When some people discuss China’s trade today, they often see only import and export figures and overlook the real effects behind them. China is both a “super seller” and a “super buyer.” As a “super seller,” the effect we bring to other parties is primarily that of benefiting our neighbors. - Li Qiang today at the Canton Fair

Today’s top items:

1. September trade data - September trade data was another stunner. Exports rose 36.3% year-on-year in dollar terms, the fastest since February and far above the 25.5% consensus. Imports rose 31.0%.

The monthly surplus was $133.53 billion, the second largest on record, including a 20-month-high $34.01 billion surplus…

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Today’s top items:

1. National Health and Wellness Conference - The National Conference on Health and Wellness convened from October 12 to 13 in a major political mobilization for delivering the health commitments in the 15th Five-Year Plan. The previous one was held in 2016. The entire Standing Committee attended and Xi of course gave an “important speech” in which he:

stressed that the 15th Five-Year Plan period is a critical period for achieving the goal of building a Healthy China by 2035. China must unswervingly follow the distinctively Chinese path for health and wellness development, implement the guidelines for health and wellness work in the new era, leverage strengths, consolidate foundations, shore up shortcomings and reinforce weak links, promote the high-quality development of health and wellness undertakings, continuously improve the people’s health, and ensure decisive progress in building a Healthy China.

Among the key points from his speech:

• Health must influence government decisions so planning, policy design, project appraisal and construction should prioritize their effects on health;

• Prevention comes first so there should be more focus on healthier lifestyles, food safety and disease-control capacity, including preventing large-scale epidemics;

• Strengthen care close to home so they need to improve and expand county and community institutions, tiered diagnosis and treatment, chronic-disease management and better integrate Chinese and Western medicine;

• Coordinate healthcare, insurance and pharmaceuticals so there needs to be deeper reform of public hospitals around their public-service purpose; reasonable patient costs and optimization of procurement and insurance payments while preserving fund security;

• Build capacity in medical research, innovation, health industries and personnel.

He also talked about China’s global role:

Xi stressed that health for all is a common aspiration of humanity. China should actively promote the building of a global community of health for all, join hands in responding to major challenges in health and wellness, and continuously improve the health and well-being of people in all countries. Health and wellness cooperation under the Belt and Road Initiative should be deepened, and China’s foreign health assistance should be strengthened and innovated. China should tell its Healthy China story well and further build international consensus.

The PRC has made incredible strides in health care in the last decade. There is still much to be improved, but this is one area where policymakers deserve a lot of credit.

2. Xi meets with leaders from Botswana and Togo - According to the readout of his meeting with the Botswana President, translated here, mining was on Xi’s agenda:

Xi put forward four proposals for advancing China-Botswana and China-Africa mining cooperation. First, uphold the premise of cooperation that Africa’s resources belong to Africa. China is willing to share its experience and help African countries formulate mining development plans suited to their national conditions. Second, uphold the philosophy of cooperation that balances principles and interests and pursues mutual benefit. China will continue to encourage Chinese companies to improve their operational capabilities, transfer green technologies suited to Africa’s realities, and promote South-South cooperation in mining development. Third, uphold high-quality development as the direction of cooperation. China will continue to promote the transformation of China-Africa mining cooperation toward industrial value addition, explore affordable and sustainable innovative financing models, and support Africa’s modernization through high-standard cooperation. Fourth, uphold a fair and open environment for cooperation. Africa’s resources should not become tools of geopolitical struggle. China welcomes genuine efforts by all parties to support Africa’s development and is willing to work with African countries to create more favorable conditions for corporate investment and operations...

习近平就推动中博、中非矿业合作提出4点主张：一是坚持非洲资源属于非洲的合作前提。中国愿分享自身经验，帮助非洲国家制定符合国情的矿业发展规划。二是坚持义利相兼、互利互惠的合作理念。中方将继续鼓励中国企业提升运营能力，转移符合非洲实际的绿色技术，推进矿业发展南南合作。三是坚持高质量发展的合作方向。中方将继续推动中非矿业合作向产业增值转型，探讨可负担、可持续的创新融资模式，以高水平合作助力非洲现代化进程。四是坚持公平开放的合作环境。非洲的资源不应成为地缘政治斗争工具，中方乐见各方真心助力非洲发展，愿同非方一道，为企业投资经营创造更适宜条件。

The two countries issued the “Joint Statement between the People’s Republic of China and the Republic of Botswana on the Establishment of a Comprehensive Strategic Cooperative Partnership”, translated here.

3. Cold water on the EU-China trade outcomes? - A Tuesday post from Yuyuan Tantian, translated here, may have thrown a bit of cold water on the claim that hybrid vehicle exports to the EU will be cut in half. Perhaps they are trying to signal strength to a domestic audience, but it makes it sound like there are some potential misunderstandings:

Tanzhu has learned that the baseline used in the negotiations was the number of hybrid vehicles the EU imported from China in 2025: 302,000.

谭主了解到，双方谈判时的基准，是2025年欧盟自中国进口混动汽车的数量：30.2万辆。

The claim that exports would “fall by more than half” came from the EU and serves the EU’s own narrative.

“减少一半以上”的说法来自欧方，服务的是欧方自己的叙事。

The EU subsequently extrapolated the expected volume of exports over the next four years using the growth rate of China’s hybrid-vehicle exports to Europe in recent years. It then compared that figure with the arrangement reached through the consultations and arrived at the claim that exports would “fall by more than half.”

欧方后来按过去几年中国混动汽车对欧出口的增速，推演出未来四年的预期出口量，再与磋商后的安排比较，得出“减少一半以上”的说法。

This extrapolated export volume was not the basis for the two sides’ actual consultations.

这个推演的出口量并不是双方实际磋商的依据。

Forecast data are inherently uncertain. Export performance in recent years was affected by many short-term market factors.

预测数据本身有不确定性。过去几年的出口情况包含了很多市场短期因素的影响。

It is inappropriate to use performance during a period of temporary fluctuations to make a linear projection for the next four years…

拿阶段性波动时期的表现去线性推演未来四年的情况，并不合适。

Therefore, in assessing these negotiations, it is important to distinguish between the story the EU tells publicly and what the two sides actually agreed.

所以看这次谈判，要把欧方对外讲的故事和双方实际谈妥的内容分开看。

And this from South China Morning Post’s Finbarr Bermingham adds to the confusion:

4. Visa finally gets approval for a bank card clearing institution - Almost two decades after Visa should have been allowed to set up a bank card clearing institution in China, the regulators granted approval to start the process. This long overdue approval is not a “deliverable” from Xi-Trump talks, nor is it a gesture of goodwill to the US given how long the PRC has dragged out this process, and how mature and competitive the payments space now is. But the Visa CEO, currently also the chair of the US-China Business Council, will now have even more incentive to act as a damper on US-China relations.

5. Huang Qifan under investigation - Sometimes the rumors are correct, and we got confirmation today that former Chongqing mayor Huang Qifan, 74, is in trouble. Huang’s political career effectively ended in 2016 after he left his post as mayor of Chongqing, where he served with Bo Xilai and then Sun Zhengcai, both of whom are now in prison. He clearly had some sort of political protection, but whatever that was is no longer operative.

After he was sidelined in 2016 he became politically irrelevant but remained a popular commentator on economic policies. We do not know why Huang’s luck ran out, but Caixin has some suggestions:

Since the 20th Party Congress, eight senior Chongqing officials have fallen: Zheng Hong, Xiong Xue, Lu Kehua, Duan Chenggang, Jiang Duntao, Hu Henghua, Luo Lin and Huang Qifan. In addition, Li Yuefeng and Wu Cunrong also previously served in Chongqing...

中共二十大以来，重庆已有郑洪、熊雪、陆克华、段成刚、江敦涛、胡衡华、罗蔺、黄奇帆等八名高官落马。此外，李钺锋、吴存荣也曾任职于重庆。

In addition, within the space of a month, two senior executives of important financial platforms that Huang built during his tenure have fallen, drawing attention. On September 12, Xie Wenhui, former Party secretary and chairman of Chongqing Yufu Holding Group Co., Ltd., was placed under investigation; he had long worked in the Chongqing Rural Commercial Bank system. On September 30, Wu Jian, former Party secretary and chairman of Southwest Securities Co., Ltd., was placed under investigation; he had served as a Party committee member and deputy general manager of Chongqing Yufu Assets Management Group Co., Ltd. Caixin also understands that Huang’s downfall is said to be related to problems in the mixed-ownership reform of some of the city’s state-owned enterprises during his time as mayor of Chongqing. And during his tenure as mayor, he lived through the downfall of two municipal Party secretaries, Bo Xilai and Sun Zhengcai.

此外，一个月内，黄奇帆任内打造的重要金融平台有两名高管落马，引发关注。9月12日，重庆渝富控股集团有限公司原党委书记、董事长谢文辉被查，他长期在重庆农商行系统工作；9月30日，西南证券股份有限公司原党委书记、董事长吴坚被查，他曾担任重庆渝富资产经营管理集团有限公司党委委员、副总经理。另据财新了解，黄奇帆落马据称与其担任重庆市长期间该市部分国企混改存在的问题有关。而他在重庆市长任上，经历了薄熙来和孙政才两任市委书记的落马。

Chongqing is a cursed posting for politicians. Former Chongqing Party Secretary Chen Min’er is in his second term on the Politburo and now in Tianjin, but any talk of him for a bigger promotion seems to have died out. Yuan Jiajun, with a background in the aerospace sector, is the current Party Secretary there.

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On today’s show Andrew and Bill begin with an extended survey of EU-PRC trade dynamics in the wake of an eventful week. Topics include: a deal on hybrid exports that may have averted a trade war, potential loopholes that may complicate the effectiveness of that reform, the tools proposed by France and Germany that may have forced a compromise, tensions that remain unresolved as the EU Council meets later this week, and a word on currency reforms as the PBOC rejects international methods for assessment. From there: Holiday spending data hits a four-year low amid analysis that suggests debt may be constraining stimulus measures. At the end: reactions to a report on Xi’s rest breaks at the White House, Xi succession questions, a report on the F-35 mishap, and speculating on the future of US-China relations and whether the current administration has passed peak China dove.

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In this issue:

1. Guidelines for developing new quality productive forces

2. Outcomes from EU-China trade talks

3. Improving new car design safety and quality

4. Cracking down on food safety violations

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. Guidelines for developing new quality productive forces - The Central Committee and State Council on Friday released the Opinions on Developing New Quality Productive Forces. Xinhua counts 19 measures and highlights original innovation, breakthroughs in key core technologies and a bigger role for national laboratories. The overall requirements make “a substantial increase in total factor productivity” the “core hallmark” and call for “relations of production better suited to new quality productive forces.” I have posted a translation of the document here and of th…

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Today’s top items:

1. European Commissioner for Trade and Economic Security in Beijing - European Commissioner for Trade and Economic Security Maroš Šefčovič met with Minister of Commerce Wang Wentao Thursday in Beijing, but all we have so far from the PRC side is a one-sentence release saying they met. Šefčovič will meet Friday with He Lifeng.

2. PBoC position paper on the RMB - The People’s Bank of China on T…

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PRC Ministry of Commerce officials did not get much of a vacation as they prepare for the visit of European trade commissioner Maroš Šefčovič, who arrives Thursday for two days of talks that seem unlikely to head off escalation in the EU-PRC trade tensions.

Today’s top items:

1. EU-China trade talks - Ahead of European trade commissioner Maroš Šefčovič’s trip to Beijing, German Chancellor Merz and French President Macron released a letter and a joint position paper calling for measures that, while not mentioning China, signal a willingness to take a tougher approach against China. The PRC reaction so far has been muted, and I expect them to call the Europeans’ bluff.

There were reports earlier today that the EU would try to get China to agree to voluntary curbs on exports of hybrid cars, but according to the Financial Times the Chinese side will not go for it:

European trade commissioner Maroš Šefčovič starts two days of talks in Beijing on Thursday and wants to agree at least one measure to reduce China’s ballooning trade surplus with the EU rather than launch punitive measures that could spark a retaliatory spiral.

His original pitch was that Beijing agree to limit hybrid vehicle exports to the EU to about 15 per cent of the EU market compared with more than a third today or face retaliatory action such as tariffs.

However, EU officials told member states on Wednesday that China had refused, according to the diplomats.

On Wednesday, Yuyuan Tantian 玉渊谭天 published an article that likely signals the PRC’s approach to trying to avoid a trade war. I have translated it here. The article concludes:

The existing consultations can address at least four categories of issues:

现有磋商至少可以处理四类问题：

Through a joint monitoring mechanism, jointly verify trade flows in sectors such as plug-in hybrid vehicles and chemicals;

通过联合监测机制，共同核对插混汽车、化工等行业的贸易流量；

Address the electric-vehicle dispute through price undertakings and other means, preventing the dispute from escalating;

通过价格承诺等方式处理电动汽车争端，避免将摩擦扩大；

Encourage Chinese companies to invest in Europe while ensuring that Chinese-invested firms receive a stable and nondiscriminatory policy environment;

鼓励中国企业在欧洲投资，同时确保中资企业获得稳定、非歧视性的政策环境；

Make the supply of critical items more predictable while resolving market-access restrictions faced by Chinese companies in Europe.

就关键物项建立更稳定的供应预期，同时解决中国企业在欧洲面临的市场准入限制。

If the European side stands ready to escalate at any time while the two sides are engaged in friendly consultations, that cannot be called meeting each other halfway.

如果在双方友好磋商期间，欧方随时准备加码，这不叫相向而行。

New tools can raise the cost of foreign goods entering the European market, but they cannot lower European companies’ energy costs. They can restrict foreign companies’ development in Europe, but they cannot carry out Europe’s industrial upgrading on its behalf.

新工具可以抬高国际商品进入欧洲市场的成本，却不能降低欧洲企业的能源成本；可以限制国际企业在欧洲发展，却不能替欧洲完成产业升级。

After all, trade imbalances are structural problems that have taken shape over a long period and are difficult to resolve through short-term restrictive measures. Both sides need to maintain strategic patience.

毕竟，贸易不平衡是长期形成的结构性问题，依靠短期限制措施很难解决。双方都需要保持战略耐心。

I doubt that the EU will go for it, but given Merz’s political weakness, the riots in France and the contested nature of EU trade policy towards China, I would not be surprised if PRC leaders believe the EU is bluffing and will back down if given a few crumbs. That might be a miscalculation, as this time feels different.

2. Reality after the Xi-Trump meeting - The US remains frustrated with the flow of rare earths, and now, according to Reuters, is back to slowing some aircraft-parts exports to China as a way to generate leverage in the ongoing talks.

One story over the holiday may particularly upset Xi. The Wall Street Journal, citing “people familiar with the visit planning”, reported that Xi needed lots of rest during his brief visit to DC, including “a private room inside the West Wing for Xi to take a break between events, with only his wife, Peng Liyuan, permitted to join him”, and that he declined a working lunch.

It can be true that at his age he needs breaks after such a long trip and the jet lag without also meaning he is sick, as the rumor mill suggested before his visit. But the PRC side cannot be happy this was leaked, as it makes him look weak and puts more emphasis on the succession question just weeks from the Fifth Plenum and just a year out from the 21st Party Congress.

A few days after that Wall Street Journal story, the South China Morning Post wrote that Beijing wanted more from Xi’s state visit to Washington:

Beijing suggested Xi could engage with the American business community and public, pushed to raise dozens of diplomatic and security issues with Trump, and proposed talks on artificial intelligence between Chinese and American executives, according to the sources, who spoke on condition of anonymity because they were not authorised to speak to media.

3. US-China AI/SI - On October 1, Yuyuan Tantian 玉渊谭天 published an article that laid out what the PRC government likely sees as the “low-hanging fruit” for the mooted US-China AI/SI Dialogue.

From the piece, which I have translated here:

First, jointly explore standards for classifying and grading AI risks…

第一，共同探讨AI风险分类和分级标准。

Second, finalize the scope, procedures, and requirements for notification of AI risk incidents…

第二，敲定AI风险事件通报范围、流程与要求。

Third, place AI governance within the broader framework of China-US exchanges.

第三，将AI治理置于更广泛的中美交流框架中。

Those do seem like reasonable starting topics, and given the Trump Administration’s approach to AI/SI regulation I do not think anyone should expect much more.

PRC AI/SI specialists are thinking about the risks. Page 6 of the September 30 Study Times has an article by Zeng Yi, Wu Yuzhang Chair Professor at the Gaoling School of Artificial Intelligence, Renmin University of China, and Dean of the Beijing Institute of AI Safety and Governance, titled “Guarding Against the Risk of Frontier AI Technology Spinning Out of Control 防范前沿人工智能技术失控风险”, which I have translated here.

Zeng discusses the risks of a “Chernobyl moment” for AI/SI and concludes with this:

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Much of the commentary in September revolved around the strength and limitations of economic interdependence as a source of political power. Against the backdrop of “strategic stability”—or stalemate—in the US-China trade relationship, Wu Bingxuan and Huang Chaofeng advise Chinese firms to concentrate on trade diversification and developing sanctions-evasion tools against the prospect of expanding US trade controls and restrictions on Chinese firms.

Regarding the absence of a business delegation accompanying Xi to Washington for the summit last month, the well-connected political commentator “Chairman Rabbit” suggests China’s feelings of insecurity about the trading relationship may lie behind it. The presence of high profile Chinese CEOs could have invited scrutiny of their relationship with the state, or requests from Trump for them to invest in the US.

China-EU trade talks are ongoing, with a resolution hoped to be achieved by mid-October and a further escalation in trade tensions looming if the talks fail to deliver. While these talks take place, China’s global trade relationships are also in the spotlight elsewhere.

The “China squeeze” thesis, recently advanced by Arvind Subramanian and Shoumitro Chatterjee, continues to provoke indignation in China against the backdrop of Xi’s visit to New Delhi for last month’s BRICS summit. The economist Xia Chun rebuts the idea that China’s economic juggernaut is displacing industrial activity in developing countries, offering as he does so an interesting window into how many in China view the source of their industrial advantage. Liu Zongyi links the “China squeeze” concept to Indian policy circles and an attempt by New Delhi to compete with China for leadership over the Global South, while Jin Canrong advises Chinese enterprises to be cautious about investing in India.

Brazil, another Global South heavyweight, is already a rapidly growing destination for Chinese enterprises escaping the low-profit squeeze of race-to-the-bottom competition at home. Against the backdrop of the election race between Flavio Bolsonaro and Lula, several scholars look at how economic penetration and political influence interact. Li Wei observes that there is a mismatch between Brazil’s apparently “laid-back” approach to international affairs and the hope among some Chinese scholars that it could form a counterweight to the US in the western hemisphere.

Di Dongsheng and Zhao Yixian offer nicely contrasting prescriptions for Chinese businesses expanding their operations in Brazil. For Di, the goal should be to deepen Chinese influence in order to shift Brazil’s political and business climate in ways more favourable to Chinese firms. Zhao, meanwhile, suggests Chinese businesses expanding overseas should aim to build “a Brazilian company with Chinese strengths”, adapting to local requirements and labour practices from the outset. BYD, in particular, has drawn fire for its labour standards in the country.

On the domestic front, Yang Wenhui and Wu Xinye express thoughtful caution on the limitations of AI as a tool for improving governance, while a roundtable with some of China’s most influential economists sets out the main lines of debate over economic rebalancing and stimulus in China. Liu Shangxi, however, observes that beyond shuffling money around, resolving problematic moral hazard in China’s economy will require more thorough institutional reforms.

— James Farquharson

1. US-China:

   1. Meng Weizhan on the midterms and the durability of Trump’s accommodation with China

   2. Liu Chong on developing a shared US-China vocabulary of AI risk

   3. Wu Bingxuan & Huang Chaofeng on strategies for evading the expanding US sanctions toolkit

   4. Ren Yi (Chairman Rabbit) on the possible reasons underlying the absent business delegation on Xi’s visit to Washington DC.

2. Global Order:

   1. Zhu Zhaoyi on the need to better define China’s security role overseas.

   2. Huang Ping on the challenge posed to certain middle powers’ leverage over AI supply chains by US–China accommodation

   3. Sun Chenghao & Zhang Xueyu on how AI could drive more intense nuclear competition

   4. Zhao Hongtu & Chen Wenlin on the rise of “electricity powers” and Europe’s energy dilemma

3. Brazil:

   1. Li Wei on the gap between China’s commercial presence and America’s social influence in Brazil

   2. Di Dongsheng on Chinese firms’ encounters with Brazil’s labour protections and development politics

   3. Zhao Yixian on mitigating the risks faced by Chinese companies setting up operations in Brazil.

4. India:

   1. Liu Zongyi on India’s BRICS ambitions and competitive coexistence with China

   2. Jin Canrong advising caution to potential Chinese investors in India

   3. Xia Chun on land reform, caste and the roots of China’s manufacturing lead over India

5. Russia and North Korea:

   1. Li Shenghua & Wu Wenzhuo on the strategic implications of North Korea’s current leverage over Russia

6. Economy:

   1. Ju Jiandong, Justin Yifu Lin, Yu Yongding, Yao Yang & Li Xunlei on China’s fiscal stimulus choices

   2. Liu Shangxi on the obstacle posed by moral hazard to China’s economic transition

7. AI and Tech:

   1. Yang Wenhui on how AI use could come into tension with local officials’ discretion and initiative

   2. Wu Xinye & Wang Zice on how AI-assisted grassroots governance could simply amplify the loudest voices

   3. Huang Rihan & Shi Yukun on the strategic purpose of US-China competition in orbital computing

8. State and Society:

   1. Liu Yunshan on the issue of “exam specialists” among the younger generations

   2. “Wen Ping” on algorithm-driven pseudo-history and upholding the correct national narrative

1. US-China

Meng Weizhan (孟维瞻): A narrow Democratic House majority would make Trump’s accommodation with China more politically costly, while leaving him substantial control over policy. Investigations, hearings and budget conditions could expose concessions to accusations of sacrificing national security for trade deals, and Democratic cooperation with Republican hawks over advanced chips, AI computing power, Taiwan and secondary sanctions could intensify this pressure. The main risk is that congressional pressure over export licences, sanctions and investment makes Trump’s existing accommodation with China harder to sustain, gradually eroding the summit’s stabilising effect. – Associate Research Fellow, Institute for Advanced Study in Social Sciences, Fudan University (Greater Bay Area Review, 28 September)

Liu Chong (刘冲): For a China-US cooperation framework on AI governance to succeed even as competition intensifies, a shared understanding of risk will be necessary first. The threshold for slowing or stopping AI training should depend less on a definition of whether AGI has been reached than on whether existing safeguards can reliably constrain a model. Governance standards should specify which combinations of capabilities warrant closer monitoring and what kind of abnormal behaviours warrant slower or suspended training. It may then be possible to establish scientific trust, mechanisms for sharing safety capabilities and a common understanding of when to apply the brakes. – Director, Centre for Technology and Strategy, China Institutes of Contemporary International Relations (CICIR, 28 September)

Wu Bingxuan (吴柄萱) & Huang Chaofeng (黄朝峰): The backdrop of stabilising US–China relations is not halting expanding financial restrictions on Chinese firms. Broader US trade controls require more diversified technology and supply chains, with risks assessed beforehand and alternative buyers and suppliers kept available. To counter tighter investment scrutiny, firms should expand de-dollarisation and use offshore financial centres and complex ownership structures to make transactions and acquisitions harder for US regulators to scrutinise. – Wu Bingxuan, PhD student, Koguan School of Law, Shanghai Jiaotong University; Huang Chaofeng, Professor and Deputy Director, National Institute for Strategic Studies, Shanghai Jiaotong University (Shanghai Jiaotong National Institute of Strategic Studies, 27 September)

Ren Yi (任意) / Chairman Rabbit : The absence of a full business delegation accompanying Xi to Washington may reflect concerns about sending the wrong policy signals domestically and internationally. Participation of Chinese companies in the delegation could mark private companies as state-linked targets for sanctions or distort domestic competition, or cause them to be pressured into US investments whose long-term security no White House administration can guarantee. Lower-profile exchanges through industry associations and state-level exchanges would allow greater economic cooperation while limiting these risks. – Political commentator (Tuzhuxi New Platform, 24 September)

See our separate analysis for a fuller account of the response in China to the Xi-Trump Summit:

2. Global Order

Zhu Zhaoyi (朱兆一): China’s Global Security Initiative needs to move from broad principles to practical security support. As Gulf states diversify their partnerships without giving up US deterrence, China could contribute crisis warning, mediation, shipping and energy security cooperation, humanitarian assistance and postwar reconstruction. This would give practical substance to “security governance without dependence” in the form of credible and lasting support at critical moments, without copying the US military alliance model or requiring countries to choose sides. – Executive director and associate professor, Middle East Institute, Peking University HSBC Business School think tank (contribution to a World Affairs roundtable, “The Paradox of Security Dependence”, 2026, Issue 18)

Huang Ping (黄平): The smaller economies that control critical AI technologies are indispensable to China and the US, giving them a degree of leverage that is nonetheless subject to the nature of the US-China relationship. These middle powers benefit most from a stable but limited Sino-US rivalry that preserves access to both markets: intensifying competition could force them to choose sides, while a US–China bargain could decide market outcomes without their participation. Following the summit, a shared interest in keeping East Asian semiconductor production running could further reduce the ability of these middle powers to gain leverage in the context of supply shortages. – Qianhai Institute for International Affairs (Greater Bay Area Review, 23 and 30 September).

Sun Chenghao (孙成昊) & Zhang Xueyu (张学玉): AI could intensify nuclear competition without an increase in warhead numbers. Better surveillance and targeting may threaten an adversary’s ability to retaliate, while gains from software and data remain hard to measure through arms control. Practical starting points would be to identify where AI enters nuclear systems and extend the US–China commitment to human control of nuclear weapons to all five recognised nuclear powers. – Associate Research Fellow, Center for International Security and Strategy, Tsinghua University; Research Assistant, Peking University (Strategic Decision-Making Studies, no. 5, 2026).

Zhao Hongtu (赵宏图) & Chen Wenlin (陈文林): The disruption of oil supplies during the US–Israeli conflict with Iran could accelerate the rise of “electricity powers”, especially in Asia. As countries seek to reduce their dependence on imported fuels and vulnerable shipping routes, influence will increasingly rest on the ability to manufacture and deploy clean-energy technology, alongside oil and gas reserves. Europe faces a dilemma: it wants faster electrification to improve energy security, but efforts to reduce dependence on external clean-energy supply chains raise costs and slow the transition. – Institute of Economic Research, China Institutes of Contemporary International Relations (Qiushi, no. 17, 1 September)

3. Brazil

Li Wei (李巍): Washington retains “social influence” in Brazil through regional elites’ children and assets in the US, enabling pressure through visa restrictions, while widespread admiration for America reinforces its influence. China’s extensive trade with Brazil has not yet translated into comparable geopolitical influence, and China should aim to deepen this partnership, exploring military cooperation to strengthen Brazilian autonomy and counterbalance US power. However, Brazil’s “laid-back” [佛系] approach to international affairs and limited ambition to become a global or military power mean that the prospect of Brazil playing a balancing role against the US is still distant. – Professor and Associate Dean, School of International Studies, Renmin University of China (Pingheng Xuehui, 23 September)

Di Dongsheng (翟东升): Chinese firms expanding into Brazil are often frustrated by cultural and institutional differences: labour protections prevent managers from pressing employees to work harder, while misguided progressive policies drain resources from Brazil’s industrial development. To strengthen and protect their investments in the country, Chinese firms should fund stronger industry associations to lobby governments, prevent involutionary competition from replicating overseas and pursue legal remedies when projects run into trouble. They should also work with Brazilian alumni of Chinese universities on cultural and scientific exchanges to build local influence and encourage Brazilians to draw lessons from China’s approach to development. – Dean, Institute of Area Studies, Renmin University of China (Guancha, 3 September)

Zhao Yixian (赵懿先): Chinese firms entering Brazil often choose the quickest, cheapest way to start operating and postpone building local compliance systems. These early decisions are a “slow poison”: tax, labour and other risks may emerge together three to five years later, when the business is larger and correction far more costly. Rather than rushing in, the goal should be to build “a Brazilian company with Chinese strengths”, capable of making decisions and sustaining relationships within Brazil’s institutions. – Director, Overseas Interests Protection Research Centre, East China University of Political Science and Law (Guancha interview, 8 September)

4. India

Liu Zongyi (刘宗义): India wants to use BRICS to strengthen its bargaining position with China and the West while avoiding a choice between them. It seeks to represent the Global South and act as its bridge to Western countries, without turning BRICS into an anti-Western bloc. Through the “China squeeze” narrative, India casts Chinese manufacturing dominance as a constraint on other developing economies in the Global South and gives India a basis to demand more Chinese investment and technology transfer. Its engagement with China thus forms part of a strategy of competitive coexistence, rather than alignment. – Director of the South Asia Research Centre at the Shanghai Institutes for International Studies. (Guancha, 13 September)

Jin Canrong (金灿荣): Chinese businesses looking to invest in India should be cautious: India uses the promise of its vast market to attract Chinese businesses while imposing far tighter restrictions on China than China does on India. Chinese firms should prioritise exports over investment, insist on payment before shipment and favour projects with few fixed assets. If substantial investment is unavoidable, joint ventures with European or Russian firms in India would be an effective measure to spread the risk. – Professor, School of International Studies, Renmin University of China (WeChat Public Account, 7 September)

Xia Chun (夏春): The “China squeeze” thesis, advanced by two Indian economists to account for developing countries’ manufacturing difficulties, cannot explain China’s lead over India, which emerged before reform and opening in 1978. In comparison with India’s incomplete land reform, China’s land reform dismantled landlord power, weakened inherited status barriers and provided the fiscal basis for industrialisation. By contrast, India’s caste hierarchies restricted labour participation and its prioritisation of elite education did not create mass employment as with China’s industrialisation. Instead, India’s IT services attracted skilled workers and raised wage expectations, hindering manufacturing through a form of “Dutch disease”. – Founder and chief economist, Zhihui Group (New Economist, 3 September)

5. Russia and North Korea

Li Shenghua (李圣华) & Wu Wenzhuo (吴文茁): Russia currently depends more on North Korea than Pyongyang does on Moscow because it needs North Korean troops and weapons for the war in Ukraine. Pyongyang could turn this wartime leverage into longer-term gains through Russian economic and technological support and diplomatic backing, reducing its dependence on China. Russia’s need for the alliance could also draw it away from its longstanding opposition to North Korea’s nuclear programme and towards recognition of Pyongyang as a nuclear-armed state. – Professor, College of Economics and Management, and MA student, Centre for Korean Studies, Yanbian University (东疆学刊, 2026, issue 4)

6. Economy

Roundtable at the Tsinghua PBCSF Chief Economists Forum, 19 September: Ju Jiandong (鞠建东) recommends issuing renminbi government bonds overseas to support household incomes, replace local debt and fund investment while advancing renminbi internationalisation. Justin Yifu Lin (林毅夫) recommends central government assuming local debts incurred through implementing national policies, while leaving local governments responsible for vanity projects. Yu Yongding (余永定) urges stronger fiscal expansion and infrastructure investment to boost domestic demand, reduce trade surpluses and limit accumulation of risky dollar assets. Yao Yang (姚洋) supports borrowing domestically, where funds are abundant, and warns that long-term investment priorities cannot resolve immediate economic problems. Li Xunlei (李迅雷) recommends replacing local debt through recapitalisation measures, relaxing special-purpose bond spending restrictions and stimulating consumption to restore domestic economic circulation. (New Economist, 19 September)

Liu Shangxi (刘尚希): The issue of a “shared risk pot” [风险大锅饭] in China’s economy is allowing losses to be socialised through public finances and preventing markets from clearing risks. Implicit state guarantees make keeping inefficient businesses alive cheaper than restructuring, trapping resources in declining industries. Furthermore, an “information black hole” is undermining market-based risk pricing, making banks more cautious about lending and companies more hesitant to borrow. To reform this, capital costs should be made to reflect actual risks, bankruptcy procedures should be simplified to enable orderly exits and the allocation of responsibility within state-run sectors should be made clearer. – Vice-president, China Society of Macroeconomics and CPPCC National Committee member (People’s Political Consultative Daily, 7 September)

7. AI and Tech

Yang Wenhui (杨文辉): Excessive reliance on AI could undermine the discretion and initiative of local officials, which are both important sources of dynamism in China’s development and governance. AI tends to favour predictable and low-risk outcomes, potentially provoking the “passive resistance” of officials to AI adoption if they find reliance on the models constraining their freedom of action and creativity. AI adoption in government should therefore be concentrated in areas where rules are clear, data are abundant and the costs of error are low. Decisions requiring flexibility and ethical judgement should remain with human officials. – Assistant Professor, Institute of State Governance and School of Government, Peking University (E-Government, issue 8, 2026)

Wu Xinye (吴新叶) & Wang Zice (汪子策): While AI promises to improve grassroots governance in some respects, it could reinforce inequalities in whose needs are addressed. Digitally vocal groups could disproportionately influence resource allocation by officials, leaving less digitally engaged residents overlooked. AI systems gathering residents’ views may prioritise issues generating quick likes and comments, overlooking less popular problems that require sustained discussion. Offline outreach and face-to-face discussion should complement digital tools to counter such “click-based participation”. – Professor and PhD student respectively, School of Political Science and International Relations, Tongji University (Social Sciences, issue 8, 2026)

Huang Rihan (黄日涵) & Shi Yukun (石宇坤): Satellite computing constellations are an important field of development and geopolitical competition, potentially helping China maintain computing services when ground facilities and networks are disrupted. Furthermore, analysing satellite observations in orbit could speed disaster response by reducing the raw data that must reach Earth before action can be taken. Against the commercial model of SpaceX’s planned orbital data centres in the US, China’s state-led coordination could accelerate deployment despite the uncertain commercial returns. – Professor, School of International Relations, and PhD student, College of Foreign Languages, Huaqiao University (Contemporary International Relations, issue 8, 2026)

8. State and Society

Liu Yunshan (刘云杉): In China, the hope that education can change a family’s fortunes has, for some, turned the gaokao into a project that dictates a child’s entire school life. “Haidian mothers”, often first-generation university graduates, try to reproduce their success by preparing children for entry to prestigious universities. This can produce “exam specialists” skilled at finding high-scoring answers within fixed rules but less practised at solving uncertain problems. As marks and GPA become the currency of recognition, students often see themselves and others as occupying ranked positions in relation to each other. – Peking University Graduate School of Education (Educational Academic Monthly, 2026, no. 5)

“Wen Ping” (文平, pen name): Algorithm-driven “pseudo-history” threatens China’s cultural and ideological security by eroding historical understanding and national identity, particularly among young people. Claims that the Tang was a “foreign” regime, alongside narratives excluding the Yuan and Qing from Chinese history, link up with dangerous overseas narratives and undermine the historical consensus underpinning a unified, multiethnic Chinese nation. AI-generated false historical material, particularly from overseas, could enter training datasets, creating a feedback loop in which algorithms amplify biased narratives and reinforce distorted beliefs. Platforms must embed “mainstream values” in recommendation algorithms and act against accounts repeatedly spreading such claims. – (Qiushi, no. 17, 1 September)

Gung-Ho Diplomacy: Chinese Commentary on the Trump-Xi Summit (30 September)

In official commentary, symbolism and language are the focus, even if difficult questions lurk beneath. CCTV’s Yuyuan Tantian blog approvingly quoted Trump’s invocation of “gung-ho” as a symbol of Sino-US cooperation. The term originated in a wartime mistranslation of China’s Industrial Cooperatives (工合, for short) as “work together”, and a similar linguistic elasticity appears in Yuyuan Tantian’s treatment of “respect, fairness and reciprocity” (the US addition to the new formula of a “constructive relationship of strategic stability”, which China has now also adopted). In Trump-administration terms, “fairness and reciprocity” usually refers to redressing unequal market access and global trade imbalances. The blog acknowledges this, but instead recasts the phrase in terms of sovereign equality, national status and China’s preferred principles of global governance. Read here

China’s Strategy for Promoting Non-Alignment in Southeast Asia | Xue Song (23 September)

Dr Xue Song argues that Sino-Indonesian relations under President Prabowo Subianto are becoming “more strategic and institutionalised”. Her evidence includes the inaugural Comprehensive Strategic Dialogue, the second foreign and defence ministers’ (2+2) meeting, a planned 2027-31 action plan and expanding defence cooperation, including through the Peace Garuda exercises. She contends that economic frictions such as nickel policy can be contained within this framework, and that Indonesia’s engagement may widen political space for other ASEAN states to pursue defence ties with China. The institutional intensity is real and is broadening the relationship beyond economics. However, it also reflects a practical need to manage divergence, and both dynamics are at work. Read here

What China Wants from the Washington Summit (18 September)

The framing of “constructive strategic stability” has remained consistent since our coverage of the consensus view in May. “Strategic stability” is presented by many scholars as a consequence of “strategic stalemate”, a term that the IR scholar Jin Canrong has previously explained as emerging from Mao’s On Protracted War. It refers to temporary stability achieved through mutual deterrence, and in this case is widely seen as having been attained as the outcome of improvements in China’s relative strength. The “constructive relationship” part is more aspirational and is how Chinese scholars often distinguish this paradigm from the nuclear-deterrent-based “strategic stability” between the US and the Soviet Union. Read here

What China Needs from an AI Deal with America | Huang Ping (13 September)

AI is expected to be a central issue at the Xi-Trump summit later this September, but the scope for concessions on either side seems much less certain. US rhetoric around AI safety is often viewed sceptically in China as a means of holding back homegrown companies, and given the recent exchange of barbs between the US and China over AI distillation, the scope for agreement over the terms of market competition appears even narrower. Huang Ping, a scholar at CUHK-Shenzhen, nevertheless lays out why it would be in China’s interests to seek a much broader AI agreement to secure its access to global markets and influence over standards. Read here

Who Pays for the New Economy? Economic Digest: August 2026 (8 September)

Overall expectations for the second half of 2026 are low among Chinese economists. This is partly a matter of policy—many would have preferred an unambiguous shift towards fiscal stimulus after the mid-year Politburo meeting, which instead focused on incremental policies and accelerating the transition to “new growth drivers”. Yet, as Wu Ge argues, the fundamental macroeconomic direction is dictated less by policy than structural factors. Mainly, these are the deepening deflationary effects of local-government deleveraging as formerly hidden debts from local-government financing vehicles (LGFVs) are moved onto government balance sheets through debt swaps. Read here

China’s Mandate to Rule the Waves and Secure the Future | Di Dongsheng (3 September)

There is something distinctly High Victorian about Di Dongsheng’s closing proclamation that “the descendants of the dragon shall ultimately rule the stars and the waves”. Indeed, the piece certainly strikes an extremely hawkish tone throughout, with Di proposing the establishment of a naval–merchant–financial complex to wrest maritime power from the “Anglo Saxons”. Yet Di is also picking up on a familiar thread in Chinese strategic thinking, made newly urgent by events around the Strait of Hormuz: the vulnerability and importance of maritime chokepoints. Read here

Changes Unseen, Strategies Uncharted | Digest: August 2026 (31 August)

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. 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.

Show Notes:

On today’s show Andrew and Bill talk through Xi Jinping’s trip to Washington last week, including low expectations that were met, lots of pageantry in between, why both sides are incentivized to preserve stability for now, and how Mao Zedong’s writing on “strategic stalemate” may inform Xi’s understanding of the current moment. From there: A Taiwan weapons controversy, panda deliverables, and thoughts on Xi’s plan to recruit 100,000 young Americans to study in the PRC over the next five years. At the end: Shared language on Iran, limited progress on AI, trolling intrigue in the East Room and at the National Archives, new Bloomberg reporting on travel restrictions for AI talent and the continued tax crackdown, and more signals that the central government recognizes the economy is struggling.

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Related Readings:

Incremental policy support; Wang Yi’s message to Japan; Document sensitivities during Xi’s DC visit; Trump on China and AI/SI -- Sinocism

US-China strategic stalemate; Premier Li signals Q4 economic support; More Nvidia chips for China?; PRC-Philippine tensions -- Sinocism

Bessent says US, China trade truce extended by 2 months -- Politico

China and the United States Reach Eight Deliverables and Understandings -- MoFA

US and China agree $60bn low tariff regime for goods from foie gras to camels -- FT

At Summit, Xi Sought to Tilt Trump’s Stance on America’s Place in Asia -- NYT

Donald Trump asked Xi Jinping if China wanted to buy American weapons, US envoy says -- FT

Potential Taiwan tension sparked ‘last minute’ change in Trump-Xi National Archives visit -- NPR

Victor Hugo makes an appearance the State Dinner -- China Articles

China’s first lady Peng Liyuan turns soft power on US audience -- Reuters

China’s Tax Grab Squeezes Rich Elite Harder Than Ever -- Bloomberg

China Broadens Travel Curbs to Encompass Family of Top AI Talent -- Bloomberg

Who’s Ahead in the Global AI Talent Race? -- Carnegie China

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Today’s top items:

1. Incremental policies to support the economy - Just a day after the State Council Executive Meeting readout said that “practical additional policies should be introduced”, the People’s Bank of China announced Tuesday adjustments to several structural monetary policy tools and the Ministry of Finance, the P…

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Looking back over the trials and hardships of the road traveled, the lens of time reveals change as well as steadfastness. The transformation in the way China and the United States interact demonstrates the new atmosphere and reshaping of the world brought by the Eastern power China as it advances step by step toward great rejuvenation. What has not changed is China’s historical initiative in bravely shouldering the responsibilities of a major country...

回望一路走来的风雨兼程，岁月的镜头里，看得见变化，也读得出坚守。中美相处方式之变，彰显中国这个东方大国一步步迈向伟大复兴给世界带来的新气象、新塑造。而不变的，是她勇担大国责任的历史主动。- September 28 People’s Daily account of Xi’s visit to the US

I have had a hard time parsing the substance from the pomp of Xi Jinping’s visit to DC last week. I have some initial thoughts and hope to have more later this week.

But before we get to a discussion of the Trump-Xi bonhomie, it is worth highlighting the signals from the Monday State Council Executive Meeting. Based on the readout, translated here, the leadership is now worried about economic performance for the rest of the year and may be looking at a Q4 supplementary stimulus. From the readout:

“in response to problems in current economic performance, macro policy should increase countercyclical adjustment to keep the economy developing toward new and better growth and strive to meet annual development targets…Practical additional policies should be introduced: improve fiscal spending, use remaining local-government debt quotas, use and adjust monetary tools as appropriate, increase re-lending quotas for innovation, technological upgrading, agriculture, and small firms, and study policies to stabilize the property market and promote employment and income.”

Xi’s visit last week is not likely to do much for China’s Q4 economic performance, but it was another step towards stabilizing the strategic stalemate between the two countries.

The most important outcome from the meetings was not the agreement on the Board of Trade and the $30B of covered goods on each side, it was the convergence of the description of the relationship to “a constructive China–U.S. relationship of strategic stability based on respect, fairness, and reciprocity”. After Beijing the Chinese side had used “a constructive China–U.S. relationship of strategic stability” and the US side added “on the basis of fairness and reciprocity”.

In his remarks after the visit, Wang Yi had this to say about the new description:

An important political outcome of this visit was that President Xi and President Trump further expanded the substance of this new positioning of China–U.S. relations. They affirmed the importance of respect, fairness, and reciprocity, and agreed to build “a constructive China–U.S. relationship of strategic stability based on respect, fairness, and reciprocity,” providing clearer strategic guidance for China and the United States as they explore how major countries should get along. Respect means respecting each other’s sovereignty and territorial integrity, the social systems and development paths each has chosen, and each other’s core interests and major concerns. Fairness means pursuing mutually beneficial cooperation, addressing differences through consultation, refraining from zero-sum games in which one side wins at the other’s expense, and not seeking unilateral absolute advantage. Reciprocity means that the two countries are equal in sovereignty, with neither above nor below the other; that neither should act in a domineering or bullying manner; that each side’s concerns should be addressed on a reciprocal basis; and that cooperation in all fields should develop in a balanced way. President Xi pointed out that China and the United States, as two major countries, bear a historic responsibility to advance human development and progress. They should act with the responsibility befitting major countries, respond to the expectations of their peoples and the broad trends of the times, and explore a new path for major countries to get along properly. Achieving the great rejuvenation of the Chinese nation and making America great again can proceed in parallel without conflict, enable each other’s success, and benefit the world.

此访重要的政治成果是习近平主席同特朗普总统进一步拓展了中美关系新定位的内涵，明确尊重、公平、对等的重要性，同意构建“基于尊重、公平、对等的中美建设性战略稳定关系”，为中美探索大国相处之道提供了更明确的战略指引。尊重就是尊重彼此主权和领土完整，尊重各自选择的社会制度和发展道路，尊重对方核心利益和重大关切。公平意味着开展互利合作，协商处理分歧，不搞你输我赢的零和博弈，不追求单方面的绝对优势。对等意味着两国主权平等，没有高低之分，不搞霸道霸凌，对等解决各自关切，平衡发展各领域合作。习近平主席指出，中美两个大国肩负着促进人类发展进步的历史重任，应当展现大国担当，顺应人民期盼和时代大势，探索一条大国正确相处的新路。实现中华民族伟大复兴和让美国再次伟大，完全可以并行不悖、相互成就、造福世界。

I have translated Wang Yi’s full remarks here.

Another important outcome was that the two sides could only agree on a two-month extension of the tariff and non-tariff measures that expire November 10. In an explainer of the outcomes of the eighth round of China-US Economic and Trade Consultations, translated here, the head of MOFCOM’s Department of American and Oceanian Affairs had this to say about the two month extension:

In October 2025, the two sides reached a joint arrangement in Kuala Lumpur to address their respective economic and trade concerns, suspending some of each side’s tariff and non-tariff measures until November 10, 2026. In these consultations, they agreed to extend the Kuala Lumpur joint arrangement until January 10, 2027, while continuing to actively discuss the matter with a view to reaching a mutually agreed solution. This gives both sides room to take stock of and assess implementation and consider next steps, while combining a time-limited extension with further active discussions to give businesses a relatively stable and predictable policy environment. We believe they will continue working through high-level economic and trade contacts before year-end to find a positive solution on a further extension.

2025年10月，中美双方在吉隆坡就解决各自关切的经贸问题达成联合安排，将双方各自部分关税和非关税措施暂停实施至2026年11月10日。本次经贸磋商中，中美双方同意在将吉隆坡经贸磋商联合安排延期至2027年1月10日的基础上，继续积极探讨这一事项，旨在达成双方同意的解决方案。此种安排一方面为双方各自盘点、评估联合安排落实情况，思考下一步如何推进中美经贸关系提供了空间，另一方面通过一定期限的延期和继续积极讨论相组合的方式，为双方企业合作提供相对稳定、可预期的政策环境。相信双方将继续努力，通过年底前的高层经贸互动，就继续延期找到积极的解决方案。

The US, as the White House made clear in its fact sheet on the visit, still has “concerns regarding supply chain shortages related to rare earths and other critical minerals”.

I have created a chart comparing the PRC statement on the “eight outcomes” with the White House fact sheet; there are some inconsistencies:

Taiwan was not mentioned in either readout, but according to the readout of Xi’s talks with President Trump, Xi “expressed the hope that the U.S. side would uphold the correct position of opposing ‘Taiwan independence’ and handle the Taiwan question prudently”. That implies that the US “opposes” Taiwan independence, but the official US position is “does not support” and US officials say there has been no change to that policy, no matter how much Xi wishes for that shift.

The latest US arms sales package is still on hold, and the US Ambassador to the PRC created a bit of a mess when he said that Trump had offered to sell weapons to Xi. Trump today denied that:

The two leaders will meet again in November in Shenzhen and then in December in Miami, so the relative stability should persist.

But I am sticking with what I wrote in May when Trump was in Beijing:

On the day Trump arrived in Beijing, the Institute of American Studies research group of the MSS think tank China Institutes of Contemporary International Relations (CICIR), issued a report titled “The Great Changes in the World and the Way for China and the US to Coexist”, which I have translated in full here. The abstract says the two countries have “entered a new phase of strategic stalemate 战略相持的新阶段”…

Previous US administrations had resisted entering into these kinds of new frameworks defined by the PRC side, so even with the US conditions of “on the basis of fairness and reciprocity” this is a very significant move by the Trump team. I believe they understand that the Chinese will use this hard won period of tenuous stability to do everything they can to derisk and reduce reliance on the US, as the PRC effectively articulated in the new 15th Five-Year Plan, but it is not clear the US side has the political will or capacity to do the same, especially as the PRC will be using every lever at its disposal to push back on further attempts in the US to derisk and reduce reliance on the PRC.

And I would caution about overconfidence in this period of tenuous calm.

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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.

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