Tariffs and resolute struggle; State Council wants more consumption and foreign investment; DeepSeek censorship and propaganda; TikTok
Summary of today’s Essential Eight:
1. Tariffs - The PRC tariffs and other measures announced last week went into effect at 12:01 AM Monday Beijing time. CCTV’s WeChat account Yuyuan Tantian wrote about those measures today in a post headlined “Resolutely Struggle! China Implements Tariff Countermeasures Against the U.S. as Scheduled 坚决斗争！中国如期实施对美关税反制”. The post said that:
China's stance indicates at least two things.
First, the U.S. needs to pay for its actions.This is clearly reflected in the areas where China has imposed additional tariffs...
Second, China needs the world, and the world needs China.
After the last round of Sino-U.S. trade frictions, China's experience and ability to deal with trade wars have improved...In recent years, the U.S. has tried to decouple and break the chain with China by rallying allies, aiming to suppress China's position in the global trade system.
Data shows that in the past seven years, under such circumstances, China has remained the world's largest exporter of goods for seven consecutive years...
China needs the world, and the world needs China. This is the confidence behind China's ability to handle a trade war 中国需要世界，世界也需要中国，这是中国应对贸易战的底气所在.
The just announced 25% tariffs on all US imports of steel and aluminum will cause pain for the PRC steel sector and the export of its overcapacity directly and indirectly to the US.
The Wall Street Journal reported that “Chinese officials are building a list of U.S. technology companies that can be targeted with antitrust probes and other tools” to try and coerce their executives into lobbying Trump to back off. If this report is correct then they should go after companies whose big shareholders both have Trump's ear and will feel pain, like Tesla.
2. State Council meeting - Premier Li chaired a State Council executive meeting Monday. According to the readout “work concerning boosting consumption was studied; the "2025 Action Plan for Stabilizing Foreign Investment" was reviewed and approved; policy measures to resolve key structural contradictions in industries were examined; and the "Draft National Development Planning Law of the People’s Republic of China" was discussed.”.
In the section on consumption the readout stated:
The meeting pointed out that boosting consumption is of paramount importance for expanding domestic demand and strengthening the domestic circulation. It is necessary to fundamentally shift our mindset and place a greater emphasis on stimulating consumption…upgrading and renewing mass consumption should be advanced by increasing support for the exchange of old products for new ones, better satisfying housing consumption needs, and extending the automotive consumption chain. The meeting also emphasized the importance of strengthening the influence of consumption brands and supporting the rapid development of new types of consumption—such as "artificial intelligence + consumption" and healthy consumption—to continuously create new consumer products, scenarios, and hotspots. A three-year action plan to optimize the consumption environment will be implemented by further improving systems related to quality standards, credit constraints, comprehensive governance, and consumer rights protection, so as to address the most pressing issues voiced by the public and create a reassuring consumption environment.
In the section on foreign investment the readout said:
More practical and effective measures must be taken to stabilize the existing volume of foreign investment and expand it further. Efforts should be made to orderly expand self-initiated opening up, deepen pilot programs in relevant fields, fully implement the removal of foreign investment restrictions in the manufacturing sector, optimize the comprehensive pilot demonstration of expanded opening up in the national service industry, and broaden the scope of industries that encourage foreign investment. The "Invest in China" brand should be continuously enhanced by increasing support for foreign enterprises reinvesting domestically, encouraging equity investments by foreign investors in China, and optimizing the rules and procedures for foreign investment mergers and acquisitions
It also sounds like the government will target overcapacity even though you can no longer say overcapacity:
The meeting further stressed that a dual approach from both the supply and demand sides is needed to address key structural contradictions in industries through both symptomatic and root-cause measures, thereby promoting the healthy development and quality upgrading of industries. This includes optimizing industrial layouts, strengthening the guiding role of standards, and promoting integration and restructuring to phase out outdated and inefficient production capacity while increasing the supply of high-end capacity. Additionally, market supervision should be optimized and industry self-discipline strengthened to jointly maintain a market order characterized by fair competition and the natural elimination of weaker competitors
3. Concerns about foreign investment - The front page of the February 10th People's Daily has an articled titled "Has foreign capital withdrawn from China on a large scale?". The article was written in response to online concerns about the drop in foreign investment in 2024. It says those concerns are unfounded:
Looking at the short term, since 2021 China has attracted over 1 trillion yuan of foreign investment for three consecutive years. The massive inflow of foreign capital has met concentrated investment demand, so the contraction seen in 2024 is within a normal range" - and that "as some in the US and the West have politicized economic and trade issues, global cross-border investment has remained sluggish—posing significant challenges for China in attracting foreign capital. The more severe the external environment becomes, the more necessary it is to pursue higher-quality development and a higher level of openness to address external uncertainties.
So while trying to project confidence this article is not unreasonably seen as a sign of concern over the decline in foreign investment.
4. Officials say generic drugs in bulk procurement are fine - The recent concerns about the quality and efficacy of generic drugs available through the bulk procurement system are due to “anecdotes and subjective feelings”. The National Healthcare Security Administration (NHSA) and the National Medical Products Administration (NMPA) released their findings from an investigation triggered by complaints from doctors in Beijing and Shanghai.
5. TikTok US deal talk - A TikTok deal may be taking shape. The Washington Post story last week was wrong in reporting ByteDance/TikTok is dragging its feet. A Wall Street Journal report over the weekend has it right. Expect to see a renewed PR push imminently around why Project Texas/USDS is actually enough to assuage national security fears. It is not, and the current law does not allow it.
6. DeepSeek censorship and propaganda - China Media Project questions the claims that hosting DeepSeek locally mitigates the problems around censorship and propaganda, writing “do coders and Silicon Valley denizens know what they should be looking for? As we have written at CMP, Chinese state propaganda is not about censorship per se, but about what the Party terms “guiding public opinion” (舆论导向)...Those testing DeepSeek for propaganda shouldn’t simply be prompting the LLM to cross simple red lines or say things regarded as “sensitive.” They should be mindful of the full range of possible tactics to achieve “guidance.”
7. Marriage registrations continue to decline - There were 6.1 marriage registrations in 2024, the lowest number since 1980 according to Caixin.
8. New rules tightening online discussion of the military - Over the weekend ten government departments, including the Political work Department of the Central Military Commission and the Cyberspace Administration of China issued new rules to tighten online discussion of the military. PLA OSINT watchers will probably not be happy.