’s top items:

1. Xi going to India - The PRC Foreign Ministry confirmed that Xi will travel to India Saturday the 12th for the 18th BRICS Summit, and return to Beijing the next day. The most interesting meeting will probably be his bilateral with Indian Prime Minister Modi, with whom he did not have an official meeting at last week’s SCO Summit. The Tribune reports that “the Modi-Xi talks were likely to cover the overall state of bilateral relations, including the situation along the Line of Actual Control, trade and economic ties.”

2. 15th Five-Year Plan for Building a Financial Powerhouse - China has formally issued a 15th Five-Year Plan for Building a Financial Powerhouse, prepared by the Central Financial Commission Office with financial institutions and agencies. The full draft is not available online. Today there was a press conference with officials from the People’s Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange to discuss the plan. I have posted a translation of the transcript of the presser here. Among the key points:

• The PBOC has issued its own reform and development plan, supported by nine action plans. Priorities include refining monetary policy and strengthening financing for technology, green development, inclusive finance, pensions, and digital finance.

• Financial regulators will reduce the number of smaller local institutions while improving their quality, address risks, and crack down on price wars and improper rebates.

• The CSRC aims to improve market stability, investor protection, listings, and institutional investment. Medium- and long-term investors have made over RMB600 billion in net A-share purchases this year.

• Foreign-exchange reforms will facilitate trade and investment while strengthening monitoring of cross-border capital flows. China has upheld a managed floating exchange rate system, with no intention of gaining trade advantages through exchange rate devaluation.

3. More signs of economic stress - The General Office of the State Council recently issued a Notice on Work Related to Strengthening Efforts to Address Payment Delays Affecting Small and Medium-Sized Enterprises, translated here, that makes it clear that the problem of larger firms, and especially SOEs, stiffing smaller companies is not resolved. Among the highlights of the notice:

Large companies that deliberately extend payment periods will be jointly summoned by multiple departments and ordered to rectify the problem. Strictly enforce the Anti-Unfair Competition Law, and punish in accordance with laws and regulations egregious cases in which large enterprises abuse their dominant position to deliberately lengthen payment terms…Central State-Owned Enterprises and other state-owned enterprises should set an example in making timely payments: Central State-Owned Enterprises must pay SMEs entirely in cash and maintain a reasonable proportion of cash payments to large enterprises.

And the National Development and Reform Commission and the State Administration for Market Regulation announced that they had recently jointly issued the Notice on Matters Concerning Cost Accounting for Disorderly Low-Price Competition in Important Industrial Products, translated here:

An NDRC official said that efforts to rectify “involution-style” competition are showing growing results and the competitive environment in key industries has improved, but irrational competition remains relatively prominent in some industrial-goods sectors. This disrupts normal production and business operations, could allow bad actors to drive out good ones, and is detrimental to healthy economic development. In addressing disorderly low-price competition, various parties have said that the provisions on costs in existing price laws and regulations are relatively general and suggested further clarifying cost-accounting requirements.

4. Anthropic’s report “Detecting and countering misuse of AI” - Anthropic’s September report is not just about China but includes multiple examples of what it says is problematic behavior by Chinese firms and individuals.

The report documents clear violations of PRC law by PRC entities. Anthropic should offer to forward its detailed findings to the Ministry of Public Security through the FBI’s channel, which would be a good example of US-China law enforcement cooperation:

these findings raise concerns about the misuse of user data by PRC AI labs. DeepSeek, Xiaomi, and Moonshot fed conversations between their own models and users into Claude. These labs then used Claude’s responses as training data with which to distill Claude’s capabilities. Some of these exchanges included sensitive information, including from individual users, major multinational companies, and state-affiliated actors. Many of these exchanges were relayed from users of third-party model routing services commonly used by users in the United States and Europe. Those sessions contained names, email addresses, company data, and other sensitive data of hundreds of end users in at least a dozen languages. These practices are likely inconsistent with privacy laws and the labs’ own terms of service.

It also includes this gem that is sure to make the MSS unhappy:

Maybe the way to get China to slow down AI development is not some unenforceable agreement based on trust but rather much tougher crackdowns on distillation, chip smuggling and remote access to AI chips?

5. US-China - We are less than two weeks away from Xi's visit to Washington, DC and are seeing tangible, constructive aspects of the relationship:

$30bn tariff cutback talks — MOFCOM's Huang Ling said Thursday the two sides are consulting on a reciprocal tariff cut covering $30 billion of products from each, and want it done "at the earliest possible date," per CGTN. The economic teams are working off the consensus from the Beijing leaders' meeting, so I would not be surprised if this is one of the things they try to have ready to announce.

Soybeans — China bought roughly 1 million tons of US soybeans this week, four traders told Reuters. That takes the buying to nearly half the 25 million tons the White House says Beijing committed to each year through 2028.

Farm purchases "on track" — USDA's Luke Lindberg told a CFR event China is set to buy $17 billion in US ag this year, $30 billion once soybeans are added.

Xiangshan Forum — The US will send Xanthi Carras, DoD's principal director for China, Taiwan and Mongolia, to lead its delegation to next week's Beijing security conference, per SCMP. Last year Washington sent only a defense attaché from the embassy, so this is a notch higher.

NDRC courts US firms — The NDRC sat down with more than 60 US companies Thursday, including Nvidia, Dell and Honeywell, to walk through the 15th Five-Year Plan and talk up Beijing's investment environment.

AmCham mood lifts — US business confidence bounced back from record lows after the trade truce, AmCham Shanghai's annual survey found. For the first time since 2022, respondents put domestic competition ahead of US-China tensions as their top worry.

Joint drug case — Chinese police arrested 21 in August in a cross-border synthetic cannabinoid precursor case, acting in part on a US tip about two PRC nationals.

The US State Department did update the China Travel Advisory with more warnings, but it did not raise the level:

6. Japan and the “enemy-state clauses” in the UN Charter - The PLA Daily is back on the UN Charter’s “enemy-state clauses” (敌国条款). A Wuhan University professor argues in the September 10 edition that the clauses are still valid law, and that with Japan’s “new militarism” (新型军国主义) on the march, saying so out loud is overdue. The peg is a recent Foreign Ministry line, plus Lavrov, who has been making the same argument from Moscow. I have posted a full translation here.

The clauses are obsolete, and the countries who said so include China. In 1995 the General Assembly called them exactly that and set out to delete them, and Beijing voted for it. The 2005 world summit reaffirmed the point, again with China signed on. Neither deletion happened, because amending the Charter needs all five permanent members to ratify and that never happened.

Now as part of the campaign to punish Japan for Prime Minister Takaichi’s Taiwan-related comments last November, we are hearing a lot more about the “enemy-state clauses” and why their existence should prevent Japan from re-arming. Russia has also weighed in on the PRC’s side.

Today’s installment reiterates the veiled threat that somehow the PRC and other founding members (Russia) can take enforcement action against Japan:

Article 53 fortifies the security line: addressing the risk that an enemy state might renew expansion or breach military restrictions, it authorizes UN founding members, when necessary, to take enforcement action without the Security Council’s ordinary authorization, providing direct legal grounds and authorization for action to prevent the revival of militarism. The system as a whole targets the root causes of war and is a core legal barrier through which the international community punishes aggression and protects peace and justice.

第53条筑牢安全防线，针对敌国重启扩张、突破军事限制的风险，授权联合国创始成员国在必要时可不经安理会常规授权采取强制措施，为防范军国主义复辟提供了直接的法律依据和行动授权。整套制度直击战争根源，是国际社会惩戒侵略、守护和平正义的核心法治屏障。

And in spite of previously agreeing they were obsolete, now China’s position is they are not:

In terms of present-day value, the balancing role of the “enemy-state clauses” remains indispensable. Japan’s right-wing forces now vigorously deny aggression, falsify history, and glorify war. At the same time, Japan continues sharply increasing its defense budget, vigorously developing offensive weapons, repeatedly breaching postwar military constraints, and accelerating “remilitarization.” Japan’s “new militarism” has bared its fangs and grown into a menace. Amid a complex and severe geopolitical environment, the clauses’ value as a constraint and counterweight has not diminished but grown more prominent. They are by no means obsolete.

从现实价值看，“敌国条款”的制衡作用至今不可或缺。当前，日本右翼势力极力否认侵略、篡改历史、美化战争。同时，日本持续大幅增加防卫预算、大力发展进攻性军备，不断突破战后军事束缚，加速推进“再军事化”，日本“新型军国主义”已露出獠牙、成势为患。在复杂严峻的地缘政治形势下，“敌国条款”的约束与制衡价值非但未减，反而愈发凸显，绝无过时可言。

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1. Deflation over for now

2. MOFCOM responds to US distillation advisory

3. Previewing the Xi-Trump summit

4. DeepSeek IPO and new model

5. Regulators want to pop the Robot Bubble

6. New spy drama

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health - Rural and Agricultural Issues

Today’s top items:

1. Deflation over for now - The NBS released August price data Wednesday. CPI rose 0.8% year on year, matching the Reuters consensus, while PPI increased 3.8%, slightly above its 3.6% consensus. Both rose 0.4% from July. Much of the improvement is due to commodity costs and particular supply conditions, rather than households spending more confidently or businesses regaining broad pricing power.

The consumer-price rebound was heavily influenced by fuel as petrol rose 7.2% month on month, contributing approximately 0.21 percentage points, or just over half of August’s total CPI increase. Internationally sensitive oil and metals industries contributed about 0.31 percentage points of the 0.4% monthly PPI increase, or approximately 78%.

So the mess in the Middle East has helped end China’s deflation in headline price measures, but today’s release does not establish a durable recovery in domestic pricing power.

2. MOFCOM responds to US distillation advisory - The Ministry of Commerce put out a spokesperson Q&A Wednesday on the September 8 joint advisory from NSA, CISA and the FBI accusing PRC AI companies of “industrial-scale” distillation of US frontier models.

The statement, translated here, says the charge has “neither a factual nor a legal basis,” calls distillation “a common practice through which AI models learn from one another,” and says US labs do plenty of it too, citing their own model reports as disclosing “extensive distillation of Chinese models.” Three consecutive paragraphs open with “the US approach is a textbook example of...美方做法是典型的...”, covering double standards, industry monopoly and technological hegemony in turn. It also goes after US labs’ terms of service, calling broad geographic restrictions “霸王条款 unfair terms” and suggesting the advisory is meant to endorse them:

The US approach is a textbook example of pursuing an industry monopoly under the pretext of cracking down on distillation. By having its security agencies issue the advisory, the US is tying the interests of certain companies and capital to national security, and using coercive state agencies to interfere in normal commercial activities. We have noted that certain US AI companies abuse their competitive advantages by imposing unfair terms in user agreements, such as broad geographic restrictions. The US allegations concerning distillation raise suspicions that they are intended to endorse these unfair terms.

美方做法是典型的以打击蒸馏为名，行产业垄断之实。美方由安全部门发布公告，是将个别企业和资本利益与国家安全相捆绑，动用国家强权机构干涉正常商业活动。我们注意到，美个别人工智能企业滥用竞争优势地位，在用户协议中设置宽泛的地域限制等霸王条款。美方相关蒸馏指控，有为这些霸王条款背书之嫌。

The response concludes:

The large-model industry is currently at a critical stage of technological iteration, recurring risks, and growth and development. As major countries, China and the US should address the challenges and risks facing AI with a positive and responsible attitude. The two heads of state have agreed to conduct an intergovernmental dialogue on AI. China is willing to engage in constructive and professional discussions with the US through dialogue, on the principles of equality, mutual benefit, and win-win cooperation. However, if the US takes action to contain and suppress Chinese AI companies under the pretext of cracking down on distillation, China will resolutely take countermeasures. We hope the US will work with China toward the same goal, manage risks through dialogue and communication, and help the AI industry benefit the world.

当前，大模型产业正处于技术迭代、风险迭发、成长发展的关键时期。中美作为大国，应以积极负责态度处理人工智能领域面临的挑战和风险。两国元首已同意开展人工智能政府间对话，中方愿意以平等互利、合作共赢原则，通过对话与美方开展建设性和专业的讨论。但如果美方以打击蒸馏为名，实施遏压中国人工智能企业的行动，中方必将坚决采取措施予以反制。希望美方与中方相向而行，通过对话和沟通管控风险，推动人工智能产业惠及全球。

Expectations should be low for US-China AI discussions around Xi’s upcoming visit, not only because of this advisory and the response but also because the US side is far from having any sort of coherent approach to regulation, or even empowered staff to figure out what to do. Politico just reported that Sam Corcos, CIO at the Treasury Department and Secretary Bessent’s top AI advisor, has been “reassigned…away from AI policy after the adviser relayed private misgivings over White House policy to AI companies.”

Dialogue is needed, especially after the tweet today by a former Anthropic researcher saying “the people building AI earnestly believe that it could kill us all by the end of the decade”. Perhaps the best thing we can hope for out of any Trump-Xi discussion of AI is that the two sides assign competent and relevant people to join the dialogue. One person who absolutely should be on the PRC side is Huang Ru at the NDRC.

US incoherence around AI regulation certainly helps the PRC make the case to the rest of the world that they are taking a more responsible approach to AI development.

3. Previewing the Xi-Trump summit - Former Obama Administration official Ryan Hass, now at Brookings, has a good article on what to expect for Xi’s visit:

China’s leaders continue to behave as though strategic competition remains undiminished...

Chinese commentators now describe America and China as being on an equal footing and entering a period of “strategic stalemate.” Like any good negotiator, Chinese leaders do not want to pay more than is necessary to sustain a period of bilateral stability. For China’s leaders, the goal is to buy time and space to strengthen self-reliance, not necessarily to improve relations with the United States.

Former Biden official Julian Gewirtz wrote on his Substack that the US and China have a “K-Shaped U.S.-China Relationship”:

It’s more accurate, and more revealing, to think of this relationship as two vectors—both conciliation and competition, both stability and strife. Diplomacy and competition have long coexisted in U.S.-China relations; what’s new is the widening distance between unusually intensive stabilization at the top and intense rivalry below. The U.S.-China relationship is not simply a paused “truce” or a static “détente.” It is accelerating in two directions at once.

Da Wei, Director of the Center for International Security and Strategy and Professor in the Department of International Relations at Tsinghua University and the former Director of the Institute of American Studies at the China Institutes of Contemporary International Relations (CICIR), a Ministry of State Security-affiliated think tank, wrote this week in Foreign Affairs about what may be the most desired outcome of the upcoming meeting, related to Taiwan:

As long as Beijing believes that cross-strait integration remains achievable, it has no reason to resort to military force. The United States could shift its declared policy to align more closely with Beijing by recognizing Chinese sovereignty over Taiwan or by explicitly opposing Taiwan’s independence, which would reassure Beijing that the prospect of “peaceful reunification” remains viable. This would allow China and the United States to reach a consensus that realizes the U.S. objective of a peaceful resolution to the dispute yet also maintains the ability of the people in Taiwan to preserve their political and social systems. By keeping the prospect of peaceful reunification alive, the core concerns of all three parties can be accommodated as much as possible.

Washington’s decision to pause $14 billion in arms sales to Taiwan, reached during Trump’s May summit with Xi, defused a rapidly escalating flash point in U.S.-Chinese relations. But it presents a new challenge to the nascent framework of strategic stability. Although Beijing certainly welcomed the delay, the pause has also raised expectations for future U.S. policy regarding Taiwan. Should the Trump administration eventually resume arms transfers—an outcome deemed likely by most Washington observers—Beijing will fiercely oppose the move, potentially jeopardizing the strategic stability framework. This scenario represents a concrete and salient threat that both countries must manage in the period ahead.

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Wednesday, September 9th, is the 50th anniversary of the death of Mao.

In this issue:

1. August trade data

2. Capital boost for state financial firms

3. Preparations for Xi’s DC visit

4. AI on the Trump-Xi agenda

5. China and Rubio’s South America visit

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health - Rural and Agricultural Issues

Today’s top items:

1. August trade data - The PRC’s August exports rose 25% year on year to $401.44 billion, while imports increased 28.2% to $282.36 billion. The goods surplus was $119.09 billion, and has now been over $100 billion for four consecutive months. Export growth matched expectations, imports missed by 1.8 percentage points, and the surplus was almost exactly as forecast. Caixin on the numbers:

China’s exports grew a better-than-expected 25% year-on-year in August, driven by a price surge in AI-related products that masked volume declines.

Outbound shipments reached slightly over $400 billion, General Administration of Customs data showed Tuesday, with the growth beating a 23.3% average forecast in a Caixin survey. Imports rose 28.2% to $282 billion.

The trade surplus widened to $119 billion, pushing the January-August total to a record $806 billion.

The January–August surplus was $805.51 billion and is tracking for over $1.2 trillion for 2026; that will not help tensions with major trading partners. Robust exports may give the leadership the (false?) confidence they can wait for existing domestic support measures to work.

2. Capital boost for state financial firms - The Ministry of Finance announced up to RMB360 billion in new capital for eight state banks and insurance firms on September 6. The MoF will issue 300 billion in special treasury bonds, and China National Tobacco Corp. and related companies will place 30 billion each into ICBC and ABC.

This is smaller than last year’s recapitalization, but covers a broader range of institutions. The March 2026 government work report explicitly proposed RMB300 billion in special treasury bonds for large state commercial banks, but the inclusion of insurance companies was a surprise. Commentary suggests the injections were precautionary, not because of any imminent problems, and that the money for the insurance firms may allow them to invest more into the stock market as “patient capital”.

Caixin on the tier 1 capital boost:

Industry analysts told Caixin that the latest funding is largely precautionary. The banks and insurers receiving capital remain broadly well capitalized, they said, but the additional buffer could help them withstand market and external shocks, support government priorities and, in the case of insurers, expand long-term investment and potentially take a larger role in resolving problems at weaker financial institutions.

Why are China National Tobacco Corp. and related companies putting 30 billion RMB into each bank? Because they are incredibly flush with cash.

3. Preparations for Xi’s DC visit - Xi will arrive in DC in just over two weeks, and it sounds like there is a bit of a scramble to get the details worked out. Reuters reported a delegation of PRC CEOs will travel with him, but so far it is not clear what they will do here. I am hearing that the CEOs of Zhongji InnoLight and Eoptolink, makers of high-speed optical transceivers, will be in the group, perhaps as a way to forestall the rumored FCC actions to ban Chinese optical transceivers.

4. AI on the Trump-Xi agenda - Reuters reported on Friday that the US and China may hold an AI safety dialogue in mid-September. I am not sure that anything structured and authoritative in this area will happen before the Xi visit in about two weeks.

Earlier today Treasury Secretary Bessent told an event that:

“Beating China — there is no day after tomorrow if China wins at this. Like everything, a trillion-and-a-half-dollar defense budget, the Iron Dome. If they were to pull ahead of us on AI, then nothing else matters,” Bessent said.

“And the U.S. does have the lead. And when I look and I think about how we did it, it was just this incredible ecosystem, and it was organic, and it kept building on itself. It was the technology. It was the chips,” he continued.

This afternoon, the NSA, FBI and CISA released a report titled China-Based Artificial Intelligence Companies Conducting Industrial-Scale Distillation Campaigns Against U.S. AI Companies. From the executive summary:

China-based artificial intelligence (AI) companies are conducting systematic extraction of proprietary functionalities and capabilities of U.S. AI companies’ models through industrial-scale knowledge distillation campaigns that form the core—not merely a supplement—of their AI development strategy. While “distillation” is recognized as a legitimate and useful technique in AI research, China-based AI companies are engaging in aggressive, malicious, and targeted distillation activities at an industrial scale that extract restricted proprietary functionalities and capabilities of U.S. frontier AI models. The National Security Agency (NSA), Cybersecurity and Infrastructure Security Agency (CISA), and Federal Bureau of Investigation (FBI) (hereafter referred to as the authoring agencies) are releasing this joint Cybersecurity Advisory to alert organizations about these malicious activities and techniques and recommend mitigations to reduce their potential impact.

Likely with Chinese government awareness, DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI extracted billions of tokens across millions of exchanges/requests from U.S. frontier AI models, including variants of Claude, GPT, Gemini, and Grok, since at least late 2024. DeepSeek has conducted organized campaigns since at least 2024 targeting reasoning capabilities, specialized optimizations, and domain-specific functions to train its R1 and V3 models. Alibaba leveraged industrial-scale distillation to improve the company’s Qwen family of AI models. Moonshot AI, MiniMax, Stepfun, and Z.AI also engaged in malicious knowledge distillation of U.S. AI companies’ models.

Between this report and Bessent’s comments earlier today, how does the Trump Administration not do more to target distillation as well as remote access to high-end AI chips?

5. China and Rubio’s South America visit - Ahead of his trip this week to Colombia, Ecuador, and Peru, US Secretary of State Marco Rubio discussed his goals on the State Department’s Substack, and he has China on his mind:

For too long, foreign state-backed extra-hemispheric actors—specifically from China—have entered our hemisphere with promises that mask their predatory practices. Their involvement too often comes in the form of opaque contracts, unsustainable debt burdens, worker exploitation, and environmental destruction. When critical national assets fall under another nation’s ownership or control, countries lose their sacred right to determine their own destiny and face grave threats to their national sovereignty, data privacy, and economic independence.

The United States offers a clear, transparent alternative. U.S. companies and business leaders invest directly in your national economy, develop your local workforce, and support the communities that surround them...

At the Seoul Defense Dialogue Tuesday, Philippine Defense Secretary Gilberto Teodoro took a question on gray-zone coercion and answered it by reading out a note the PRC side had given him, which called the 2016 South China Sea arbitral award "illegal, null and void." His rebuttal to the "null and void" line was two words: "Because you lost." He then said that delivering the note in the first place was "coercion, bullying and aggression”.

He also said:

I will keep this paper as a memento of how desperate China is, and how ineffective its position is in the face of a free audience. ... Thank you very much for the person who gave me this piece of paper. I hope you don't suffer in the gulag for it.

No wonder they have sanctioned him and his family.

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Show Notes:

On today's show Andrew and Bill begin with a perspective on PRC strategy under Xi, including what the party wants from global institutions, how the PRC differs from the U.S., and political security as a paramount priority. Then: Thoughts on the heartbreaking flood at the Nepal-Tibet border, including the party’s response, censorship and data sharing, and the realities of the geography in question. At the end: A raft of U.S.-China stories: the PRC scuppering a G20 joint communique, Anthropic and AI safety questions, notes before Xi’s visit in three weeks, waiting for better evidence that the PRC is shaping U.S. data center discourse, and TikTok dodges the China Select Committee.

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Related Readings:

Xi at the SCO; China’s global strategy; Li Qiang meets US business leaders; Taxing foreigners; Overseas guidelines for PRC automakers -- Sinocism

The disaster in Nepal and Tibet; Xi at the SCO; Supporting consumption; National Defense Mobilization Law; Signals for PRC-US AI dialogue; New era for real estate -- Sinocism

China’s Global Strategy under Xi Jinping -- Steve Tsang and Olivia Cheung

CLM Insights Interview with Steve Tsang and Olivia Cheung -- CLM

Correspondence: The Challenge of Studying What China Wants -- International Security

Hit by deadly floods, Nepal renews push for Chinese data and early warnings -- Reuters

Punishment and Silence: China Pulls Out the Disaster Playbook in Tibet -- NYT

China-US Spat at G20 Largely Came Down to Dispute Over One Word -- Bloomberg

Exclusive: Why China Regrets That This G20 Meeting Failed to Issue a Communiqué -- Yuyuan Tantian (Sinocism Translation)

Anthropic Has Contracted the “American Disease” -- Yuyuan Tantian (Sinocism Translation)

Trump plans state dinner for Xi even as disputes with China pile up -- MS NOW

The X Safety team conducted an investigation into suspected Chinese inauthentic accounts involved in influence operations -- X Global Affairs

Halt and Catch Ire -- Sharp Text

TikTok Backs Out of House Meeting to Avoid Kids Safety Questions -- Bloomberg

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Monday is Labor Day here in the US and so there will not be a regular edition of the newsletter until Tuesday the 8th.

In this issue:

1. PRC explanation of why there was no G20 communiqué

2. NDRC wants to accelerate “Six Networks” projects

3. EU-China

4. Q2 carbon emissions fall

5. China and AI

6. The Memory Museum

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health - Rural and Agricultural Issues

Today’s top items:

1. PRC explanation of why there was no G20 communiqué - The G20 Finance Ministers and Central Bank Governors Meeting in Asheville ended September 1 with a US chair's statement rather than a communiqué. The statement noted that all members present except the PRC agreed to the text and that the PRC objected to paragraphs 4, 10, 11 and 13. Asked about it Wednesday, the MFA spokesperson said the PRC "deeply regrets" the outcome and that the G20 should coordinate "based on the principles of consensus and equal participation."

Yuyuan Tantian, the CCTV-affiliated account that carries authorized leaks on trade issues, on Thursday published an "exclusive" laying out the objections. I have posted a full translation here.

The three "concerns," in its framing: the text described the global economy without mentioning tariffs or high-tech export controls; paragraphs 10 and 11 were the US "smuggling in its own agenda" (夹带私货), since "non-market policies and practices" and "excessive reliance on export-led growth" are, per the piece, "the claims the United States has recently and repeatedly hyped—'overcapacity,' 'China shock 2.0' and the 'China squeeze' thesis"; and the debt paragraph singled out official bilateral creditors, who hold only about 15% of developing-country debt, while saying nothing about shrinking aid from developed countries.

A "person involved in the negotiations" told Tantian:

The G20 has never discussed a definition of the term "non-market policies and practices"... Moreover, the so-called "non-market policies and practices" language actually comes from the United States' 2018 Section 301 investigation of China.

G20从未讨论过"非市场政策和做法"这一表述的定义……更不要说，所谓"非市场政策和做法"，其实来自于2018年美对华"301调查"

The article sees the US moves at the meeting as an attempt to "reap the benefits twice": tariffs and export controls first, then a multilateral label that becomes the "basis" for more of both. And the “atmosphere for China-U.S. cooperation” is now damaged:

A person close to the negotiations told Tantian: “By doing this, the United States is undermining the broader multilateral agenda this year. The G20 and APEC have always been the most important multilateral platforms for global economic governance, and this year the United States and China are serving as hosts, respectively. China-U.S. relations are at a critical stage, and the two countries’ heads of state have charted the direction for bilateral relations and multilateral cooperation. By playing these petty tricks at the G20 meeting, the United States has damaged both the G20’s credibility and the atmosphere for China-U.S. cooperation.”

一位接近谈判的人士告诉谭主：美方这么做，就是在破坏今年多边议程的大局。G20和APEC历来是全球经济治理最重要的多边平台，今年又恰逢美国和中国分别担任东道主。中美关系正处于关键阶段，两国元首为双边关系和多边合作划定了方向。美方在G20会场里搞这种小动作，既损害了G20的信誉，也破坏了中美合作的氛围。

2. NDRC wants to accelerate “Six Networks” projects - A deputy director of the NDRC “chaired a meeting of the coordination mechanism for major “Six Networks” projects to study improvements to the government-bank-enterprise cooperation mechanism and the development of project pipelines.” From the brief readout, translated here:

The meeting focused on urging the lead departments and localities to accelerate the creation of project pipelines for the “Six Networks,” strengthen information sharing with financial institutions, and achieve efficient coordination between investment and lending; accelerating the identification of a group of attractive engineering projects to be publicly promoted

This is part of the accelerating implementation of existing policies that the leadership has been talking about in response to some of the recent weak economic data.

3. EU-China - In yesterday’s discussion of EU-China trade discussions I asked “Has the EU finally reached its breaking point on the trade imbalances?”

According to Noah Barkin, the answer is yes:

It is a near certainty at this point – even if Beijing were to make last-minute concessions in its ongoing talks with Brussels – that the EU will begin rolling out a series of new trade measures targeting China next month. This could quickly devolve into a full-blown trade war if Beijing responds with brute force. Still, the determination to act has never been higher in Europe.

This is because of a fundamental shift in how Germany has come to view the costs and benefits of economic engagement with China.

4. Q2 carbon emissions fall - Carbon Brief is out with a report titled China’s CO2 emissions fall in Q2 2026 due to plummeting oil use that cites plummeting oil consumption and the surge in EVs in the wake of the disruptions in the Strait of Hormuz as the main reason:

The effect of EVs on oil consumption was almost twice as large as would be expected based on the increase in the number of EVs on the road alone, as the usage of existing EVs surged.

Oil consumption displaced by EVs in China in the first half of 2026 exceeded the UK’s total oil consumption over a six-month period.

5. China and AI - Both ChinaTalk and the Oxford China Policy Lab have interesting articles on the “Hugging Face Incident” and Chinese views on AI safety.

Do you know what the PRC AI safety community means when they talk about “loss of control shikong 失控”? Thanks to Zilan Qian, the answer is “it depends”:

To answer that question, this article compares how “loss of control” is used in Western AI safety discourse with how shikong is used in China. In specific English-language discourse, the term increasingly points to the scenario where AI agents deployed inside the labs go rogue, and thus the risk of humans permanently losing control over AI. In China, shikong is used more broadly and mundanely, but the discourse is changing rapidly. By categorizing existing usage of LoC in China across three loci defined by who loses control, the piece argues that Western observers should not over-index on top-level mentions of words without context. Rather, it calls for a stronger focus on specific operational problems, and an end to one actor invoking specific terminologies assuming that their counterpart shares a similar understanding.

One thing I will add is that for the Party, loss of control concerns will also include any AI that could threaten political stability.

And as we discussed on this week’s episode of Sharp China, what happens when someone removes safeguards and uses a PRC model to try to hack the GFW, for example?

6. The Memory Museum - Shen Lu has a wonderful discussion of M Lin’s new book “The Memory Museum” in the latest issue of the Hǎi 海 newsletter:

The Memory Museum, 记忆博物馆, is a collection of nine short stories by New York-based writer M Lin. Some stories felt so real they read like nonfiction. They are, in a nutshell, about the collective experience of the generation of urban Chinese women who came of age in the late 1990s and early 2000s.

I had never read a book like this—about us—in either Chinese or English. It would not have passed censorship in China. Yet it’s nothing like the English-language literary fiction about China I’ve read in the past, which tends to be set in periods more familiar to the West, such as the Cultural Revolution. Some of the most established writers from China, Ha Jin and Yiyun Li for instance, write out of complicated political and personal relationships with a China distant from the one I have lived in. Reading The Memory Museum felt like reading my own life. It was almost alarming to find myself and my friends, our memories, feelings, and choices, laid bare like that.

Read more

1. Xi’s Egypt visit

2. G20 Finance Ministers and Central Bank Governors meeting

3. Bond issuance for rest of the year

4. EU-China trade

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Society, Arts, Sports, Culture and History - Energy, Environment, Science and Health - Jobs and Events

Today’s top items:

1. Xi’s Egypt visit - Xi has completed his state visit to Egypt. The two countries signed “cooperation documents concerning the Belt and Road, artificial intelligence, trade and economic ties, and industrial and supply-chain cooperation…[and] issued the Joint Statement Between the People’s Republic of China and the Arab Republic of Egypt on Further Deepening the Comprehensive Strategic Partnership”, which I have translated here.

According to the Xinhua readout of his meeting with Egyptian President El-Sisi, Xi called for “building a new Middle East security architecture” and called on “major countries outside t…

Read more

1. Xi at the SCO

2. China’s global strategy

3. Li Qiang meets US business delegation

4. Tax changes for foreigners

5. Auto industry overseas conduct guidelines

6. Latest issue of Qiushi

The Feed: Business, Economy and Trade - Politics and Law - Foreign and Defense Affairs - Hong Kong - Taiwan - Tech and Media - Energy, Environment, Science and Health - Education - Rural and Agricultural Issues

Today’s top items:

1. Xi at the SCO - Xi gave two speeches in Bishkek Monday for the SCO’s 25th anniversary: one to the Council of Heads of State in the morning, one to the “SCO Plus” session in the afternoon. I have posted translations here and here.

The morning speech is the deliverables speech. Under four headings (development, security, people, governance) Xi announced an international AI application cooperation center for SCO countries, more “10-gigawatt” solar and wind projects, 100 science and technology projects over three years, a port economy cooperation center in Tianjin, a basic education cooperation center, and support for standing up the SCO’s “four security centers.” Every one of the four global initiatives gets a mention, with the SCO cast as the “important platform” or “priority region” for each. The security section calls for strictly guarding against “external forces interfering in countries’ internal affairs, endangering political security” (外部势力干涉各国内政、危害政治安全).

The afternoon speech was titled “Jointly Advocate an Equal and Orderly Multipolar World” (平等有序的世界多极化), and Xi calls the trend toward multipolarity “irreversible.” Xi has been consistent with this theme:

The domination of international affairs by a small number of countries is a historical injustice; hegemony by one country, joint rule by a few, or bloc politics is not true multilateralism.

少数国家主导国际事务是历史不公，一国独霸、几方共治、集团政治不是真正的多边主义。

He also lists what must be rejected, “double standards, exceptionalism, interference and bullying, and the law of the jungle,” and says major countries “in particular should take the lead in following the rules.” The US is not named, but it does not need to be.

A Xinhua commentary, translated here, had this to say about the SCO:

Twenty-five years on, the once-in-a-century changes in the world are accelerating; dialogue and confrontation, win-win and zero-sum, multilateralism and unilateralism are locked in fierce contest, and the dark clouds of war have not receded. The SCO should bravely shoulder its historical responsibility and take the initiative to steer the course of history. Looking to the future, President Xi put forward four propositions: adhere to development as the priority and open up prospects for common prosperity; adhere to security as the essential and create an environment of universal security; adhere to a people-centered approach and deepen the foundation of friendship across generations; adhere to dialogue and consultation and improve fair and orderly governance. The "Four Adheres" respond to the concerns of all parties, emphasize an action orientation, and draw a blueprint for the SCO to achieve higher-quality development.

25年后的今天，世界百年变局加速演进，对话和对抗、共赢和零和、多边和单边激烈博弈，战争阴霾并未远去，上海合作组织应该勇担历史责任，主动引领历史航向。面向未来，习近平主席提出4点主张：坚持发展优先，开创共同繁荣的前景；坚持安全为要，营造普遍安全的环境；坚持以人为本，厚植世代友好的根基；坚持对话协商，完善公平有序的治理。"四个坚持"回应各方关切，注重行动导向，为上海合作组织实现更高质量发展擘画了蓝图。

There were no readouts of meetings with India’s Prime Minister Modi or Iran’s President Pezeshkian, so they probably did not happen.

Iran’s Mehr News Agency said Xi and Pezeshkian met on the sidelines of the summit, but from the photo it published it looks more like a brief, standing interaction than an actual meeting.

Xi is expected to be in New Delhi, India, on September 12–13, 2026, to attend the BRICS Summit, so if he does go he can meet Modi there.

Xi has now arrived in Egypt.

2. China’s global strategy - I am looking forward to reading Steve Tsang and Olivia Cheung’s new book “China’s Global Strategy under Xi Jinping”. The latest issue of China Leadership Monitor has an interview with the authors. The themes in Xi’s speeches at the SCO make even more sense:

What are the underlying assumptions and core components of China’s global strategy? How do these components complement each other?

China’s global strategy has a dual pivot. Its primary pivot is to engage the Global South, which constitutes a clear majority of the world’s countries and population, to secure support for China to steadily reshape the existing international order by re-centering the UN in global politics, so that, with China taking the lead, international affairs, from security crises to global governance, are more responsive to them than they are to the minority democratic West. This is the basis for Xi’s idea of the “democratization of international relations.” With the support of the Global South, Xi seeks to forge a common destiny of humankind, implying transforming what remains of the “liberal international order” into a Sino-centric order, which is based on his understanding of the traditional Chinese concept of tianxia…

Putting tianxia in place implies “restoring” Chinese global pre-eminence. Xi has no desire for China to replace the U.S. as the global hegemon, not least because American hegemony after 1945 also included delivering costly public services, such as policing, to the global community. Nor does he want China to assume such obligations. Being embraced as the pre-eminent power suffices for him, as it will already ensure that China’s Communist Party system cannot be challenged.

This is a much better scholarly explanation of “what China wants” than anything i have read so far.

3. Li Qiang meets US business delegation - On Tuesday Li Qiang made nice with the members of the board of the US-China Business Council in Beijing, ahead of the Trump-Xi meeting later this month. According to the readout, translated here:

Li Qiang pointed out that surveying the development of international economic and trade cooperation today, some important lessons can be drawn: it can be said that win-win cooperation is the prevailing trend, respect and understanding are the foundation, and moving toward each other is the key. The essence of China-US economic and trade relations is mutual benefit and win-win, and strengthening cooperation is both an intrinsic need of both sides and the right choice. Looking around the world, China may be the only market with rich potential that combines the two characteristics of being “big” and “new”; in particular, high-quality, upgraded consumption such as smart consumption and green consumption is growing rapidly, and US companies are welcome to actively seize the opportunities and step up their efforts to open up and cultivate the Chinese market. China-US economic and trade cooperation is large in scale, and it is normal for some contradictions and frictions to arise. As long as there is mutual respect and mutual understanding, and communication and consultation are strengthened, solutions can always be found. China is ready to actively promote the resolution of the reasonable concerns of US companies in China and to safeguard a market environment of fair competition in accordance with the law; it also hopes the US side will move in the same direction, take concrete actions to address China’s concerns, and jointly implement the outcomes of the two countries’ economic and trade consultations. It is hoped that the US-China Business Council will continue to exercise its influence, guide all sectors in the United States to view China’s development rationally and objectively, and promote the stable, healthy, and sustainable development of China-US relations.

李强指出，综观当今国际经贸合作的发展，能够得出一些重要的启示，可以说合作共赢是大势，尊重理解是基础，相向而行是关键。中美经贸关系的本质是互利共赢，加强合作是双方的内在需求，也是正确选择。放眼世界，中国可能是唯一兼具“大”和“新”两个特点的富有潜力市场，特别是智能消费、绿色消费等高品质、升级类消费快速增长，欢迎美国企业积极抢抓机遇，加力开拓、深耕中国市场。中美经贸合作体量大，出现一些矛盾摩擦是正常的。只要相互尊重、相互理解，加强沟通协商，总能找到解决办法。中方愿积极推动解决美国来华企业的合理诉求，依法维护公平竞争的市场环境，也希望美方相向而行，以切实行动解决中方关切，共同落实好两国经贸磋商成果。希望美中贸委会继续发挥自身影响，引导美国各界理性客观看待中国发展，促进中美关系稳定健康可持续发展。

4. Tax changes for foreigners - The Ministry of Finance and the State Taxation Administration issued an announcement on September 1 making clear that, effective September 1, dividend and bonus income obtained by foreign individuals from foreign-invested enterprises shall be subject to individual income tax at a rate of 20 percent. This tax exemption has been in place since 1994, and now it is ended, effective today. Xinhua quotes Liu Yi, director of the China Center for Fiscal and Tax Research at Peking University, saying "After the exemption is removed, the individual income tax a foreign individual pays in China can be credited against tax owed to their country of residence, so the actual tax burden will not increase." But now the PRC government gets the revenue. Did anyone have advance notice of this?

Yicai in its coverage of the change cites tax avoidance by PRC citizens as a driver:

Read more

1. The disaster in Nepal and Tibet

2. Xi at the SCO

3. State Council Executive meeting

4. Measures to expand and upgrade consumer goods consumption

5. Revised National Defense Mobilization Law

6. Signals for PRC-US AI dialogue

7. Cracking down excessive competition in the domestic auto market

8. New era for real estate

Read more

This month’s digest pulls in different directions—insofar as we can follow a single thread, it is that of traditional systems being swept away and of “changes unseen in a century” coming to pass: in discussions of nuclear proliferation, the Cold War nuclear order has “irreversibly come to an end”; in the Middle East, the US security architecture is crumbling; in the maritime domain, volatility threatens sea lanes; and overseas, Chinese firms’ modus operandi is shifting.

While most scholars identify the increasing security risks attendant on such changes, what comes next and what China should do about it are open questions. More hawkish scholars advocate stronger unilateral action in the international system, while others caution against such measures.

Addressing maritime chokepoints, Di Dongsheng argues that China must embark on a 30-year effort to secure control of the seas, whereas Zhao Long makes the opposite case, arguing that the solution lies in the international community’s joint efforts to maintain “open, stable, and predictable operating rules”. Hu Bo comes down on Zhao Long’s side, arguing that military power cannot provide absolute security, while also claiming that maritime chokepoints remain secure despite volatility and that Hormuz is an exceptional case.

On Taiwan, two analysts reflect positively on the US’ new posture following the May summit. Zhou Zhihuai argues that the “Taiwan issue has begun to become an option for cooperation” between the US and China, while Wang Weixing claims that Taiwan’s path of “resisting reunification by force” has been “completely closed off” after the US revealed its bottom line.

However, on the broader US–China relationship, Wang Fan counsels caution, writing that while US strategic contraction is an inevitable trajectory, China should maintain strategic composure and not act too hastily.

In the Middle East section, Zhou Li, a former vice-minister, looks favourably on the “Mecca Agreement” signed on 7 August. Not only does it have points of convergence with China’s Global Security Initiative, but it is “an inevitable product of deepening global multipolarity” that exposes the “inherent fragility and hypocrisy of the US-led unipolar security architecture”.

Sun Degang reads weakening US security commitments as forcing the Gulf States to pursue policies that reflect a newfound pragmatism and emphasis on diversification. Meanwhile, Niu Xinchun explores the downward trajectory of US–Israel relations and Guo Xiaobing explains how the Iran war has fundamentally changed the underlying logic of aerial warfare.

While next month’s commentary on Europe is likely to heat up ahead of ministerial talks in October, August’s coverage was sparse but contained a couple of highlights: Duan Demin and Wang Hongyi provide a fascinating, business-focused map of Europe’s shifting geoeconomic landscape, while Wang Yuyan and Wang Shuo pin Europe’s “economic protectionism” on France.

Elsewhere, Zheng Jiyong provides an unusually frank account of Beijing’s shifting priorities vis-à-vis North Korea, admitting China’s discomfort with growing Russia–DPRK ties and writing that short-term denuclearisation is no longer a realistic goal. On Russia itself, Zhou Li offers a rare account of the country’s economic woes, though he is quick to highlight Putin’s responsiveness to criticism.

This month’s “Going Out” section focuses on the Global South—Qin Hui claims that China’s “low human-rights advantage” is being eroded and that rather than dispatching Chinese labour for overseas infrastructure, Chinese firms are now hiring local labour. Ju Yue and Chen Qi then explore how another established economic model—in which resource-producing countries supply minerals and China processes them—is shifting due to localisation and “resource nationalism”.

On AI, commentators focus on wider AI ecosystems: Huang Yutao looks at China’s “token exports” model; Hou Hong examines the trade-offs of continuing the open-source strategy for development; and Liu Shaoshan makes the case that as agentic AI develops, a cheap supply of energy will become a major source of China’s comparative advantage.

Finally, the award of Fields Medals—mathematics’ highest honour—to Chinese nationals in July continues to prompt reflection. Ding Xueliang uses the occasion to question China’s focus on applied disciplines over theoretical research, while Li Houchen examines the debate over whether the winning mathematician, Wang Hong, should return to China.

Zhu Rongji’s death also generated a number of pieces, the most interesting of which (besides the Zhao Jian piece we translated in full) was Yang Zaiping’s article, which warns that China’s development is fettered by “ultra-leftist” ideological currents that threaten to derail continued market reform.

More than usual, August’s commentary is a mixed bag of themes, without a dominant mood or prescription—the constant is change, coupled with a strong sense that geopolitical turbulence is an operating condition rather than a problem that can be solved.

— Jacob Mardell

1. US–China & Global Order:

   1. Jin Canrong on China needing to expand its nuclear arsenal to strengthen deterrence.

   2. Jiang Tianjiao on the Cold War nuclear order having “irreversibly come to an end”, bringing new risks.

   3. Wang Fan on US strategic contraction being inevitable, but China needing to resist advancing rashly.

2. Taiwan:

   1. Zhou Zhihuai on “jointly managing ‘Taiwan independence’” becoming an area of US–China cooperation.

   2. Wang Weixing on historic restructuring in the Taiwan Strait and “resisting reunification by force” being completely closed off.

3. Maritime Security:

   1. Di Dongsheng on China needing a 30-year effort to “regain” control of the oceans.

   2. Zhao Long on growing threats to maritime chokepoints requiring international cooperation.

   3. Hu Bo on broad maritime security, Hormuz being an exceptional case and military power being unable to provide absolute security.

4. Middle East:

   1. Zhou Li on the “Mecca Agreement” aligning with the Global Security Initiative and reflecting deepening multipolarity.

   2. Sun Degang on weakening US security commitments pushing Gulf states towards different forms of diversification.

   3. Niu Xinchun on US–Israel relations entering long-term structural decline as both ideological affinity and strategic alignment erode.

   4. Guo Xiaobing on Iranian asymmetric operations fundamentally disrupting the logic of aerial warfare.

5. Europe:

   1. Duan Demin & Wang Hongyi on Europe’s geoeconomic map being redrawn, with Southern Europe shifting from periphery to destination.

   2. Wang Yuyan & Wang Shuo on France as the “standard-bearer” of European economic protectionism.

6. Russia & North Korea:

   1. Zheng Jiyong on short-term North Korean denuclearisation no longer being realistic and the risks of deeper Russia–DPRK ties.

   2. Zhou Li on Russia’s resilience under sanctions masking long-term erosion of economic competitiveness.

7. Economy:

   1. Dong Yu on the Chinese government’s plan for the economy.

   2. Yao Yang on a naïve belief that high tech can replace the property sector.

   3. Sun Liping on the difficult challenge of establishing a social security system for the growing ranks of flexible workers.

8. Going out:

   1. Qin Hui on rising wages and local resentment eroding China’s “low human-rights advantage” and the growing use of local labour in overseas infrastructure.

   2. Ju Yue & Chen Qi on resource nationalism shifting critical-mineral value chains towards local processing.

9. AI & Tech:

   1. Huang Yutao on China competing with the US through “token exports”, with overseas compute and data trust remaining constraints.

   2. Hou Hong on growing US support for open-source AI competition.

   3. Liu Shaoshan on cheap energy becoming a major Chinese comparative advantage as agentic AI develops.

10. Society:

    1. Ding Xueliang on institutional conditions constraining breakthroughs in mathematics and basic science.

    2. Li Houchen on the Wang Hong debate revealing an assumption that individual career choices are subject to collective judgement.

    3. Yu Huiwen on Hohhot using continuous performance evaluation to enable cadre demotion.

    4. Yang Zaiping on “ultra-leftist” thinking as the principal fetter on economic development, threatening continued market reform.

    5. Liu Dong & Zhang Jun’an on young people’s “debt spiral” reflecting structural risks, requiring stronger welfare provision and tighter credit controls.

1. US-China & Global Order

Jin Canrong (金灿荣): China should rapidly expand its nuclear arsenal, developing tactical nuclear weapons and increasing its reserves as much as possible in order to strengthen deterrence. Recent NBC reporting that the US Department of Defense is studying a new policy of using tactical nuclear weapons in the case of a direct conflict with China or Russia is plausible and warrants China moving beyond its previous thinking of “as long as we have enough, that will do” regarding its nuclear arsenal. — Director, Center for China’s Foreign Strategy, Renmin University of China (金金乐道编辑部, 14 August).

Jiang Tianjiao (江天骄): The Cold War-era nuclear order has irreversibly come to an end, but a new order has not yet coalesced. Doubts about extended nuclear deterrence have led Japan, South Korea and Saudi Arabia to debate acquiring nuclear weapons, while some Global South states may pursue proliferation to enhance security and international standing. Russia and the US are developing new nuclear weapons and doctrines for their “limited use” in conventional conflicts. China fears its smaller arsenal could be vulnerable to a pre-emptive US strike, while Washington has refused to assure Beijing that it would not target China’s retaliatory capabilities. — Associate Professor, Development Institute of Fudan University. (复旦发展研究院, 9 August).

Wang Fan (王帆): US strategic contraction did not begin with Trump and is not determined by the wishes of a particular president—when the cost of maintaining hegemony exceeds the benefits, contraction becomes inevitable. However, China should exercise restraint, rather than seizing the opportunity to “advance rashly”. As major-power competition shifts towards artificial intelligence, the world may leave the area of nuclear deterrent-based stalemate and wars may once again produce clear winners, increasing systemic risk in the world order. As these changes progress, a world dominated and controlled by the West will fade out of existence—and in its place will be a more reasonable situation of multipolar joint governance. — Former President and Professor, China Foreign Affairs University (Guancha.cn, 7 August).

2. Taiwan

Zhou Zhihuai (周志懷): Following the China–US leaders’ meeting in May 2026, the Taiwan issue has begun to become an option for cooperation between the two sides, but cooperation should involve “jointly managing ‘Taiwan independence’”, rather than “jointly managing the Taiwan Strait”. The two sides have not yet formed an institutional consensus embodied in a joint statement or joint communiqué, and the US should reduce uncertainty by moving from personal statements by the president towards formal official statements. Overall, the essence of China–US relations remains competition, and the relationship is still at the stage of strategic stalemate rather than strategic counter-offensive. — Research Fellow and former Director, Institute of Taiwan Studies, Chinese Academy of Social Sciences (CRNTT, 12 August).

Wang Weixing (王卫星): The security configuration in the Taiwan Strait has undergone a historic restructuring and the path of “resisting reunification by force” has been completely closed off. The overall chessboard of China–US competition has undergone a systemic reset, while Trump has clearly revealed America’s “strategic bottom line” of being unwilling to become involved in a conflict in the Taiwan Strait and unwilling to pay the price for “Taiwan independence”. The balance of power across the Taiwan Strait has undergone a fundamental reversal, with mainland China’s ability to strike at “Taiwan independence” separatism and resist external interference continuously strengthened. — Vice-President, National Society of Taiwan Studies; former Deputy Political Commissar, PLA Academy of Military Science (京彩台湾, 12 August).

3. Maritime Security

Di Dongsheng (翟东升): The US has not fully accepted the “relationship of constructive strategic stability” and may be preparing leverage against China’s weak points, the major one being its maritime routes. Geopolitical changes around the Panama Canal, Greenland and Iran are warning signals that the openness of the oceans is moving towards an end. Counting the US alliance network and overseas bases, China remains far from surpassing US maritime power and may need a 30-year effort to secure control of the seas. Besides channelling funds into the navy, China must foster a new national consensus: only by “regaining” control of the oceans can the Chinese nation have a future. — Associate Dean, School of International Studies, Renmin University of China (翟东升的全球政治经济研究, 25 August).

Zhao Long (赵隆): Under the dual impact of the Ukraine crisis and the Middle East crisis, the vulnerability of critical maritime routes has become even more pronounced. The rapid proliferation of long-range precision-strike weapons and low-cost unmanned platforms has increased asymmetric combat capabilities, while critical routes are increasingly becoming an important lever through which certain countries seek strategic competitive advantages and dominance over industrial and supply chains. The international community should uphold freedom of navigation, common, comprehensive, cooperative and sustainable security, and improve the provision of public goods for critical maritime routes. — Director and Research Fellow, Institute for International Strategy and Security, Shanghai Institutes for International Studies (环球时报, 24 August).

Hu Bo (胡波): Developments in the Strait of Hormuz have caused enormous volatility, but global maritime chokepoints remain stable and secure overall. The Strait of Hormuz is exceptional—other routes have alternatives and other countries would find it difficult to imitate Iran’s approach of blockading the strait. Military strength has its limits—safeguarding the security of maritime passages must still rely primarily on diplomatic, economic, financial and legal means. As the world’s largest goods-trading nation, China cannot pursue absolute security in the way the United States does. China should maintain strategic composure and not become excessively anxious merely because certain countries occasionally “talk tough”. — Director, South China Sea Strategic Situation Probing Initiative (溟坤数科, 9 August).

4. Middle East

Zhou Li (周力): The principles embodied in the “Mecca Agreement”—“collective self-strengthening, openness and inclusiveness, and defensive self-protection”—have points of convergence with the core spirit of China’s Global Security Initiative. The agreement’s political significance exceeds its military significance, communicating to the outside world a strategic posture of “collective self-strengthening and not relying solely on the United States”. It is an inevitable product of deepening global multipolarity, catalysed by the US-Israeli conflict with Iran, which has further exposed the inherent fragility and hypocrisy of the US-led unipolar security architecture. — Former Vice-Minister, International Department of the CPC Central Committee (爱思想, 19 August).

Sun Degang (孙德刚): The Gulf Arab states’ philosophy of “security depends on the United States, development depends on Asia” is coming under strain as conflict in the Middle East intensifies, forcing them to pursue divergent policies that nonetheless reflect diversification amid declining US hegemony and weakening security commitments. Saudi Arabia and Kuwait are pursuing strategic autonomy by expanding cooperation with additional partners. Oman and Qatar are pursuing strategic balancing, maintaining close relations with the US while engaging Iran. The UAE and Bahrain, meanwhile, remain dependent on US support. — Director, Center for Middle Eastern Studies, Fudan University (光明日报, 2 August).

Niu Xinchun (牛新春): The structural trajectory of US–Israel relations is one of gradual long-term weakening due to the erosion of two traditional pillars: ideological affinity and strategic alignment. Ideologically, Americans, particularly Democrats, increasingly see Israel’s “democratic” character as fading and moving away from American values, while polling shows growing public hostility towards Israel. Strategically, US and Israeli interests are increasingly misaligned: Washington is pursuing strategic retrenchment in the Middle East, while Israel seeks to reshape the regional balance of power through military force against its regional adversaries. — Executive Dean, China–Arab States Research Institute, Ningxia University (环球时报, 11 August).

Guo Xiaobing (郭晓兵): Iran’s asymmetric operations have broken through the US–Israeli air and missile defence system, disrupting the underlying logic of aerial warfare. Faced with the impact of Iran’s swarm tactics, the West is accelerating adjustments to air and missile defence systems. Emphasis will be placed on developing short-range laser interception capabilities, with reliance on high-end missiles abandoned in favour of a graduated, layered defence system. Artificial intelligence will likely be used to remedy weaknesses in low-altitude detection, attack and defence will be integrated in order to strike threats at their source, and manufacturing capacity across the entire industrial chain will be strengthened. — Director, Arms Control Research Centre, China Institutes of Contemporary International Relations (中国网, 11 August).

5. Europe

Duan Demin (段德敏) & Wang Hongyi (王弘毅): Europe’s geoeconomic map is being redrawn and Southern Europe is shifting from the market periphery towards becoming a destination for investment into electrification-related industries. Following the EU’s imposition of anti-subsidy duties on Chinese EVs, Chinese firms must resolve industrial frictions by implementing a localisation model of “manufactured in Europe, designed for Europe, maintained by European workers”. Political change in Central and Eastern Europe provides an opportunity to abandon the rigid model of tying relations to “top-leader projects”. In security-conscious Northern Europe, Chinese firms should use minority equity stakes, joint R&D, replaceable supply-chain models and avoid controlling acquisitions. — Director of Centre for European Studies, Peking University; Associate Professor, Centre for Central and Eastern European Studies, Beijing Foreign Studies University (北京对话, 9 August).

Wang Yuyan (王语嫣) & Wang Shuo (王朔): France has become the “standard-bearer” of European economic protectionism, turning French concerns into common European anxieties and French initiatives into EU operating rules. Europe is facing competition from Chinese manufacturing to the East and US subsidy policies to the West. Whereas the “China shock” of the late twentieth century was concentrated in labour intensive industries, the new shock has penetrated into traditional areas of European strength. France has shaped a roadmap for the EU’s direction of travel, “herding” member states towards trade defence, industrial support and greater “economic sovereignty”. — Research Assistant and Professor, School of International Relations, Beijing Foreign Studies University (世界知识, 25 August).

6. Russia & East Asia

Zheng Jiyong (郑继永): Beijing is adjusting its policy priorities towards North Korea—it recognises that immediate denuclearisation of the peninsula is not realistic, while deepening Moscow–Pyongyang relations give North Korea greater strategic autonomy and make its behaviour more difficult to predict. The greatest risk from deepening Russia–North Korea cooperation is that it provides the US, Japan and South Korea with a powerful pretext for strengthening security cooperation. China needs an institution-driven policy towards North Korea, emphasising formal cooperation mechanisms and institutionalised communication channels. Beijing also hopes to involve North Korea in more multilateral cooperation platforms. — Professor and Dean, Institute of Country and Area Studies, Tianjin Foreign Studies University (Foreign Affairs, 10 August).

Zhou Li (周力): Russia has demonstrated surprising resilience under Western sanctions, but this has been more a matter of passive adaptation than active breakthrough—the Russian economy faces erosion of its long-term competitiveness as military mobilisation, capital outflows and tight monetary policy squeeze civilian investment. External pressure is “resonating” dangerously with internal structural weaknesses. Former VEB chief economist Andrei Klepach argues that Russia finances the world while the world finances Ukraine, and warns that a social crisis is “almost certain”. Klepach is a genuine patriot, while Putin’s response is evidence that he is listening to expert opinion. — Former Vice-Minister, International Department of the CPC Central Committee (爱思想, 24 August).

7. Economy

Dong Yu (董煜)：Four “Zhong Caiwen” articles published in quick succession this August address misunderstandings regarding the leadership’s responses to China’s economic challenges. The government is working both to “accelerate the transition between old and new growth drivers”, but this does not involve the abandonment of traditional industries, whose upgrading remains an important part of economic planning. Meanwhile, the absence of large increases in stimulus is due to planners aiming for targeted structural measures to avoid creating economic dependence on policy support. The economic priorities are to continue focus on the provision of high-quality services, leverage private investment by providing private companies with a list of “national projects” eligible for support, and aim to “create a fair and orderly environment for market competition”, curbing local protectionism and duplicated construction. — Executive vice-president, China Institute for Development Planning Tsinghua University; Former deputy director, Second Economic Bureau of the Central Financial and Economic Affairs Commission (三里河，25 August)

Yao Yang (姚洋)：The prevailing explanation that China is passing through a “gear shift” period while transitioning from property to an economy driven by technology obscures the pressing need to focus on boosting weak demand. Property and construction are huge industries, and there is space for it to expand as rural populations continue to move to cities, or migrate from third- and fourth- tier cities to first- and second- tier cities. Furthermore, while a strong property sector does not suppress the development of high tech, excessive investment in high tech sectors can crowd out consumption as it reduces local governments’ ability to subsidise household consumption. The idea that local governments may eventually be able to replace income previously generated by property through returns on equity investments in technology sectors is “extremely naïve”. — Dean and Professor, Dishui Lake Advanced Finance Institute, Shanghai University of Finance and Economics (姚洋说, 21 August)

Sun Liping (孙立平)：The controversy surrounding recent statements by a Peking University professor on social security for gig workers draws attention to a salient fact: China’s flexibly employed population is growing rapidly, and the traditional “five social insurances and one housing fund”, financed jointly by employers and employees, is not adapted to this kind of work. The professor suggested that gig workers with irregular schedules enjoy a greater degree of “freedom” and that it therefore does not make sense to include them in the same social-security system as those in formal employment—a claim that is difficult to accept. However, her core proposal of introducing an “unbundled” and flexible system of social-security protection for mobile workers would function well as a transitional arrangement towards fuller protection in the future. — Retired Professor of Sociology, Tsinghua University (老孙荐读, 26 August)

8. Going Out

Qin Hui (秦晖): The traditional Chinese overseas infrastructure model is precisely the opposite of the colonial model—rather than using local workers for hard labour, Chinese firms dispatched their own migrant labour abroad. However, this is now changing as rising wages and local resentment push Chinese firms towards local hiring. The Tindouf–Béchar railway illustrates this “integration with international standards”, with skilled workers and managers coming from China and locals performing the heavy labour. As such, China’s “low human-rights advantage” is being eroded, though the old model has not disappeared, as demonstrated by the BYD “slave labour” case in Brazil. — Professor Emeritus of History, Tsinghua University (失語者, 7 August).

Ju Yue (琚悦) & Chen Qi (陈琪): Global critical-mineral value chains are shifting from a model in which “resource-producing countries supply minerals and China processes them” towards one in which “resource-producing countries retain the value chain”, diminishing China’s control over processing capacity. Across resource-rich African countries, export controls, industrial-chain localisation and changes to ownership and operating rights are turning temporary interventions into structural norms. China must move beyond the role of “resource acquirer” towards “two-way empowerment”, using joint ventures, technology sharing and local processing to align investment with African development goals. — Lecturer and Researcher, respectively, Baize Institute for Strategic Studies, Southwest University of Political Science and Law (白昃研究, 23 August).

9. AI & Tech

Huang Yutao (黄宇韬): The key arena of competition between Chinese and US AI is shifting to one of ecosystems, rather than purely the performance of the models. The Trump administration has rescinded many of the Biden restrictions on global exports, emphasising export of the “full stack”. As China cannot replicate this model, it is focusing on “token exports”, a non-monopolistic business model that is attractive to price-sensitive users. However, Chinese token exports generally run on overseas data centres—a far cry from the ideal of using local electricity and national compute. The main challenges for this model are balancing overseas and domestic demands for inference and establishing trust in Chinese companies’ handling of overseas data. — Assistant Research Fellow, Global Governance Division, Institute of World Economics and Politics, Chinese Academy of Social Sciences (FT Chinese, 24 August).

Hou Hong (侯宏): The emergence of strong voices in the US tech industry in support of competing on the open-source front signifies a growing US industrial consensus on the importance of ecosystem diffusion to national AI competitiveness. However, while Chinese companies’ open-source approach may serve the national interest, the reality is that the difficulty of earning profits on open-source technology means that the industry’s future business model is uncertain. The open-source model may yet find a way to “save itself”: Kimi recently modified its K3 open-source terms to require overseas cloud platforms deploying its model to sign a separate agreement, departing from the classic definition of open-source and offering a potential profit-making path forward. — Assistant Professor of Management, National School of Development, Peking University (侯宏文存, 16 August).

Liu Shaoshan (刘少山): Energy is not currently the main price constraint of artificial intelligence model-inference costs, but as agentic AI develops, a cheap supply of energy will become a major source of China’s comparative advantage in AI. At present, cheap electricity can partially relieve the pressure that poor chip efficiency might place on operating costs. However, it is not enough to simply continue providing data centres with cheap electricity. To avoid idle capacity, policy needs to focus more on improving actual utilisation rates through better coordination between computing and grid supply, as well as developing the capacity to provide compute services to overseas customers, at lower costs than the US. — Director, Embodied Intelligence Centre, Shenzhen Institute of Artificial Intelligence and Robotics for Society (环球时报，26 August).

10. State & Society

Ding Xueliang (丁学良): This year’s Fields Medals have prompted reflection among mainland scholars: whereas the winners had access to five-to-ten-year research funding, Chinese mathematics and basic-science researchers complain that annual reporting requirements push them towards projects seeking “quick success and immediate benefit”. Government funding should not favour applied disciplines while cutting support for abstract theoretical research. Some discussion encouraging students to study abroad has already been abridged, yet the winners’ decision to pursue postgraduate study in the West was crucial. Internationalised teams are also less prone to rigid hierarchy, arbitrary administrative interference and senior researchers abusing their positions. — Professor Emeritus, Hong Kong University of Science and Technology (學人, 2 August).

Li Houchen (李厚辰): The debate over whether Fields Medallist Wang Hong should return to China reveals a deeper consensus that an individual’s career is a national question open to collective judgement. Even official commentary’s “tolerance” over Wang Hong staying away implies that her choice requires permission. This system of absorption is not accomplished through propaganda alone, but is a Chinese-style logic in which investment amounts to a claim over someone’s person. The real question is whether those ordinary researchers who have no Fields Medal also have the right to choose where they live, whom they work with and whom they thank. — Independent scholar and columnist (看理想, 10 August).

Yu Huiwen (于会文): To promote a system in which cadres can “go up and down”, cadres must genuinely be able to “go down”, with the “soft ailments” of mediocrity and laziness treated as grounds for demotion alongside the “hard injuries” of disciplinary or legal violations. Hohhot is responding by turning cadre evaluation from “judging horses” to “racing horses”, using monthly tracking and differentiated performance indicators to identify officials for removal. Since the reshuffling of Hohhot’s Party and government leadership teams in 2021, 11 cadres have been removed from leadership teams for shortcomings including weak public-engagement skills and an inability to handle difficult and complex situations. — Member, Standing Committee of the CPC Inner Mongolia Autonomous Regional Committee; Party Secretary of Hohhot (求是, 1 August).

Yang Zaiping (杨再平): The principal fetter on China’s economy is now the resurgence of “ultra-leftist” ideological currents, which have caused a lack of confidence among private businesses, foreign investors and the market. The old planned-economy system has largely been reformed, but the process is not complete. The basic spirit of reform and opening since Zhu Rongji’s period can be summarised in three words: marketisation, rule of law and internationalisation. This was true then and will remain true for a long time to come—successful reforms must retain continuity rather than constantly “flipping the pancake”. — Founding Secretary-General, Asian Financial Cooperation Association (IMI财经观察, 16 August).

Liu Dong (刘东) & Zhang Jun’an (张君安): The “debt spiral” among young people is a defensive strategy for survival in an uncertain environment and a consequence of structural risks being transferred downwards onto vulnerable groups. Online-lending platforms and illegal credit providers target young people who urgently need funds or lack self-control. The government should increase subsidised rental housing, improve subsidies for training and education, as well as strengthen the social-security system’s buffering role. Regulators should also impose strict combined credit ceilings on young people who don’t have stable repayment capacity and prevent borrowing from multiple lenders. — Associate Professor and Head of the Department of Social Work and Lecturer in Social Work, Shanghai Business School (文化纵横, 26 August).

Why China’s Football Problem Is an Economic Problem | Li Xunlei| (28 August)

Li Xunlei, chief economist at the securities firm Zhongtai International, is among the most engaging proponents of economic rebalancing in China. In the this article, he cites China’s World Cup qualification woes as among the consequences of a growth model that prioritises fixed-asset investment. With returns on investment falling and growth in local government debt outpacing GDP growth, Li presses the case for an urgent shift towards growth anchored in household consumption. He argues that failure to carry out such a shift represents an obvious, but neglected, risk factor in China’s economy—what one might also call a “grey rhino”. Read here

Xu Jilin on the Politics of Resentment among China’s Youth (26 August)

In this piece, introduced by Timothy Cheek, Xu Jilin dissects the phenomena of “lying flat”, “involution”, and the troubling attitudes of China’s youthful “post-90s” generation. That attitude, expressed in the low motivation of lying flat and distrust of the meritocracy described as involution—in which more work does not result in advancement—is described by Xu as yuanhen, “resentment” in simple terms. Xu’s essay is both a recognition of the social experience of this generation (and a useful introduction to readers of Sinification) and also a warning to those with the power to give this youth some hope and opportunity. As he concludes, “These are grave questions that China must now confront in earnest.” Read here

Sun Liping and Li Daokui Debate China’s Disconnected Growth (20 August)

Whether expressed as “strong supply, weak demand”, overcapacity or some form of a “K-shape”, a consensus has emerged that insufficient demand is the central weakness of the Chinese economy. The persistent debate centres on how best to fill that demand gap. Here, Li Daokui argues that while new industries have failed to expand sufficiently to replace the old ones, the deflationary “black hole” of local government finances has exerted a cooling effect on the entire economy. In the same edition, Sun Liping provides a riposte to Li Daokui’s diagnosis. Read here

Understanding Europe’s “China Shock” Anxiety | Huang Yiping (19 August)

The full-scale trade war that Huang Yiping warns of here has not yet come to pass, but the reprieve may be temporary. Huang is very much an establishment voice and he doesn’t stray far from the mainstream framing, but he takes European anxiety far more seriously than most and makes an important concession along the way. This should offer some encouragement to EU policymakers, who for years have felt that their concerns have fallen on deaf ears. However, those same policymakers may be less heartened by Huang’s reading of European fragmentation and his later recommendation that China “bypass highly politicised EU-wide negotiating frameworks”. Read here

Strong Supply, Weak Demand, Little Urgency? | Economic Digest: July 2026 (14 August)

“K shaped” is July’s defining buzzword, with a flurry of articles exploring China’s simultaneous boom and bust in different parts of the economy through this alphabetic metaphor. Taken together, this edition contains a remarkable range of competing prescriptions, but many do converge around a sense that insufficient demand and economic imbalance require a more urgent policy response. It is ironic then, that the most recent piece in the collection—Zhang Jiqiang’s reading of the Political Bureau of the CPC Central Committee meeting held on 30 July—concludes that, in Zhang’s opinion, “the urgency of stepping up policy support is not high.” Read here

Dreaming of Zhu Rongji’s China | Zhao Jian (14 August)

The death of Zhu Rongji, the former premier of China who spearheaded market-oriented economic reforms during the 1990s, was announced on Wednesday. This obituary is by the economist Zhao Jian, an advocate of renewed marketisation and an admirer of Zhu’s forceful approach to driving through a series of state enterprise restructurings and market-oriented reforms. Judging by the article’s removal from WeChat a day after publication, it may have touched a nerve. Nominally written as an obituary for Zhu, the piece is really his lament for a bygone era when Chinese society felt confident and people said what they really thought. Read here

Advantage Does Not Equal Victory | Digest: July 2026 (4 August)

The celebratory mood that followed the Trump–Xi summit in May seems to have run its course. The prevailing assessment of US–China “strategic stability” remains broadly optimistic, but July’s commentary offers a more sober assessment of China’s strategic environment. July’s strongest writing qualifies confidence in China’s rise—American retrenchment is adaptive rather than terminal, the trade war is survivable but unavoidable and China’s growing power is running ahead of the institutional, diplomatic and intellectual capacities needed to translate it into durable gain. Read here

N.B. Sinification features a broad spectrum of voices, ranging from conservative hawks and state propagandists to more moderate and liberal thinkers. Readers are encouraged to bear this diversity in mind when engaging with the content.

On today's show Andrew and Bill begin with a series of questions on the US and China, including a look at the likely toothless threats implied by Trump's "Economic D-Day" agenda, China's role or lack thereof in a breakdown between the US and Canada, questions about the next four weeks and four months of the relationship, and, unrelated to the US, what to watch for as Xi heads to the SCO Summit where he could potentially meet Vladimir Putin. From there: A cabbage scandal in Hebei province and a longstanding concern among both PRC citizens and the party. At the end: How and why the central government is using tax crackdowns to cover local government shortfalls, four People's Daily articles on the economy, a surprise plenary session of the CCDI, the founder of Evergrande is sentenced to life in prison, and thoughts on what the Party wants from the stock market as Unitree stock loses nearly half its value after an initial IPO pop.

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