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On today's show Andrew and Bill begin with the tentative ceasefire in Iran and reports that the PRC applied pressure to the Iranians to defuse the tensions. Topics include: The lack of clarity on what the PRC actually did and why, China's vote at the UN this week, why the PRC would like the war to end sooner rather than later, and relationships with other Gulf countries that may or may not change because of the war. From there: Ma Xingrui's disappearance from public view is met with official confirmation of an investigation, Anthropic's Mythos model clarifies the stakes of the AI race, DeepSeek news, a token crunch in China, and scenes from Victor Wembanyama's visit to the Shaolin Temple last summer.

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1. Iran war - There appears to be a ceasefire in the war, though already there have been violations. According to President Trump. China played a role in convincing Iran to agree to the cease fire, though so far official channels in China have given no details of what exactly China may have done to push Iran towards the agreement. Trump also posted that that “A Country supplying Military Weapons to Iran will be immediately tariffed, on any and all goods sold to the United States of America, 50%, effective immediately”, which will be awkward for US-China relations, and his visit to China next month, if he really follows through.

2. All-PLA Senior Cadre Training Course - Now we know why there was that very long piece on the PLA in the PLA daily and People’s Daily, translated here. A senior military cadre training course opened today at National Defense University and Xi Jinping delivered an important speech calling for ideological rectification and political rectificat…

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1. China and Russia veto UN resolution on opening Strait of Hormuz - China and Russia vetoed a watered-down United Nations Security Council resolution put forward by Bahrain to encourage countries to work together to reopen the Strait of Hormuz. PRC ambassador to the UN explained why they vetoed the resolution, citing in part President Trump’s post early today:

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The war in Iran predictably dominates commentary in March.

We covered initial reactions to the US-Israeli strikes in our briefing earlier last month, where we noted that assessments of China’s risk-opportunity balance hinged largely on Trump’s ability to turn action into success. We also featured a censored piece from the Intellisia Institute that pushed this logic further, arguing that a prolonged Middle East war could become a major strategic opportunity for China.

More than a month on, early scepticism about US regime-change prospects in Iran has hardened into a feeling somewhere between consternation and schadenfreude, with most analysts now framing the situation as a quagmire. The dominant motif is Trump’s “tiger-riding predicament” [骑虎难下]—meaning that it is easier to climb on a tiger than to dismount and easier to start a war than to end one.

Which makes it refreshing to read CFAU professor Shi Zhan and former Brookings “returnee scholar” Li Cheng urging caution on US failure narratives and dismissing comparisons to the post-9/11 strategic distraction from China. On the more familiar hawkish side we have Wang Jiangyu, who calls this “the last war America can launch with any semblance of dignity”.

Meanwhile, Di Dongsheng argues that high energy prices are a net gain for China—a case he was apparently unable or unwilling to make on his WeChat blog on the same theme a few days earlier, which promised but conspicuously withheld the argument. The economic counter-case comes from Morgan Stanley Chief China Economist Xing Ziqiang, who warns that markets are underpricing the oil shock. His surprisingly stark warning is that $130 oil over a single quarter could drag China’s GDP growth to 3% or below.

Coverage of the Chinese economy is also weightier than usual, driven by the Two Sessions and the new Five-Year Plan. Direct FYP coverage was expectedly boilerplate, but the rural pension question (the FYP’s token increase was arguably the biggest social policy disappointment of the Two Sessions) prompted a more pointed debate. Against the many calls among Chinese economists for significant pension increases, Lü Dewen mounts an eight-point rebuttal, concluding that cash is not what the elderly actually need—and that pension transfers risk producing a “crowding-out effect” [挤出效应] on children’s sense of filial obligation.

Elsewhere, Zhou Tianyong puts a damning number on China’s reform deficit, forecasting an average growth of just 2.4% through 2035 unless institutional change occurs. Jia Qingguo and Wang Yiming both flag what Beijing is reluctant to concede—that the export model is generating resistance it cannot indefinitely absorb. Meanwhile, consumption-driven growth is challenged on three fronts: Zhu Tian argues that low consumption was a key driver of four decades of growth rather than a pathology; Yu Yongding rejects the existence of a coherent “consumption-driven growth” [消费驱动] category; and Lu Di and colleagues dismantle the “flawed arguments” for a consumption pivot. Among others, Wang Xiaolu takes a more consumption-friendly stance, arguing that government expenditure is devoted to investment and bureaucracy at the expense of a “livelihood-oriented fiscal policy”.

Beyond Iran and the economy, several pieces extend these discussions into broader questions of strategy. Wu Xinbo portrays a Beijing that increasingly regards tariffs as a secondary issue and appears prepared to retaliate against US interests in third countries. Zheng Yongnian, in turn, calls for an “Interventionism 2.0”, arguing that the PRC’s traditional non-interference doctrine no longer matches the scale of its global interests. And on Taiwan, Wei Leijie captures the bluntness with which some mainland voices now reject the case for continued delay in “cross-Strait reunification”.

— Jacob Mardell

1. Iran War:

   1. Shi Zhan on why it is too hasty to predict US defeat in Iran without first analysing Washington’s war aims.

   2. Li Cheng on why an Iran quagmire is unlikely to soften Washington’s China policy, and on China’s “many paradoxes and policy choices” over Iran.

   3. Wang Jiangyu on allies having now established a precedent of not following America, making this the last war America can launch with any semblance of dignity.

   4. Di Dongsheng on China profiting from war, as high oil prices improve the relative competitiveness of Chinese manufacturing while stretching Washington and its allies.

   5. Xing Ziqiang on markets severely underpricing the risk of a prolonged oil shock, with oil at US$130 for a quarter potentially dragging China’s growth to around 3% or lower.

   6. Li Fuquan on why the US-Israeli strikes make Iran’s abandonment of its nuclear programme a near-impossibility.

   7. Wu Hailong on why the US-Israeli strike is part of Washington’s broader strategic competition with China and Russia, requiring a coordinated Sino-Russian response.

2. Global Order & US–China Relations:

   1. Zheng Yongnian on China urgently needing an “Interventionism 2.0”—a revised doctrine permitting proactive intervention when overseas interests are threatened.

   2. Jia Qingguo on how China should adjust its model for overseas investment to reduce frictions in the host country.

   3. Zhang Yongle on the viral “kill line” discussion marking a shift in China’s cognitive positioning from “looking up” to “partially looking down” at the US.

   4. Zhao Dingqi on the current far-right wave marking a new “Polanyian moment” in which the United States is already operating a form of “anticipatory fascism”.

   5. Xia Liping on Trump’s revival of the G2 concept as an opening for greater Sino-American coordination on a more equal basis.

   6. Wu Xinbo on Beijing’s growing concern over US interference in its overseas economic interests and the broader agenda it wants to press beyond tariffs.

3. Taiwan:

   1. Chen Xiancai and Su Weibin on the mainland having established “overwhelming advantages” in sovereignty, governance and legitimacy, while identity remains the “deepest and most difficult obstacle”.

   2. Wei Leijie on the urgency of achieving “Taiwan’s recovery” at the earliest opportunity, and on why common arguments for strategic patience are fallacies.

4. Chinese Economy:

   1. Wang Xiaolu i) on government expenditure being devoted to investment and bureaucracy at the expense of a “livelihood-oriented fiscal policy”; and ii) on official income-distribution statistics understating the true extent of state economic control.

   2. Wang Yiming on China’s 30% share of global manufacturing meaning further export expansion risks provoking trade restrictions.

   3. Zhou Tianyong on China’s economy growing at only 2.48% in 2026–2030 without institutional reform—well below the 5% needed to meet the 2035 modernisation target.

   4. Tang Dajie on why significant increases to rural pensions are a necessity from the perspective of both economic stimulus and societal fairness.

   5. Lü Dewen on why increasing rural pensions is ill-suited to short-term stimulus, whereas the real problem for the very elderly is care rather than cash.

   6. Lu Di, Yu Shiwen and Gao Ling on why the case for consumption-driven growth rests on three flawed arguments.

   7. Yu Yongding on “consumption-driven growth” as a macroeconomic red herring, and why China should not treat the 3% deficit ceiling as binding.

   8. Zhu Tian on why China’s low consumption rate was a driver of high-speed growth rather than a structural problem.

5. Artificial Intelligence:

   1. Liang Jianzhang and Wang Ciqiao on AI as a fertility depressant operating through three channels, including competition for reproduction from low-cost entertainment.

   2. Zhuo Xian on AI producing three simultaneous decouplings that collectively undermine the three pillars on which social insurance was built.

   3. Yao Yang on AI as a massive bubble whose collapse may be triggered by a Chinese photonic or optoelectronic chip breakthrough.

1. Iran War

Shi Zhan (施展): It is premature to predict that the US will lose the war without first analysing its objectives. If Washington’s aim is regime change, it is unlikely to succeed without ground forces; if its aim is only to destroy Iran’s nuclear capability and ability to project influence externally, that objective can probably still be achieved. The claim that a Gulf shock would collapse US AI financing, let alone US financial hegemony, is overstated: petrodollars account for less than 10% of AI financing, and the real transmission mechanism runs through higher oil prices, stickier inflation, tighter financing conditions, and rising electricity costs. Those pressures could still hurt the US economy, but they remain a long way from the disintegration of America’s financial hegemony. — Professor; Director, Research Centre on World Politics, China Foreign Affairs University (施展世界, 4 March)

Li Cheng (李成): The idea that the US being bogged down in Iran may cause it to soften its stance on China does not hold up—this is not the post-9/11 moment, when Bush recognised that the PRC was not the primary adversary. The Iran war itself is not in Beijing’s interests, but China also cannot accept Iran falling under US control or becoming pro-American. China faces “many paradoxes and policy choices” [很多悖论与政策选择] over Iran, and the impact of the war on US–China relations depends above all on the degree and direction of the conflict’s development. — Founding Director, Centre on Contemporary China and the World, University of Hong Kong (CCCW, 26 March)

Wang Jiangyu (王江雨): The refusal of US allies to follow Washington’s lead in the Strait of Hormuz sets a precedent that will make it much harder for America to rally allies in future wars—this may be the last war Washington can launch with any semblance of dignity. Trump is “riding a tiger and unable to get off” [骑虎难下]: he underestimated Iran’s resilience, but Iranian surrender is impossible without a large-scale ground invasion that he does not dare launch. The most likely outcomes are either a US declaration of victory followed by withdrawal, or a drawn-out low-intensity war. China’s tolerance for the damage the war inflicts on the world economy is the strongest, and China’s strategic environment may grow increasingly favourable as distrust of America deepens—including from Russia. — Professor, School of Law; Director, Centre for Chinese and Comparative Law, City University of Hong Kong (IPP Review, 18 March)

Di Dongsheng (翟东升): With the two Cold War superpowers now bogged down in quagmire conflicts, China is following the script the United States played in the early stages of World War One to profit from the war. Among the world’s major net energy importers, China ranks ahead of the United States in energy autonomy, meaning that higher oil prices improve the competitive position of Chinese manufacturing relative to more oil-dependent rivals. High oil prices also transfer wealth from energy-importing core economies towards peripheral ones, boosting purchasing power in Africa and the Middle East precisely where Chinese goods are most competitive, while stretching the fiscal and strategic resources of Washington and its allies. Chinese exports of new energy vehicles, storage, photovoltaics and wind power equipment will accelerate, while the defence industry and dual-use technology sectors stand to profit quietly. — Professor and Vice Dean, School of International Relations, Renmin University of China (Weibo, 30 March)

Xing Ziqiang (邢自强): If oil were to average around US$130 for a quarter—the threshold at which global demand would fall non-linearly—it would lead to both a direct oil shock and a collapse in external demand for China, meaning that real GDP growth could fall to around 3% or lower without policy intervention. Global markets are severely underpricing this risk: even after counting backup pipelines, additional Russian exports and full releases of strategic reserves, only around 7 million of a 20-million-barrel daily shortfall could be covered. Rather than carrying out fiscal tightening going into the shock—which would compound China’s demand problem without fixing the supply-side cause—the correct response is from the 2021 commodity spike playbook: ease credit conditions through reserve requirement cuts and re-lending to keep squeezed firms afloat, while expanding fiscal spending in the second quarter if conditions warrant. — Chief Economist, Morgan Stanley China (爱思想, 27 March)

Li Fuquan (李福泉): The US-Israeli strikes have made clear to Tehran that remaining non-nuclear did not buy security but instead invited catastrophic destruction, making any genuine abandonment of Iran’s nuclear programme increasingly unlikely. The strikes have sent a signal that any state judged to possess nuclear intent and capability—even without actual weapons—may face a military strike by a powerful state, destroying the cornerstone of the international non-proliferation system. Three scenarios could follow: prolonged stalemate; a negotiated compromise—requiring conditions that are almost impossible to satisfy; or the most dangerous possibility—Iran shifting toward a “more covert, dispersed and miniaturised” nuclear programme until it crosses the threshold and shatters the regional balance. — Professor, School of Area and Country Studies, Northwest University (世界知识, 25 March)

Wu Hailong (吴海龙): The US-Israeli strike is part of America’s broader strategic competition with China and Russia. Unwilling to confront either directly, Washington is instead moving against weaker aligned states one by one. This demands a coordinated Sino-Russian response: deeper bilateral strategic coordination, full use of the UN and SCO mechanisms, stronger Global South solidarity, and the building of hard power sufficient to deter American aggression. — Former President, China Public Diplomacy Association (北京对话, March)

2. Global Order & US-China Relations

Zheng Yongnian (郑永年): China urgently needs an “Interventionism 2.0” [干预主义2.0版]—a revised doctrine permitting proactive intervention when overseas interests are threatened by a host state or third party, or when external factors impinge directly on domestic interests. Non-alignment remains principally correct and has so far prevented a Sino-American bloc confrontation from tipping into world war, but China’s traditional non-interference principle must be updated to protect the country’s growing global footprint. — Professor and Dean, School of Public Policy, The Chinese University of Hong Kong, Shenzhen (大湾区评论, 9 March)

Jia Qingguo (贾庆国): As rising Chinese competitiveness drives resistance to Chinese investment abroad, Beijing should respond by shifting its default outbound investment model from wholly-owned to joint-venture structures. Amid geopolitical deterioration and nationalist tendencies, Chinese firms have grown larger and more competitive so that the wholly-owned outbound investment model has begun threatening local enterprises in ways it previously did not. Alongside the shift to joint ventures, China should improve its transparency and relax restrictions on people-to-people exchange, while also improving its institutional management of overseas relations by expanding internal intelligence-sharing among research institutions and diplomatic departments. — Professor, School of International Relations, Peking University; Standing Member, 14th National Committee of the CPPCC (iGCU, 9 March)

Zhang Yongle (章永乐): The viral Chinese internet discussion of the American “kill line”—the threshold below which a minor illness or unpaid bill sends a middle-class family into cascading collapse—marks a shift in Chinese netizens’ cognitive positioning from “looking up” [仰视] to “looking at the same level” [平视] and even “partially looking down” [局部俯视] at the US. Defenders of the American social model are now required to explain why the world’s wealthiest nation leaves its middle class fragile and lacking in a safety net, reversing the long-standing frame in which China had to justify its institutions against an assumed American standard. — Associate Professor, School of Law, Peking University (爱思想, 20 March)

Zhao Dingqi (赵丁琪): The current far-right wave marks a new “Polanyian moment”—a counter-movement against the structural crisis of neoliberal capitalism—but unlike the interwar period, there is no race between communism and fascism: far-right forces are developing with a strength far exceeding that of the left. The United States is already operating what David Hill calls “pre-emptive fascism” [先发制人的法西斯主义]: formal democratic institutions are maintained not out of commitment but because working-class weakness makes it unnecessary to discard them. The cause of the left’s weakness is its abandonment of class politics for identity politics, which in fact became an accomplice and abettor of capital—providing cultural legitimacy to neoliberalism while leaving working-class material interests unaddressed. — Researcher, Chinese Academy of Social Sciences (文化纵横, 16 March)

Xia Liping (夏立平): Trump’s revival of the “G2” concept should not be read as a call for Sino-American co-governance, but as an opening for greater Sino-American coordination on a more equal basis. Unlike earlier formulations, it reflects America’s grudging recognition of China’s strength and a move from denial and anger towards bargaining. China should seize the opportunity to institutionalise leader-level and cross-sector dialogue, secure tangible gains in 2026, and build flexible “China-US+” frameworks with other actors. Properly deployed, the G2 framework can help constrain US containment, increase China’s international weight, and check Japanese militarist revival. — Professor, Tongji University (CRNTT, 16 March)

Wu Xinbo (吴心伯): Beijing is increasingly concerned about US pressure on its overseas economic interests and could retaliate against US interests in third countries where China holds the upper hand. China also feels more confident in confronting the tariff challenge and will not treat it as a major concern at the upcoming Trump–Xi summit in May. Beijing will instead treat tariffs as secondary to technology controls, entity-list removals, investment restrictions, Taiwan—including restraint on future US arms sales—and the restoration of a working mechanism for people-to-people exchanges. — Professor and Executive Director, Centre for American Studies, Fudan University (Brookings, 27 March)

3. Taiwan

Chen Xiancai (陈先才) and Su Weibin (苏炜彬): Taiwan “reunification” is a question of modern state construction in which the mainland already possesses “overwhelming advantages” in sovereignty, governance capacity and legitimacy. The real obstacle is identity: after seventy-five years of separate development, divergent systems, memories and ways of life have been internalised by many Taiwanese as a durable “psychological barrier” [心理屏障]. The answer is a shift away from “blood-transfusion” [输血式] style preferential policies towards a “blood-generating” [造血式] model of “asymmetric integration” [非对称融合]—binding Taiwan into mainland sectors that are hardest to replace, so that decoupling becomes “economically irrational and practically unfeasible”. — Director (Chen); Doctoral Researcher (Su), Taiwan Research Centre, Xiamen University (CRNTT, 11 March)

Wei Leijie (魏磊杰): The case for “recovering Taiwan” [收台] sooner rather than later is a matter of strategic urgency, and the two most common arguments for waiting—that Taiwan will converge democratically with the mainland, or that time will resolve the issue naturally—are both fallacies that function in practice as indefinite delay. The status quo is not stable but rather drifting irreversibly towards de facto independence, while Taiwan’s population, after four centuries without major warfare, lacks the psychological preparation or geographic conditions for prolonged resistance. Beijing should set a concrete recovery timetable to generate a sense of inevitability among Taiwan’s population and foreclose the option of indefinite delay. — Professor, Xiamen University Law School (CRNTT, 6 March)

4. Chinese Economy

Wang Xiaolu (王小鲁): Despite the money supply reaching 2.3 times nominal GDP, consumer demand remains stuck at 37–39% of GDP—because China’s problem is not simply low aggregate demand but a structural imbalance, with government expenditure devoted to investment and bureaucracy at the expense of a “livelihood-oriented fiscal policy” [民生财政]. Public education, healthcare, and social security account for only 13.9% of GDP against an OECD average of 23.5%, while administrative expenditure runs at 9.7%—nearly double the OECD average. Roosevelt’s New Deal succeeded not through Keynesian expansion but through improving people’s livelihoods; China must extend unemployment insurance—currently reaching only 240 million of 470 million urban workers— while simultaneously reducing onerous enterprise contributions. — Deputy Director and Senior Research Fellow, National Economic Research Institute, China Reform Foundation (爱思想, 6 March)

Wang Xiaolu (王小鲁): China’s official income distribution statistics systematically undercount government resource control by excluding land revenues, unrepaid debt, and the effects of monetary expansion—meaning the government now controls over 40% of the economy, exceeding its pre-reform-and-opening-up share. Fiscal and monetary loosening was never withdrawn after the 2008 stimulus, and local governments borrowed massively through shadow financing vehicles, continuously expanding state resource control in ways not reflected in official figures. Households bear the cost: despite controlling a larger share of the economy than comparable governments, China directs only 33% of expenditure to social security, healthcare and education—half the OECD average—meaning expanded government spending has not translated into public welfare but into investment and administration. — Deputy Director and Senior Research Fellow, National Economic Research Institute, China Reform Foundation (爱思想, 8 March)

Wang Yiming (王一鸣): With China’s share of global manufacturing already at 30%, further export expansion will invite trade restrictions from a growing number of countries, making a fundamental shift in the development model unavoidable. At the same time, China is passing through the 60–80% of US GDP “critical threshold” of US-China rivalry even as it faces compounding domestic headwinds: weak productivity growth, an 8.5 trillion yuan hole left by real estate that the “new three” [新三样]—lithium batteries, EVs and solar panels—cannot fill, and the possible early arrival of the post-urbanisation era. — Vice-Chairman, China Centre for International Economic Exchanges; former Vice President, Development Research Centre of the State Council (新华文摘, Issue 4 2026)

Zhou Tianyong (周天勇): Without institutional reform, China’s economy will grow at only 2.48% in 2026–2030 and 2.42% in 2031–2035—well below the 5% needed to meet the 2035 modernisation target. Unlike traditional industries, technologically advanced new-quality productive forces actually reduce inputs of capital and labour—and may therefore hamper economic growth in the absence of redistribution. Misallocation of labour, capital and land—stuck in low-productivity agriculture and non-competitive enterprises—costs the economy approximately 30 trillion yuan annually. Thorough-going reform across the hukou system and rural land marketisation, capital reallocation from SOEs to competitive firms, and sharply raised welfare transfers is therefore needed to maintain the economic growth rate. — Director, National Economic Engineering Laboratory, Dongbei University of Finance and Economics; former Deputy Director, Institute of International Strategic Studies, Central Party School (爱思想, 8 March)

Tang Dajie (唐大杰): The current basic rural pension rate (143 yuan a month, increased to 163 yuan during the Two Sessions) is less than a quarter of the rural Minimum Living Security Standard (equivalent to 574 yuan a month): to consolidate rural poverty alleviation, the aim should be to reach this standard within three to five years. Given the high consumption propensity of rural residents, this adjustment would generate a high pay-off in consumption potential and drive GDP growth. From the perspective of fairness, this could be paid for by halving the annual pension increase rate for civil servants and state-owned enterprise employees and directing it to rural residents. Just as the social security protections of the New Deal helped the US emerge from the Depression, China needs a more ambitious approach. — Guest Researcher, Research Centre for Finance, Tax and Law, Wuhan University (Caixin, 7 March).

Lü Dewen (吕德文): The discussion of rural pensions contains several misconceptions, including ignoring the risk that pension increases may produce a “crowding-out effect” [挤出效应], weakening children’s sense of obligation to care for their parents. Pensions have the quality of “welfare inelasticity” [福利刚性]—once raised, they cannot be lowered—making them unsuitable as short-term demand stimulus. The historical contributions argument is morally understandable but operationally incoherent and what the very elderly actually need is not cash but care—fully dependent elderly need 5,000–6,000 yuan or more, so relying on pension increases alone to resolve elderly care is like “trying to catch fish in a tree” [缘木求鱼]. — Distinguished Research Fellow, Department of Sociology, Wuhan University (爱思想, 18 March)

Lu Di (卢荻), Yu Shiwen (于诗文) and Gao Ling (高岭): The case for shifting to consumption-driven growth [消费驱动] rests on three flawed arguments. Cross-national comparisons merely describe a structural feature of late industrialisation; the demand-constraint claim is empirically falsified by post-2014 data; and the sustainability argument underestimates China’s remaining industrialisation needs and institutional capacity for long-term investment. The debate is at its core a contest between the developmental autonomy of late-developing nations and Western-centric paradigms. The “overcapacity” narrative [产能过剩论] is hence a discursive instrument for constraining China’s capital accumulation. — Professor (Lu Di); Doctoral Candidate (Yu Shiwen); Associate Professor (Gao Ling), Lingnan College, Sun Yat-sen University (东方学刊, 2 March)

Yu Yongding (余永定): “Consumption-driven growth” does not exist in any strict sense: growth rests on savings-funded investment, while consumption can only fill a shortfall in effective demand. Overcapacity is a sector-level problem for market competition, not a macroeconomic policy target, and the 3% deficit ceiling is a European political construct with no relevance to Chinese conditions. With bond yields signalling ample fiscal space, the central government should raise the deficit ratio, issue long-term bonds and absorb infrastructure financing responsibilities from over-indebted local governments. — Academician and Research Fellow, Institute of World Economics and Politics, Chinese Academy of Social Sciences (Tencent Finance, 2 March)

Zhu Tian (朱天): China’s low consumption rate was never a structural problem—it was a key driver of four decades of high-speed growth; the current demand shortfall stems from an acute cyclical downturn triggered by the real estate crisis, not a fundamental structural imbalance requiring long-term reform. Since utilisation rates for infrastructure and productive capacity are already low, government investment cannot find high-return “effective investment” projects; large-scale fiscal stimulus directed at consumption—specifically 4 trillion yuan in consumer vouchers and government purchase of under-construction housing for conversion to welfare—is more direct, efficient and does not generate ineffective excess capacity. Concerns about debt are misplaced: as long as the debt interest rate remains below the sum of the growth rate and asset returns, stimulus is self-correcting. — Vice President and Co-Dean, China Europe International Business School (爱思想, 8 March)

5. Artificial Intelligence

Liang Jianzhang (梁建章) and Wang Ciqiao (王次桥): AI is a fertility depressant operating through three channels: it provides instant, low-cost entertainment whose “dopamine return rate” is more competitive than child-rearing’s delayed rewards; it intensifies the skills arms race, eliminating entry-level positions and forcing continuous upskilling precisely during peak childbearing years; and it drives up the educational arms race for children. A further three structural mismatches prevent market correction—the childbearing window overlaps with peak career pressure; families bear the full cost of raising children while society captures most returns; and 96% of education spending is local while talent flows elsewhere. China’s childcare subsidy at 0.07% of GDP is a fraction of Japan’s 0.99%, and without a major fiscal response, China risks losing the population-scale advantage in data and application scenarios that underpins its AI competitiveness. — Research Professor of Applied Economics, Guanghua School of Management, Peking University (Liang); PhD Candidate in Economics, Chinese University of Hong Kong (Wang) (统梁说, 8 March)

Zhuo Xian (卓贤): AI is producing three simultaneous decouplings—investment from employment, technological progress from human capital, and wages from productivity—that collectively undermine the three pillars on which social insurance was built. As AI-intensive sectors no longer bid for labour, the mechanism that historically transmitted high-sector wage gains across the whole economy has broken down and the “learning-by-doing” ladder through which junior associates become senior experts is being severed. Policy responses include a differential robot tax, exempting “labour-augmenting” technologies, shifting social security financing toward general taxation to capture AI-generated wealth, and treating sovereign AI computing infrastructure as a future financing vehicle analogous to Norway’s oil fund. — Director and Research Fellow, Department of Social and Cultural Development Research, Development Research Centre of the State Council (New Economist, 24 March)

Yao Yang (姚洋): AI is a massive bubble deliberately hyped up by Silicon Valley tech companies—the trigger for its collapse may come from a Chinese photonic or optoelectronic chip breakthrough within two to five years; the government’s most urgent task is not AI but boosting domestic demand. Discussing medium-to-long-term growth targets is meaningless and the “two elephants in the room” obstructing consumption are the real estate market’s sustained negative growth and collapsing local government expenditure. If the problem continues, China will become 90s Japan—everyone repaying debts, economic growth severely dragged down. The solution is the 1990s debt governance model—government capital injection to get triangular debt [三角债] (chains of unsettled arrears) circulating—not structural adjustment, and not infrastructure investment, which has itself already gone into negative growth. — Dean, Dishui Lake Advanced Institute of Finance, Shanghai University of Finance and Economics (经济观察报, 26 March)

China’s Financial Strategy: Power, Sovereignty and the Limits of Caution (31 March)

This post presents a sharp debate over the meaning of financial power in China’s rise. Xia Bin argues that China remains a “weak financial power” and should pursue full domestic marketisation alongside only limited cross-border financial globalisation, using caution and control to shield the real economy from external shocks. Alicia García-Herrero, by contrast, contends that this approach understates finance’s autonomous strategic value and leaves China trapped in dependence on the dollar system. The piece is valuable not only for Xia’s systematic argument, but for the contrast it draws between financial caution and financial ambition.

Protracted War in the Middle East: Strategic Opportunity for China (22 March)

This swiftly censored memo by the Intellisia Institute sets out a strikingly hard-edged argument: that a prolonged war in the Middle East could become a major strategic opportunity for China. Rather than merely draining American military, financial, and diplomatic resources, the conflict is presented as one that could redirect capital, energy routes, and supply chains in Beijing’s favour. The piece argues that turmoil at sea strengthens China’s continental advantages, accelerates renminbi-based hedging, and deepens China’s role as the hub of global industry. Its logic is markedly more opportunistic than the neutrality favoured in much recent Chinese commentary.

Iran as the “Bridgehead” for Securing China’s Western Frontier (17 March)

Revisiting a 2013 essay by Zhang Wenmu, this post presents Iran as the outermost shield of China’s western security, embedded in the Zagros–Hindu Kush–Himalaya barrier that has historically blunted pressure from the west before it could reach China. Zhang argues that the states of the Iranian Plateau, more than India, have long absorbed and worn down external powers, from ancient empires to modern Western intervention. The article therefore casts Iran’s security as strategically bound to China’s own. Read against the backdrop of the current Iran crisis, it reveals a harsher, more anxious geopolitical logic than that found in much recent Chinese commentary.

Active Neutrality in the Middle East – Chinese Commentary on the US-Iran war (8 March)

Chinese commentary largely favours neutrality and mediation in the US–Iran war, with only limited calls for greater Chinese assertiveness. Analysts condemn the strikes as illegal yet often pair this with grudging respect for American power and arguments that China must learn from it. Some see the conflict as a strategic opportunity, predicting US entanglement in the Middle East, while others warn its logic could be replicated in East Asia. Most argue the consequences for China depend on the war’s outcome, doubt regime change without ground troops, and prioritise insulating US-China ties.

Chinese Debates on a Fragmenting Global Order | Digest: February 2026 (3 March)

This digest surveys Chinese commentary on a world increasingly defined by US retrenchment, regional fragmentation and intensifying great power rivalry. It highlights debates over how China should respond: whether through sharper economic red lines, new forms of managed trade, or more ambitious leadership in shaping a post-American order. Coverage spans Iran, Japan, Taiwan, Europe, Latin America, the Chinese economy and AI’s social effects. Across these themes, a central question emerges: how should China navigate a more dangerous, unstable and potentially more permissive international environment without overreaching or repeating America’s mistakes?

Today’s top items:

1. Wang Yi working the phones about Iran war - Wang Yi has been very busy working the phones about the Iran crisis over the last 24 hours, holding calls with the German, Saudi Arabia and Bahrain Foreign Ministers and the EU’s High Representative for Foreign Affairs and Security Policy. Wang has also spoken with the Iranian FM in recent days, but I do not believe he has spoken with his Israeli and American counterparts. Perhaps this is the moment China can play a constructive role in opening the Strait of Hormuz, but so far they are blocking a Bahraini UN resolution to reopen the Strait so I am skeptical.

The PRC Foreign Ministry spokesperson told the April 2 pres conference that:

The root cause of the obstruction to navigation in the Strait of Hormuz is the illegal military actions by the United States and Israel ag…

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Show Notes:

On today's show Andrew and Bill begin with thoughts on China's response to the war in Iran, including a peace plan co-authored with Pakistan, why the PRC is not necessarily interested in global leadership, how China sees a deepening U.S. rift with NATO countries, and President Trump's visit to Beijing rescheduled for May 14th. From there: Context for the KMT Chair's visit to China later this month, reactions to a Reuters report on Huawei's latest AI chips, while the Financial Times reports that both Manus co-founders have been banned from leaving China. At the end: ZXMOTO steals the show at the World Superbike Championship and Zhang Xue introduces himself to the world.

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Related Readings:

China-Pakistan Iran peace initiative; PBoC monetary committee meeting; US-China; ZXMOTO; Taxes wanted -- Sinocism

KMT Chairwoman to visit China; Li Qiang on Xiong’an; March Politburo meeting; Beijing bans drones; WDO, SAMR on involution -- Sinocism

China, Pakistan Issue Joint Call for Peace, Reopening Hormuz -- Bloomberg

A brief history of China’s X-point plans for the Middle East -- China-Mena Newsletter

Will China be the real winner from the Iran war? -- The Economist

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Chinese analysis on the war in Iran -- China Mena Newsletter

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Li Qiang examined nuclear power, hydropower, and other equipment and core components, encouraging the enterprises to target the frontiers of science and technology and market demand, promote the deep integration of artificial intelligence and other advanced technologies with manufacturing, and continuously achieve new breakthroughs in clean energy equipment manufacturing and other fields. - Li Qiang on an inspection tour of Sichuan

AI summary of today’s top items:

1. Premier Li Qiang’s three-day Sichuan tour was heavy on clean energy, energy security, and advanced technologies.

2. With Trump set to announce next steps tonight, the Iran war remains unresolved as the UAE pushes the UN to authorize force to reopen Hormuz, potentially putting Beijing in an uncomfortable spot between Tehran and its Gulf partners.

3. A Qiushi “special commentary” by a CASS economist offers the most detailed official-media explanation yet of why China’s trade surplus is structural rather than deliberate — and lays out a…

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1. China and Pakistan propose Iran war peace initiative - Pakistani Deputy Prime Minister and Foreign Minister Dar is in Beijing and met with Wang Yi. After their meeting they issued the “Five-Point Initiative of China and Pakistan For Restoring Peace and Stability in the Gulf and Middle East Region”:

I. Immediate Cessation of Hostilities: China and Pakistan call for immediate cessation of hostilities and utmost efforts to prevent the conflict from spreading. Humanitarian assistance must be allowed to all war-affected areas.

II. Start of peace talks as soon as possible. Sovereignty, territorial integrity, national independence and security of Iran and the Gulf states should be safeguarded. Dialogue and diplomacy is the only viable option to resolve conflicts. China and Pakistan support the relevant parties in initiating talks, with all parties committing to peaceful resolution of disputes, and refraining from the use or the threat of use of force during peace talks.

III…

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1. KMT Chairwoman Cheng Li-wen to visit China - KMT Chairwoman Cheng Li-wen will head a delegation to visit Jiangsu, Shanghai, and Beijing from April 7 to 12. It is not confirmed that she will meet with Xi Jinping, but that is the expectation, especially since the PRC announcement of the visit stated “CPC Central Committee and General Secretary Xi Jinping Welcome and Invite KMT Chairwoman Cheng Li-wen to Lead a Delegation Visit”. It is not clear how well her visit will go over inside the KMT, but we should all hope that through Cheng Beijing continues to see prospects for some sort of peaceful resolution of the Taiwan issue, even if she probably can not deliver what Beijing wants.

2. Li Qiang chairs State Council Executive Meeting - The March 27 State Council executive meeting chaired by Premier Li Qiang covered three main agenda items.

On Xiong’an New Area, the meeting called for implementing Xi Jinping’s recent address on the area’s development, striking a balance b…

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Next week may be more interesting, there should be the March Politburo meeting, and whether or not there is a ceasefire in the Iran War, we may start seeing more data showing growing inflation pressures in China in areas reliant on imports affected by the war. We went into the year worried about deflation in China, the odds may be going up that inflation will now become a problem, at least on the producer side.

Today’s top items:

1. Wang Yi speaks with Canadian FM - Wang Yi continued his calls with counterparts around the world to discuss the Iran war. In a call today with the Canadian Foreign Minister he said, according to the Xinhua readout:

the Iranian nuclear issue should be resolved through dialogue and should not become a justification for the use of force. The abuse of force will only bring serious repercussions, and the spillover of the war threatens …

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1. US-China - The Iran war should be over by May 13th, if that is the condition for President Trump’s visit to China to meet Xi Jinping. Earlier today Trump posted that he will meet President Xi in Beijing May 14-15.

It is interesting that Trump refers to Xi as “President”, the preferred title for foreign meetings, while Secretary of Treasury Bessent calls Xi “Party chair”, a role that does not exist.

US-China cooperation on fentanyl continues, with a new indictment “against six Chinese nationals and two Chinese pharmaceutical companies in narcotics and money laundering conspiracies involving chemical agents used to manufacture and cut fentanyl. Three defendants are also charged with attempting to provide material support to a Mexican drug cartel.”

The Department of Justice announcement of the indictments credited PRC cooperation: “China’s Ministry of Public Security provided the FBI with critical intelligence that helped advance its understanding and investigation of…

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On today's show Andrew and Bill begin with last week's indictment of Wally Liaw, the co-founder of Super Micro, and its implications for US chip policy. Topics include: Incredible details from the indictment, US enforcement options, and bipartisan calls for government action on Nvidia exports to China and Southeast Asia. Then: Xi takes three Standing Committee members and three other Politburo members to inspect the progress at Xiong'an, signaling continued commitment to the "new area" 60 miles south of Beijing. At the end: Reports that the US visit to China is delayed indefinitely, the PRC's delicate diplomatic calculus as the Iran war continues, and tech news on Manus, Apple, OpenClaw, and an FCC ban on routers.

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Today’s top items:

1. Wang Yi speaks with Iranian counterpart - Wang Yi had a call with Iranian Foreign Minister Abbas Araghchi. According to the readout:

Wang Yi reiterated China’s principled position, emphasizing that all hotspot issues should be resolved through dialogue and negotiation instead of using force. Talking is always better than fighting. This serves the interests of the Iranian nation and people and reflects the universal desire of the international community. He expressed hope that all parties would seize every opportunity and window for peace to launch the peace negotiation process as soon as possible. China will continue to maintain an objective and impartial stance, oppose the violation of other countries’ sovereignty, actively advocate for peace and the cessation of hostilities, and commit to regional peace and stability.

2. Japan-China - There is a new diplomatic incident between Japan and China. A man claiming to be a member of the Self-Defe…

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1. Xi inspects Xiong’an - Xi took three PBSC members - Li Qiang, Cai Qi and Ding Xuexiang - and three other Politburo members - He Lifeng, Yin Li, and Chen Min’er - to inspect Xiong’an, his fourth visit to the new city since 2017. It is an interesting signal to make this his first inspection tour after the Two Sessions and the launch of the 15th Five Year Plan.

There can be no doubts about the decision to build Xiong’an:

Xi…emphasized that under the strong leadership of the CPC Central Committee and through the joint efforts of all parties, the construction and development of the Xiong’an New Area have achieved major phased results. Practice has fully proven that the Central Committee’s decision to build the Xiong’an New Area is completely correct, and the work in all aspects has been solid and effective.

More from the long CCTV report on his visit, which I have translated in full below:

During his inspection and hosting of a symposium on further promoting t…

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On today’s show Andrew and Bill begin with the news that President Trump has postponed his visit to Beijing amid the war in Iran, including why a delay made sense for both sides, a “Board of Trade” proposal amid signs of stability in Paris, and the uncertainty that pervades on both sides as the war in Iran continues. From there: Reactions to a DNI assessment on China’s reunification intentions, news on U.S. weapons sales to Taiwan, the unknowns for China as Gulf unrest persists, and questions surrounding PLA readiness in 2026. At the end: Reactions to reports that several military scientists have had their profiles scrubbed from public websites, while Jensen Huang tells the world that Nvidia has received purchase orders for the H200 but Groq will not be shipping inference chips.

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1. Iran war - Wang Yi had a call with UK Foreign Secretary Yvette Cooper to discuss the “situation in the Middle East”. From the Xinhua readout:

Wang Yi elaborated on China’s position, stating that the current conflict in the Middle East is still escalating and the war is still expanding. This not only impacts regional peace and stability but also directly affects international energy, finance, trade, and shipping, undermining the common interests of all countries. There are no winners in a protracted war, and a ceasefire to end the fighting is the common desire of the people. China urges all parties to immediately cease military actions, resolve differences through equal dialogue, and jointly safeguard regional peace and stability. As permanent members of the UN Security Council, China and the UK bear the responsibility of maintaining international peace and security. Both sides should strengthen communication, persist in acting in ways conducive to peace, jointly co…

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1. Xi meets with Turkmenistan leader - Xi met with Gurbanguly Berdimuhamedov, National Leader and Chairman of the People’s Council of Turkmenistan. According to the PRC readout of their meeting, among the things Xi called for is expanding “the scale of cooperation in the natural gas sector”:

Xi Jinping emphasized that mutual support is the core essence of the comprehensive strategic partnership between China and Turkmenistan. No matter how the international situation changes, China will always support Turkmenistan in safeguarding its national independence, sovereignty, and territorial integrity, always support Turkmenistan in pursuing a policy of permanent neutrality, and always be a trustworthy cooperative partner of Turkmenistan. The two sides should accelerate the alignment of the Belt and Road Initiative and the strategy to “Revive the Great Silk Road,” expand the scale of cooperation in the natural gas sector, elevate the level of trade and investment, and broade…

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1. US-China - President Trump said Tuesday that his meeting with Xi may now take place in five or six weeks, and that the Chinese are “fine with it”. He was originally scheduled to arrive in China two weeks from today, so that would mean the meeting may happen sometime after April 20.

Earlier today I had a fascinating conversation with Demetri Sevastopulo, US-China correspondent for the Financial Times. We discussed US-China relations, now and in Trump’s first term, when he was Washington Bureau Chief for the FT, Trump’s delayed China trip and why it may be delayed longer than 5-6 weeks, Taiwan, and the visit later this week to Washington by Japanese Prime Minister Takaichi.

Demetri pointed out that the Chinese may be unwilling to commit to a new date for the Trump-Xi meeting until the war is over, as if it is ongoing the risk of another delay would not be low.

2. PRC-Vietnam - Wang Yi led a delegation with Minister of Public Security Wang Xiaohong and Minister of De…

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We had a fascinating conversation about US-China relations, now and in Trump’s first term, when he was Washington Bureau Chief, for the FT, Trump’s delayed China trip and why it may be delayed longer than 5-6 weeks, Taiwan, and the visit later this week to Washington by Japanese Prime Minister Takaichi.

Thank you to Demetri and everyone who tuned in live, and please do subscribe to him on Substack @