In this issue:
Xi going to India
15th Five-Year Plan for Building a Financial Powerhouse
More signs of economic stress
Anthropic’s report “Detecting and countering misuse of AI”
US-China
Japan and the “enemy-state clauses” in the UN Charter
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. Xi going to India - The PRC Foreign Ministry confirmed that Xi will travel to India Saturday the 12th for the 18th BRICS Summit, and return to Beijing the next day. The most interesting meeting will probably be his bilateral with Indian Prime Minister Modi, with whom he did not have an official meeting at last week’s SCO Summit. The Tribune reports that “the Modi-Xi talks were likely to cover the overall state of bilateral relations, including the situation along the Line of Actual Control, trade and economic ties.”
2. 15th Five-Year Plan for Building a Financial Powerhouse - China has formally issued a 15th Five-Year Plan for Building a Financial Powerhouse, prepared by the Central Financial Commission Office with financial institutions and agencies. The full draft is not available online. Today there was a press conference with officials from the People’s Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange to discuss the plan. I have posted a translation of the transcript of the presser here. Among the key points:
The PBOC has issued its own reform and development plan, supported by nine action plans. Priorities include refining monetary policy and strengthening financing for technology, green development, inclusive finance, pensions, and digital finance.
Financial regulators will reduce the number of smaller local institutions while improving their quality, address risks, and crack down on price wars and improper rebates.
The CSRC aims to improve market stability, investor protection, listings, and institutional investment. Medium- and long-term investors have made over RMB600 billion in net A-share purchases this year.
Foreign-exchange reforms will facilitate trade and investment while strengthening monitoring of cross-border capital flows. China has upheld a managed floating exchange rate system, with no intention of gaining trade advantages through exchange rate devaluation.
3. More signs of economic stress - The General Office of the State Council recently issued a Notice on Work Related to Strengthening Efforts to Address Payment Delays Affecting Small and Medium-Sized Enterprises, translated here, that makes it clear that the problem of larger firms, and especially SOEs, stiffing smaller companies is not resolved. Among the highlights of the notice:
Large companies that deliberately extend payment periods will be jointly summoned by multiple departments and ordered to rectify the problem. Strictly enforce the Anti-Unfair Competition Law, and punish in accordance with laws and regulations egregious cases in which large enterprises abuse their dominant position to deliberately lengthen payment terms…Central State-Owned Enterprises and other state-owned enterprises should set an example in making timely payments: Central State-Owned Enterprises must pay SMEs entirely in cash and maintain a reasonable proportion of cash payments to large enterprises.
And the National Development and Reform Commission and the State Administration for Market Regulation announced that they had recently jointly issued the Notice on Matters Concerning Cost Accounting for Disorderly Low-Price Competition in Important Industrial Products, translated here:
An NDRC official said that efforts to rectify “involution-style” competition are showing growing results and the competitive environment in key industries has improved, but irrational competition remains relatively prominent in some industrial-goods sectors. This disrupts normal production and business operations, could allow bad actors to drive out good ones, and is detrimental to healthy economic development. In addressing disorderly low-price competition, various parties have said that the provisions on costs in existing price laws and regulations are relatively general and suggested further clarifying cost-accounting requirements.
4. Anthropic’s report “Detecting and countering misuse of AI” - Anthropic’s September report is not just about China but includes multiple examples of what it says is problematic behavior by Chinese firms and individuals.
The report documents clear violations of PRC law by PRC entities. Anthropic should offer to forward its detailed findings to the Ministry of Public Security through the FBI’s channel, which would be a good example of US-China law enforcement cooperation:
these findings raise concerns about the misuse of user data by PRC AI labs. DeepSeek, Xiaomi, and Moonshot fed conversations between their own models and users into Claude. These labs then used Claude’s responses as training data with which to distill Claude’s capabilities. Some of these exchanges included sensitive information, including from individual users, major multinational companies, and state-affiliated actors. Many of these exchanges were relayed from users of third-party model routing services commonly used by users in the United States and Europe. Those sessions contained names, email addresses, company data, and other sensitive data of hundreds of end users in at least a dozen languages. These practices are likely inconsistent with privacy laws and the labs’ own terms of service.
It also includes this gem that is sure to make the MSS unhappy:
Maybe the way to get China to slow down AI development is not some unenforceable agreement based on trust but rather much tougher crackdowns on distillation, chip smuggling and remote access to AI chips?
5. US-China - We are less than two weeks away from Xi's visit to Washington, DC and are seeing tangible, constructive aspects of the relationship:
$30bn tariff cutback talks — MOFCOM's Huang Ling said Thursday the two sides are consulting on a reciprocal tariff cut covering $30 billion of products from each, and want it done "at the earliest possible date," per CGTN. The economic teams are working off the consensus from the Beijing leaders' meeting, so I would not be surprised if this is one of the things they try to have ready to announce.
Soybeans — China bought roughly 1 million tons of US soybeans this week, four traders told Reuters. That takes the buying to nearly half the 25 million tons the White House says Beijing committed to each year through 2028.
Farm purchases "on track" — USDA's Luke Lindberg told a CFR event China is set to buy $17 billion in US ag this year, $30 billion once soybeans are added.
Xiangshan Forum — The US will send Xanthi Carras, DoD's principal director for China, Taiwan and Mongolia, to lead its delegation to next week's Beijing security conference, per SCMP. Last year Washington sent only a defense attaché from the embassy, so this is a notch higher.
NDRC courts US firms — The NDRC sat down with more than 60 US companies Thursday, including Nvidia, Dell and Honeywell, to walk through the 15th Five-Year Plan and talk up Beijing's investment environment.
AmCham mood lifts — US business confidence bounced back from record lows after the trade truce, AmCham Shanghai's annual survey found. For the first time since 2022, respondents put domestic competition ahead of US-China tensions as their top worry.
Joint drug case — Chinese police arrested 21 in August in a cross-border synthetic cannabinoid precursor case, acting in part on a US tip about two PRC nationals.
The US State Department did update the China Travel Advisory with more warnings, but it did not raise the level:
6. Japan and the “enemy-state clauses” in the UN Charter - 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。