Foreign leaders meet with Xi; US-China; Lu Shaye; Tesla; Modernization; DeepSeek
Summary of today’s Essential Eight:
1. Foreign leaders meet with Xi - Xi started the first work day of the Year of the Snake with meetings with the President of Pakistan and the President of Kyrgyzstan. The Sultan of Brunei and the Prime Minister of Thailand are also visiting this week.
2. US-China trade - President trump said Tuesday afternoon, just after I hit send on yesterday’s newsletter, that he was “in no rush” to speak with Xi Jinping, and there has been no chatter today about a possible call between the two. The US Postal Service announced it would stop accepting packages from China and Hong Kong Post, but then a few hours later reversed itself and said it will still accept them.
3. Trustbusters coming for Apple’s PRC app store? - Bloomberg reports that the State Administration for Market Regulation is looking at Apple’s policies around its app store and may launch an antitrust probe. Perhaps the SAMR can compare notes with EU regulators? The SAMR’s interest started “last year” and there are legitimate reasons for regulators to examine Apple’s app store policies, but the timing will of course be seen as political given the US-China trade tensions. It would be significant if this is a political decision related to current US-China tensions. In the Trump 1.0 trade war Apple was able to avoid collateral damage. Any changes the company might make to satisfy PRC regulators might have to apply in other markets as well; Apple might have some PR issues if it cuts a special deal just for the PRC market.
4. Li Qiang on preparing the government work report - We are just a month away from the opening of the National People’s Congress and Premier Li’s presentation of the government work report. On the first official work day of the Year of the Snake the Premier convened a State Council plenary meeting to discuss a draft of the work report. According to the readout Li said:
It is important to not only grasp the overall picture by comprehensively balancing the relationships between domestic and international factors, short-term and long-term considerations, macro and micro aspects, as well as development and security, in order to find effective paths among multiple objectives, but also to seek breakthroughs and identify development areas with strong potential and ample room for growth. We must devise work measures with strong traction and leverage that create more outstanding highlights capable of driving the overall situation. It is also necessary to carefully summarize and further expand upon the good practices explored in past work, to align with development goals by intensifying countercyclical regulation according to the situation, to focus on prominent issues by integrating resources and concentrating efforts, and to boldly introduce tangible policy measures that break with convention, respond promptly to concerns, and enhance the interaction between policy and the market.
What that means in practice remains to be seen, and of course the number all investors are waiting for is how much more fiscal support will be forthcoming. They are not leaking it yet.
5. Alternative vision of modernization - The page 9 theory page of the February 5th People’s Daily has three articles on the theme of Chinese modernization, and why it is better for the world than Western modernization, a point often reiterated by Xi. According to the People’s Daily editor’s note introducing the three articles:
From a comparative perspective between China and the West, a comprehensive and in-depth understanding of the development concept, development path, and development pattern of Chinese modernization is conducive to further highlighting its fundamental characteristics and institutional advantages, as well as its significant contributions to the world, thereby demonstrating the global significance of the theory of Chinese modernization. In view of this, this issue’s theory section has set aside a special feature to elaborate on the topic
Yang Guangbin, Dean of the School of International Relations at Renmin University, writes in his piece that:
Unlike the order brought to the world by the rise of the West, the new form of human civilization created by Chinese modernization will be shared development rather than beggar-thy-neighbor, common security rather than security dilemmas, and civilization mutual learning rather than civilization conflicts. It sets an example for "Global South" countries to independently and autonomously move towards modernization and will inevitably be emulated by some countries.
We constantly hear the China is not trying to export its development model. But what we are starting to hear, and what Yang writes in his article, is the idea that the Chinese modernization model is so successful and so attractive that other countries will inevitably want to emulate it.
6. Lu Shaye the new special representative for European Affairs -Remember when then-Ambassador to France Lu Shaye told a French TV show in 2023 that Crimea may not belong to Ukraine and “in international law, even these ex-Soviet Union countries do not have the status, the effective [status] in international law, because there is no international agreement to materialize their status as a sovereign country”? There was of course outrage across the EU about Lu’s negation of the sovereignty of multiple European countries, then there were rumors he had been silenced or even recalled as the PRC reconsidered “wolf warrior diplomacy”. He finally did leave his post in France in December, but he will be heading back to the Europe on occasion as he is now the new special representative for European Affairs, replacing Wu Hongbo, according to the South China Morning Post. Lu does not seem to have suffered any career damage for his 2023 remarks. In an alternative universe the EU and most member nations would tell Beijing that none of their officials will meet with Lu until he issues a public repudiation of those comments, but I do not expect those officials do anything but grumble privately and take the meetings.
7. 2025 will be a tough year for PRC carmakers - Caixin has a long story titled “2025 No Longer Just a Price War, the Auto Industry Enters the 'Warring States Period” that looks at how tough this year is likely to be most automakers in China. Tesla just launched its biggest discounts ever in the PRC, but even if they can launch FSD in the country this year they may not be able to charge for it. Caixin reports that BYD has been told by regulators to hold off on slashing prices like it has done in the past, but that the company “is considering a large-scale rollout of its intelligent driving systems on mainstream models and will offer smart-driving functions for free.” Toyota announced today that it will build a new wholly-owned electric vehicle manufacturing plant in Shanghai. That is smart of the PRC, binding one Japan's most important companies even more tightly to China and supply chains there. Toyota pressured the Japanese government to not go along with some of the US chip export controls, and they would probably lobby even harder against them now.