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China Update — Weekly Briefing
🕑 Added 2025-11-09 13:29:14 +0000 UTC⚔️ Taiwan Warnings: “They Know the Consequences”
In a CBS 60 Minutes interview at the start of the week, US President Donald Trump said Chinese officials “know the consequences” of any attempt to take military action against Taiwan. Pressed on whether he would defend the island, Trump replied, “You’ll find out if it happens — and [Xi] understands the answer.”
The comments came days after Trump’s first meeting with Xi Jinping in six years, held in South Korea, where the leaders discussed trade tensions and the resumption of U.S. nuclear testing. Trump said Taiwan “never even came up,” insisting that Xi “understands it very well.” The U.S. continues to maintain “strategic ambiguity” under the 1979 Taiwan Relations Act, which commits Washington to help Taiwan defend itself but stops short of a defense guarantee.
Beijing responded sharply. A spokesperson for China’s embassy in Washington reaffirmed that Taiwan remains “China’s internal affair,” vowing it would “never allow any person or force to separate Taiwan from China in any way.”
The Taiwan issue also cast a shadow over Japan’s new prime minister Sanae Takaichi, who met a Taiwanese presidential adviser at the APEC summit in South Korea. Beijing lodged formal protests, accusing Takaichi of “hyping” Taiwan ties online. Tokyo called the exchanges routine under APEC’s framework. The diplomatic friction underscores the fragility of regional balances—and the stakes of even symbolic gestures.
🤝 Trade Thaw: Tariffs Suspended, Rare Earths Flow Again
In a surprise weekend breakthrough, Washington and Beijing agreed to suspend key tariffs and reverse several export controls, marking the first tangible de-escalation in months.
Under the new pact, China will lift export curbs on critical materials—including rare earths, gallium, germanium, and graphite—while ending investigations into U.S. chipmakers such as Nvidia and Qualcomm. In return, Washington will delay planned tariffs, extend Section 301 exemptions through 2026, and halve a fentanyl-related tariff from 20% to 10%.
Beijing also pledged to resume large-scale U.S. agricultural purchases, committing to buy at least 25 million metric tons of soybeans annually for three years. The White House hailed the deal as “a step toward restoring predictability,” though Treasury officials stressed it was “a pause, not a pivot.”
Markets rallied modestly Monday, but analysts warned the détente may prove short-lived. “The U.S. has made tactical concessions to prevent economic escalation,” said Wendy Cutler of the Asia Society Policy Institute. “The structural rivalry remains fully intact.”
🛢️ Energy Front: Chinese Refiners Retreat from Russian Crude
Chinese oil refiners are pulling back from Russian crude purchases after Washington and its allies expanded sanctions on Moscow’s energy giants Rosneft and Lukoil—and some of their Asian customers.
State-owned giants Sinopec and PetroChina have reportedly canceled multiple Russian cargoes, while smaller independent refiners—known as “teapots”—have paused imports altogether, fearing secondary sanctions. Prices for Russia’s ESPO crude, a key export to Asia, have plunged, with analysts estimating that nearly 45% of China’s Russian oil imports are now at risk.
The move marks a stunning reversal. Russia had become China’s largest oil supplier since 2022, offering steep discounts as Western buyers turned away. But the latest sanctions are biting, leaving refiners caught between energy security and geopolitical risk.
With Russian supply squeezed, U.S. and Middle Eastern exporters are likely to gain ground—ironically at the same time Washington and Beijing are reopening trade channels. “It’s a moment of quiet alignment between necessity and politics,” said Rystad Energy’s Louise Dickson. “China will talk partnership with Moscow but hedge with the West.”
⚙️ Beijing’s New Tech Doctrine: Powering Domestic Chips
According to the Financial Times, Beijing is now subsidizing energy costs by up to 50% for data centers that use only domestically produced AI chips. Provinces such as Gansu, Guizhou, and Inner Mongolia—flush with cheap coal and hydropower—are leading the push.
Electricity is being turned into industrial policy. Chinese chips like Huawei’s Ascend 910C consume 30–50% more power than Nvidia’s top processors, so these discounts effectively level the playing field. Average rates for state-backed centers now fall to 0.4 RMB/kWh (5.6¢)—almost half U.S. averages.
Beijing has also barred foreign chips from all state-funded data centers, including Nvidia’s H20—the last exportable model under U.S. rules. Projects less than 30% complete must remove foreign hardware; others face review.
Analysts view this as a defining phase of China’s “AI sovereignty” strategy: trading efficiency for control. “They’re weaponizing their grid,” said one industry consultant. “Power is cheap, compliance is priceless.”
Goldman Sachs estimates China’s cloud-service providers will invest $70B in data centers in 2025, up 65% year-on-year. The result: cheaper compute, slower chips—but total domestic autonomy.
🏠 Property Ghosts Return: Vanke’s Crisis Deepens
Five years into China’s housing downturn, Shenzhen-based Vanke Co.—once the nation’s most trusted developer—has become a symbol of exhaustion. Its largest backer, Shenzhen Metro Group, has asked the company to pledge collateral for 20B yuan in loans and capped future credit, ending the quiet state protection that had kept Vanke afloat.
The developer faces 5.7B yuan in bonds due by December and another 7.7B by mid-2026, with cash covering less than half. Sales are down 40% this year, creating a 100B yuan funding gap.
Even as Beijing loosens purchase rules in major cities, October home sales plunged 42% year-on-year, showing the rebound has again fizzled. “The property zombie is stirring,” said a Shanghai-based economist. “Every short-term fix buys time—but not solvency.”
💍 Marriage Revival—But Demographic Slide Persists
Official data show 5.15M marriages registered in the first three quarters of 2025—up 9% from last year but still well below pre-pandemic levels. The surge stems from new nationwide registration rules allowing couples to wed anywhere in China and local incentives such as marriage vouchers and “red envelope” subsidies.
Shanghai’s Qixi Festival saw 2,310 marriages—half from out-of-town couples. Yet demographers warn that even small upticks can’t offset the larger decline in births. “Young Chinese are marrying later, having fewer children, or none,” noted sociologist Xue Yali. “The policies encourage weddings, not families.”
🌏 Xi at APEC: Charm Offensive, Cold Reception
With Trump leaving the South Korea APEC summit early, Xi Jinping seized the spotlight, meeting leaders from Japan, Canada, Thailand, and South Korea. His message: China as stabilizer-in-chief in a fractured world.
He framed China as pursuing “non-Western modernization,” offering multipolarity over U.S.-led order. Yet even friendly counterparts pushed back quietly—especially as China’s maritime and military assertiveness continues to alienate neighbors.
Still, Xi’s push to reset ties with Tokyo via Prime Minister Takaichi and to reopen trade with Ottawa marks a pragmatic recalibration. Nearly three-quarters of visiting heads of state to China since 2023 have come from the Global South, a pattern Beijing is keen to entrench.
🧠 Transnational Censorship: Sheffield Hallam’s Retreat
In Britain, Sheffield Hallam University is under fire for halting research into Uyghur forced labor after alleged pressure from Beijing. Documents seen by The Guardian and BBC show that Chinese state-security officers visited the university’s Beijing office last year, warning staff to stop work linked to Xinjiang labor programs.
Soon after, the university’s insurers withdrew coverage for defamation cases, following lawsuits from garment suppliers named in reports. The result: an end to its Forced Labour Lab, previously cited by the UN and UK Parliament.
Human-rights advocates called the episode “a chilling case of foreign censorship on British soil.” Beijing dismissed the allegations as “rumor-mongering.”
🌍 Race for Rare Earth Diversification
Treasury Secretary Scott Bessent told the Financial Times that China’s leverage in critical minerals will “last no more than 24 months,” predicting a coming “rebalancing” as allies ramp up production.
India plans to triple funding for rare-earth magnet manufacturing to $788M.
Canada unveiled a C$6.4B initiative to stockpile and co-invest with G7 partners.
The EU, while welcoming Beijing’s recent suspension of export controls, remains uneasy about the “ambiguous” scope of relief.
As Bessent put it: “It’s one thing to have a gun on the table; another to fire shots in the air.” The rush for diversification, he added, is “the unintended consequence of China’s own overreach.”
📉 Exports Falter, Growth Math Stretched
After eight months of expansion, China’s October exports fell 1.1% y/y, breaking the streak. EVs and solar panels remain strong in volume but weak in value as prices collapse. Analysts say the country’s “quantity up, profit down” pattern is deepening.
Still, Premier Li Qiang, speaking at the China International Import Expo, projected GDP will hit 170 trillion yuan by 2030—implying ~4% annual nominal growth. Li promised a pivot to consumption-driven growth and “anti-involution” policies to curb destructive price wars.
Economists doubt the sustainability. If Beijing says it will reach 4% growth, it will—but through credit, not productivity. The question is not whether it can, but at what cost.
Until next time!
Comments
SabreKai
The air over China is about to become much grayer. With the rest of us enjoying it soon after. I wonder if Carney wore his knee pads while talking to Xi.
