New regulations on outbound investment; Qiushi on future industries; Chip export control dysfunction; Shangri-La Dialogue; EU-China
There was no publicized May Politburo meeting, or any sign of Xi visiting North Korea last week.
Today’s top items:
1. New regulations on outbound investment - The State Council released the State Council Regulations on Outbound Investment (国务院关于对外投资的规定), consisting of 34 articles. Premier Li Qiang signed State Council Order No. 837 promulgating the text on May 5, and the public release came on June 1, with a joint Q&A from the Ministry of Justice, NDRC, and MOFCOM. The regulation takes effect July 1. I have posted a translation of the regulations here and of the Q&A here.
Most of the content consolidates existing laws and regulations. The Q&A says explicitly that the prior model — outbound investment governed “principally on the basis of departmental rules and normative documents” — “no longer meets current needs” given “geopolitical risks” and intensifying “international competition.” This was in the State Council’s 2025 and 2026 legislative work plans. NDRC and MOFCOM say more implementing rules will follow.
Some of the interesting sections:
Article 13 intends to plug workarounds, including ones Manus and its investors used:
Article 13. In conducting outbound investment activities, investors shall not export or use goods, technologies, services, or related data whose export is prohibited by the state, nor shall they export or use goods, technologies, services, or related data whose export is restricted by the state without authorization; they shall not transfer to other countries (or regions) any goods, technologies, services, or related data whose export is prohibited by the state — including by such means as dispatching technical personnel across borders, organizing personnel to work in other countries (or regions), providing technical guidance across borders, or arranging cross-border training of personnel — nor shall they transfer without authorization to other countries (or regions) any goods, technologies, services, or related data whose export is restricted by the state.
第十三条 投资者开展对外投资活动，不得出口、使用国家禁止出口的货物、技术、服务及相关数据，或者未经许可出口、使用国家限制出口的货物、技术、服务及相关数据；不得以跨境派遣技术人员、组织人员赴其他国家（地区）工作、跨境提供技术指导、安排人员跨境培训等方式向其他国家（地区）转移国家禁止出口的货物、技术、服务及相关数据，或者未经许可向其他国家（地区）转移国家限制出口的货物、技术、服务及相关数据。
Article 15 establishes an overseas investment security review run by the investment and commerce authorities with other State Council departments, covering both the investment itself and any later transfer or disposal of related assets, equity, or interests.
The Q&A insists the possible countermeasures listed in Articles 24-25 are “protective, defensive” and “do not affect normal market transactions.”:
Article 24. Where any country (or region) or international organization, in violation of international law and the basic norms of international relations, takes discriminatory prohibitive or restrictive measures or other similar measures against the People’s Republic of China in matters such as investment and business operations, the Chinese government and its relevant departments may take corresponding measures in light of the actual circumstances to protect the security and legitimate rights and interests of investors and their outbound investments and to protect the state’s overseas interests from threats and harm.
第二十四条 任何国家（地区）、国际组织违反国际法和国际关系基本准则，在投资经营等方面对中华人民共和国采取歧视性禁止、限制或者其他类似措施，中国政府及其有关部门可以根据实际情况采取相应的措施，保护投资者及其对外投资的安全和正当权益，保护国家的海外利益不受威胁和侵害。
The relevant departments of the State Council may, in accordance with the Anti-Foreign Sanctions Law of the People’s Republic of China, the Provisions on Implementing the Anti-Foreign Sanctions Law of the People’s Republic of China, and other rules, decide to add to the countermeasures list those organizations and individuals that directly or indirectly participate in formulating, deciding on, or implementing the discriminatory prohibitive, restrictive, or other similar measures referred to in the preceding paragraph, and take corresponding measures.
国务院有关部门可以依照《中华人民共和国反外国制裁法》、《实施〈中华人民共和国反外国制裁法〉的规定》等，决定将直接或者间接参与制定、决定、实施前款规定的歧视性禁止、限制或者其他类似措施的组织、个人列入反制清单，采取相应的措施。
Article 25. Where foreign organizations or individuals endanger China’s national sovereignty, security, or development interests; violate normal market transaction principles by interrupting normal transactions with Chinese enterprises, other organizations, or individuals; or take discriminatory measures against investors and their outbound investments, unreasonably depriving them of or restricting their legitimate rights and interests, the relevant departments of the State Council may take measures including: prohibiting or restricting their engagement in import and export activities related to China; prohibiting or restricting their investment within China; prohibiting or restricting organizations and individuals within China from conducting related transactions, cooperation, or other activities with them; prohibiting or restricting the entry into China of related personnel, products, or means of transportation; and revoking or restricting the eligibility of related persons to work, stay, or reside within China. The relevant measures may apply to organizations that are actually controlled by, or participated in the establishment or operation of by, the foreign organizations or individuals concerned.
第二十五条 外国组织、个人危害中国国家主权、安全、发展利益，违反正常的市场交易原则中断与中国企业、其他组织或者个人的正常交易，或者对投资者及其对外投资采取歧视性措施，不合理剥夺或者限制投资者及其对外投资正当权益的，国务院有关部门可以采取禁止或者限制其从事与我国有关的进出口活动，禁止或者限制其在中国境内投资，禁止或者限制中国境内的组织、个人与其进行有关交易、合作等活动，禁止或者限制相关人员、产品、交通运输工具等入境，取消或者限制相关人员在中国境内工作、停留或者居留资格等措施。有关措施可以适用于外国组织、个人实际控制或者参与设立、运营的组织。
They are intensifying efforts to control capital flows, prevent technology leakage, and prevent supply chain decoupling.
2. Developing future industries - The June 1 issue of Qiushi has as its main theme the development of future industries, and the lead article from Xi is part of his speech at the January 30, 2026 Politburo Study Session on this topic. I have translated Xi’s article here, and created a summary of the issue here.
Xi explains why this is important: “Cultivating and developing future industries carries major significance for us in seizing the commanding heights of science, technology, and industry”.
The “six future industries chosen as the main directions of attack” are quantum science and technology, biomanufacturing, hydrogen energy and nuclear fusion energy, brain-computer interfaces, embodied intelligence, and sixth-generation mobile communications.
According to the editor’s introduction to the issue:
In support of studying and implementing the spirit of General Secretary Xi Jinping’s important article, this issue carries an accompanying article by the Qiushi Editorial Department, “How Future Industries Will Shape the Future of Industrial Development” (未来产业何以塑造产业发展未来), which offers exegesis from three perspectives; an article by Yin Hejun, explaining how to lead future-industry development with high-level scientific and technological self-reliance and self-strengthening; an article by Zhang Jun, expounding on consolidating the foundations of future-industry development through source innovation; and an article by Liu Zhenzhong, discussing perceptions and reflections on developing future industries.
To reinforce the messaging, the Monday People’s Daily carries a page nine article by Li Lecheng, Party Secretary and Minister of Industry and Information Technology - Accelerating Forward-Looking Layout and Development of Future Industries.
Underestimate their seriousness in this endeavor at your peril.
3. EU-China trade tensions heating up - The European Commission College of Commissioners met Friday to “take stock of EU-China relations”. According to the readout:
The Commission’s overarching approach remains de-risking, not decoupling. China is a critical partner, and engagement and dialogue will continue. At the same time the current state of the trade and investment relationship is not sustainable. As economic and security interests become ever more intertwined, both dimensions will require a more robust and coherent response.
The PRC government responded quickly, with a piece by CCTV’s Yuyuan Tantian over the weekend refuting claims of “overcapacity” and threatening specific retaliation:
According to an exclusive disclosure from a source, China can launch anti-discrimination investigations and industrial supply-chain security investigations into the EU’s relevant practices. The Ministry of Commerce has made clear that once China’s national interests and the rights and interests of its enterprises are harmed, China will resolutely retaliate.
据消息人士独家披露，中方可以对欧方有关做法发起反歧视调查、产供链安全调查。商务部已明确表态，一旦中国国家利益和企业权益受到损害，中方将坚决反制。
If the EU insists on pushing the so-called “overcapacity tool,” China will surely act at the first moment, adopting comprehensive countermeasures. China is neither unfamiliar with nor afraid of trade frictions, and will see this through to the end.
如果欧盟执意推动所谓的”产能过剩工具”，中方必将第一时间采取行动，采取综合性反制措施。中方对贸易摩擦既不陌生也不害怕，奉陪到底。
Third, the logic of the EU’s accusations does not hold up in itself.
第三，欧盟的指责逻辑本身站不住脚。
France has been China’s largest source of cosmetics imports for three consecutive years, accounting for 29.6% of China’s total cosmetics imports in 2025. EU exports to China of meat, alcohol, luxury goods, cosmetics, and other products all hold significant shares in the Chinese market.
法国已连续三年成为我国第一大化妆品进口来源地，2025年占据我国化妆品进口总额的29.6%。欧盟出口到中国的肉类、酒类、奢侈品、化妆品等产品，在中国市场都占据了显著份额。
If the EU uses the absurd logic of “production capacity exceeding domestic demand” to accuse Chinese products of “overcapacity,” then whether these European products sold in China are in the same situation is also worth considering.
如果欧盟用所谓”生产能力超过本土需求”的荒谬逻辑指责中国产品”产能过剩”，那么这些在华销售的欧洲产品是否存在同样的情况，也就值得考虑了。
4. Taiwan missing from US speech at Shangri-La Dialogue - For the first time on over a decade, the US Defense Secretary’s speech at the annual Singapore event did not mention Taiwan. Last year, Secretary Hegseth mentioned Taiwan five times in his speech. His full remarks are consistent with the recent National Defense Strategy, which PRC officials did not see as “soft” on China, and statements like “our approach in the Pacific centers on deterrence by denial along the First Island Chain”, of which Taiwan is a key part reinforce that view. However, given President Trump’s recent Taiwan remarks, and the lack of any updates about the status of the proposed large arms sales package to Taiwan, people are right to ask what has changed.
5. Japan and “new militarism” - In his speech at the Shangri-La Dialogue, Japanese Defense Minister Koizumi pushed on PRC claims that Japan is pushing “new militarism”:
Distinguished guests, some of you may have heard the term “new militarism,” but nothing [could be] further from the truth.
Think about it. There is a country that has a huge arsenal of nuclear weapons and strategic bombers. Japan has neither of such weapons. And yet Japan is labeled “new militarism.” Isn’t it strange?
The reaction from the Ministry of Foreign Affairs was as expected:
The remarks from the Japanese official you mentioned have no basis at all. They have zero authority in front of history, law, facts and figures. There is no way that making such remarks will help Japan earn the trust of its Asian neighbors and the international community…
The Japanese official you mentioned deliberately evaded Japan’s historical crimes and the facts above. He even attempted to shift blame and create confusion. Is this a sign of unease, or an attempt to conceal Japan’s own military expansionist ambitions? Under such circumstances, Japan’s claim that it seeks dialogue is just performative and shows no sincerity at all.
The latest issue of Qiushi has an article by “Qing Yuan 青原”, a pen name used for authoritative commentary/articles on foreign affairs, titled Recognizing the Concrete Threat of Japan’s “New Militarism”.
So no signs of any offramp in Japan-PRC tensions…
6. Chip export control dysfunction - On Sunday the US Department of Commerce Bureau of Industry and Security (BIS) issued a brief guidance to close a loophole created with the scrapping of the AI Diffusion Rule that allowed the sale of the most advanced AI chips to overseas subsidiaries of PRC firms. According to Reuters, an anonymous paper that circulated last week highlighting this loophole is what caused BIS to issue this weekend guidance. This updated guidance does also address the loophole that allows TSMC and other fabs make advanced chips for overseas subs of PRC companies, but it does not prevent shell companies of those PRC firms from having advanced chips fabbed at TSMC et al. It is a mess. PRC officials will likely not be pleased, but since these restrictions pre-dated the Busan understanding, the Trump team can credibly argue that issuing this guidance is not a violation of that deal.
And yes, export controls definitely will fail if you do not even try to enforce them…
7. Li Qiang on reserves - Last week Premier Li made an inspection tour to Zhoushan and Ningbo, Zhejiang, and visited the Zhoushan National Petroleum Reserve Base, the Bulk Agricultural Products Storage and Transportation Base, and the Ningbo Daxie Commercial Petroleum Reserve Project among other places. His call to “enhance the international influence of the price-formation mechanism for bulk commodities” (增强大宗商品价格形成机制的国际影响力) and to explore futures-spot linkage at the Zhejiang International Bulk Commodity Trading Center is the long-running effort to move China from commodity price-taker to price-maker and relocate some of the global benchmarking that currently sits in London, Singapore and Chicago.
During his tour of the Zhoushan national strategic reserve base and the Ningbo Daxie commercial petroleum reserve, he explicitly called for “coordinated operation between strategic reserves and commercial reserves” (战略储备、商业储备等协同运作) and improved rotation, deployment, and market regulation mechanisms”. The petroleum reserve system appears to have worked well for China during the current Iran war supply shock, but will be interesting to learn, if we ever do, what the leadership thinks should be improved.
8. More on the expelled New York Times reporter - The New York Times finally wrote an article admitting that the PRC had revoked the visa of its correspondent Vivian Wang, “in response to the appearance by video of Taiwan’s president at a Times DealBook summit in New York in December”. The Trump Administration responded by revoking the visa of a Xinhua employee in the US.
According to the Foreign Ministry:
The New York Times provided platform for Taiwan authorities to peddle separatist rhetoric for “Taiwan independence,” and blatantly called China’s Taiwan region a “country.” This grossly violates the one-China principle and the three China-U.S. joint communiqués, and sends a gravely wrong signal to “Taiwan independence” separatist forces. China firmly opposes it. The New York Times should correct its wrongdoings rather than continue down the wrong path.
This is an intensification of the efforts to enforce the “correct” understanding of and discourse about Taiwan globally, and also a convenient pretext for the PRC relevant organs to expel a very good reporter they did not like. How will the New York Times handle China and Taiwan at this year’s conference? And will this punishment affect the agendas of conferences by other media organizations with correspondents in the PRC?