EU-China summit brings a fragile cooling of tensions

Brussels and Beijing seek stability but offer little substance

Jul 26, 2025

Welcome back to What’s Happening in China, your weekly China brief.

Meant to mark 50 years of diplomatic ties, the PRC hosted an EU-China summit this week in Beijing. With the relationship under strain over trade tensions and China’s support for Russia in its invasion of Ukraine, European Council President António Costa and European Commission President Ursula von der Leyen met with Chinese leader Xi Jinping and held talks with Premier Li Qiang.

Ahead of the summit, on Monday, China’s Ministry of Commerce responded to the EU’s recent move to sanction two Chinese banks for helping Moscow circumvent sanctions—the first such action since the war in Ukraine began. The ministry said the decision “had a serious negative impact on China-EU economic and trade relations and financial cooperation,” and vowed to “take necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies and financial institutions.”

In her opening remarks to Xi, von der Leyen said the two sides “have reached an inflection point” and that “rebalancing our bilateral relation is essential.” “It is vital for China and Europe to acknowledge our respective concerns and come forward with real solutions,” she added.

“Limit the external impact of involution,” she urged Li Qiang, using Beijing’s preferred term for deflationary price wars.

Xi said the two sides “should respect each other, seek commonality while reserving differences, uphold openness and cooperation, and pursue mutual benefit,” as he “put forward three proposals for advancing China-EU relations.”

They also issued a joint statement on climate, and the EU announced a tentative agreement on what von der Leyen described as an “upgraded [rare earths] export supply mechanism.”

The summit came as the EU faces mounting pressure on two fronts. Brussels is racing to finalize trade negotiations with Washington before an August 1 deadline to avoid steep tariffs, while also managing relations with a China that, as von der Leyen said at a G7 meeting in June, “floods global markets with subsidized overcapacity that its own market cannot absorb”—and one that, as Chinese Foreign Minister Wang Yi admitted to EU officials weeks ago, cannot afford a Russian defeat in Ukraine.

If anything, the summit achieved a temporary cooling of tensions between the bloc and the world’s second-largest economy. It may not have felt like much, but in times like these, that can count as a success.

Let’s jump into it.

— PC

Through the Lens

In Focus

I. EU-China summit

Zsuzsa Anna Ferenczy, an affiliated scholar at the Free University of Brussels, said the message the EU sends to China was "clear and consistent" once again at the summit.
"What Europe needs to do is to hold its ground and try to stay as coherent as possible … so that we do not allow China to divide and undermine the unity that we have," she told DW.
Prior to the summit, many in Brussels were surprised by reports of an unexpectedly frank remark made by Chinese Foreign Minister Wang Yi, who allegedly told the EU's top diplomat that it would not be in Beijing's interest to see a Russian loss in Ukraine.
Wang Guochen, a China economy assistant research fellow at Taiwan's Chung-Hua Institution for Economic Research (CIER), said these recent interactions have escalated tensions and the summit once again "confirmed that China-EU relations are unlikely to improve."

Read: EU-China summit exposes deepening tensions (DW)

Related:

US Tariffs Drive Europe to Rethink Its China Trade Relationship (Bloomberg)
European Chamber Chief Urges Concrete Action on EU-China Ties (Caixin)

II. U.S.-China trade talks

As the U.S. heads toward fresh trade talks with China next week, President Trump is increasingly focused on trying to strike an economic bargain with Beijing, one that aims to open the Asian giant to more American business and technology.
For much of this year, the administration has used the pressure of tariffs to redirect supply chains away from China. The goal has been to weaken Beijing’s geopolitical influence and press American businesses to bring manufacturing jobs back to the U.S.
Now, people familiar with White House thinking said, he wants to do deals.
The White House is now actively encouraging China to buy more American technology, underscored by the lifting of a ban this month on sales of Nvidia’s H20 artificial-intelligence chips to Beijing, reversing a policy aimed at protecting U.S. national security.
“The president wants an economic deal, and he’s pushing very hard to negotiate that deal” with China, said Stephen Biegun, who served as deputy secretary of state during Trump’s first term.
In response to questions from The Wall Street Journal, White House deputy press secretary Anna Kelly said, “President Trump’s first instinct is always diplomacy, and as the ‘Dealmaker in Chief,’ he always wants to secure better deals for the American people.”
She said the administration is “working to level the playing field for American farmers and workers and build secure supply chains for American consumers,” adding that China is again shipping rare-earth magnets to the U.S.
Beijing had restricted exports after Trump imposed steep tariffs on China.
Right now the U.S. levies are in the range of 30% to 50% on Chinese imports—higher than the levels negotiated in recent days with Vietnam, Japan and Indonesia. And the administration has been pressuring countries to build a so-called tariff fortress against the rerouting of Chinese goods through their territories.
Specifics on how the U.S. would police so-called transshipments from China through third countries couldn’t be determined. China has said it would retaliate against any country that strikes trade deals with the U.S. at China’s expense.

Read: Trump Is Shifting to Dealmaking Mode on China (WSJ)

Related:

China's Xi Makes Trump Wait for Leader Talks (Newsweek)
Donald Trump and Xi Jinping tipped to meet ahead of or during Apec summit in South Korea (SCMP)
Trump may travel to China to meet Xi in 'not-too-distant future' (Reuters)
Trump China tariff deadline likely to be extended, Bessent says (CNBC)

III. “Buy early, enjoy early”

Fierce price wars in China are hitting industries from cars to food deliveries to solar panels, squeezing profits and worsening the country’s deflationary slide. Though consumers may be lured by ultra-cheap deals, the trade-offs for them are more complicated than they might seem.
Since the pandemic and amid the ongoing housing slump, Chinese consumers have grown more price-sensitive, focusing on value and cutting non-essential spending. To stay competitive, carmakers have rolled out steep discounts and slashed prices — helped by government subsidies — deepening a price war that’s raged on for years.
In the so-called instant commerce sector, Alibaba, JD.com and Meituan are racing to expand delivery networks and pledging billions in subsidies, enticing customers with deals like bubble tea for mere cents.
It’s not hard to see the appeal the trend holds for some consumers.
Li Kun, a resident in Beijing eyeing a model by Chinese electric vehicle maker XPeng, said he was immediately hooked after a salesperson called him about new subsidies.
“The harder the manufacturers compete, the better it is for the buyers,” Li said. “Compete however you want!”
But timing a purchase can feel like a gamble if prices drop afterward, said Yu Peng, a Beijing resident planning to upgrade his car. “As a consumer, all you can do is quietly accept it,” he said. Still, he shrugged it off with a Chinese saying: “Buy early, enjoy early.”
The cutthroat competition comes with hidden costs.
Some buyers in China acknowledged that safety and quality can suffer when automakers cut corners to stay cheap, citing issues with recalls and assisted-driving features that received low scores. And Beijing is now concerned that price wars don’t just hurt companies and suppliers but also wages, tax revenues and the entire economy.

Read: Chinese firms are waging price wars. The consumer isn’t always winning (CNBC)

Related:

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Politics & Society

China lead poisoning: disease control agency, hospital faked results, probe finds (SCMP)

Ten officials in China’s northwestern Gansu province are under investigation for oversight failures, after the provincial disease control agency and a hospital were discovered to have falsified test results during a major kindergarten lead poisoning scandal.
This comes nearly two weeks after police in Gansu’s Tianshui city detained eight people over their involvement in the poisoning that left more than 200 kindergarteners with high lead levels in their blood, in a case that shocked the nation.
According to an investigation report released by the provincial government on Sunday, the Gansu Provincial Centre for Disease Control and Prevention (CDC) and the Tianshui Second People’s Hospital manipulated testing procedures and results for children from Heshi Peixin Kindergarten.
The officials placed under “accountability discipline investigation” include the Communist Party chief for the Gansu health commission, Zhang Hao, and director Liu Borong, provincial disease control bureau director Gan Xiaozhou, Tianshui municipal party committee secretary Feng Wenge and Tianshui mayor Liu Lijiang, the report said.
[…]
The local government will treat the children free of charge and reimburse any medical costs incurred outside the city, the report added.

Chinese kindergartens in crisis as enrolments plunge 25% in 4 years (Financial Times)

The number of Chinese kindergartens has fallen by a quarter in four years, prompting the closure of tens of thousands of schools in the country as a precipitous drop in births hits the education system.
Enrolments in China’s kindergartens have declined by 12mn children between 2020 and 2024, from a peak of 48mn, according to data from the country’s ministry of education. The number of kindergartens, serving Chinese children aged 3-5, has also fallen by 41,500 from a high of nearly 295,000 in 2021.
Falling enrolments are now “baked into the system and that’s not going to change”, said Stuart Gietel-Basten, director of the Center for Aging Science at the Hong Kong University of Science and Technology. He added that compared with five or 10 years ago, the decline in births was “huge”.
The contraction of China’s pre-school system is a foretaste of the challenges to come for business and policymakers from China’s demographic decline, which is expected to be one of the most rapid in the world.
China has recorded three consecutive years of population decline to 2024 following the decades-long policy, ended in 2016, that limited many couples to one child.
While the number of births rose by about 520,000 last year to 9.3mn, following a record low in 2023, they were still outpaced by deaths and have declined by nearly half since the peak of 17.9mn in 2017.
Zhuang Yanfang, an educator and owner of three kindergartens in Jinhua, a city in China’s prosperous coastal Zhejiang province, decided to turn one of her facilities, which at its peak had boasted 270 children, into a 42-bed nursing home in 2023.
“With the birth rate dropping, enrolments had declined,” said Zhuang. She estimated that “90 per cent of private kindergartens have closed” in the rapidly ageing community.
Despite expanding her two remaining kindergarteners to provide day care for infants starting from 10 months old, she was not optimistic. The facilities had only about 150 children combined, down from more than 1,000 a few years ago.
Some see opportunities for reforming China’s education system in response to the demographic cliff. HKUST’s Gietel-Basten said that Beijing could reallocate resources saved by the declining student numbers to improve the overall quality of the education system, from providing better day-care facilities for infants to investing in its universities.
It could also revamp systems such as the gaokao, the notoriously demanding university entrance exam that determines a student’s chances of entering the best schools.
“All of these aspects have to be reformed in order to allow this smaller, older but more educated, more skilled and healthier population to really thrive,” he said.

7 found accountable for contaminated tap water in East China's Hangzhou (China Daily)

Seven officials have been held accountable for the contamination of running water in Yuhang district of Hangzhou, the capital of East China's Zhejiang province, the municipal government said on Wednesday.
The seven officials include a deputy district head, as well as officials of the district's housing and urban development bureau, according to a report issued by a joint investigation panel organized by the municipal government.
The investigation found that substances detected in water samples were organic sulfur compounds that can emit odors similar to garlic, swamps or decay, even in low concentrations.
Since early July, sustained high temperatures have triggered rapid algae blooms in the upstream of Dongtiao River, and in bodies of water near the intake area of the Renhe water plant. Rainfall over a period of days led to concentrated runoff, resulting in the accumulation of algae and related degradation products -- including substances with a sulfurous odor -- near the intake area, and that runoff was processed by the plant early on July 16.
A comprehensive analysis concluded that the unusual odor in the water supply had resulted from a combination of climatic, environmental and hydrodynamic factors.

China’s Xi Gives Up Air Miles for More Time at Home (WSJ)

Xi’s evolving travel patterns drew attention in the fall of 2023, when he skipped a summit of the Group of 20 advanced and developing economies that India was hosting. He sent Premier Li instead.
Chinese officials didn’t say why Xi missed an event where he had been a regular participant. China had typically been represented by its president at G-20 summits since the bloc began arranging leader-level meetings in 2008.
In early July, when Xi skipped the Brics summit, Li filled in at the meeting in Brazil, where Xi had gone just seven months earlier to attend a G-20 summit and conduct a state visit.
Diplomats and analysts say that Xi’s decision to skip a Brics summit is notable given his efforts to boost the relevance of multilateral groupings where China holds greater sway, compared with institutions such as G-20, which Beijing has portrayed as too beholden to the U.S.
The Brics group—named after its early members of Brazil, Russia, India, China and South Africa—has presented itself as a multilateral counterweight to a U.S.-dominated world order.
“Physical stamina is a precious political resource, and Xi knows it. As Xi grows older, he is carefully managing his travel to preserve his strength,” said Thomas, the fellow at the Asia Society Policy Institute. “Skipping the Brics summit in Brazil likely had less to do with geopolitics and more with jet lag. A 48-hour round-trip for a two-day meeting just was not worth the physical toll.”

‘Eliminate toxic influences’: China’s military issues new political guidelines in wake of corruption wave (SCMP)

China’s top military body has issued a new set of guidelines for political officers following a series of corruption cases.
The regulations, released by the Central Military Commission (CMC), were designed to “strengthen political loyalty”, according to the official newspaper PLA Daily. It stressed the importance of Communist Party officials embedded within the military “acting with fairness and integrity in personnel matters, and leading by example”.
A commentary published by the newspaper on Monday said the new rules drew “clear political red lines, boundaries on the exercise of power and limits on social interactions”, and “represented a solemn commitment to the entire military”.
The report did not say when the new rules had been issued and the full text has not been made public.
The guidelines come in the wake of an anti-corruption purge that has seen more than a dozen People’s Liberation Army generals and some defence industry executives being placed under investigation.

China warns public workers against 'showing off' state secrets online (HKFP)

China’s spy agency warned public workers on Thursday to curb their “desire to show off” state secrets on social media.
Beijing has ramped up espionage warnings in recent years as ties with the United States and other Western nations have cooled.
Its Ministry of State Security (MSS) said this month that foreign spooks were targeting public officials with tantalising “honey traps” and blackmail to infiltrate the country and steal sensitive information.
In another admonition on Thursday, the ministry turned its focus to newbie workers who, in its view, might be spending a little too much time online.

Chinese officials warn comedians that mocking the other sex is no laughing matter (The Guardian)

Chinese provincial officials have warned comedians against stirring up discord between the genders, instructing them to criticise constructively rather than “for the sake of being funny”.
The warning came from authorities in eastern Zhejiang province on WeChat over the weekend after a comedian referred to her allegedly abusive marriage in a performance that went viral on Chinese social media.
Women’s rights are sensitive territory in China – over the last decade, authorities have cracked down on almost every form of independent feminist activism.
Zhejiang’s publicity department chastised some comedy shows for becoming a “battlefield” and simplifying gender issues into “opposition between men and women”.
“Criticism is obviously fine, but it should be … constructive rather than revolve around gender opposition for the sake of being funny,” Sunday’s WeChat article read.
The department also offered comedians tips on how to discuss gender in their sets.

Hong Kong & Macao

Hong Kong places bounty on 19 pro-democracy activists (DW)

Hong Kong police on Friday announced a bounty for 19 overseas-based activists for their roles in a "subversive organization" abroad, accusing them of being in violation of the national security law imposed by Beijing.
The group — "Hong Kong Parliament" — aimed to promote self-determination and establish a "Hong Kong constitution," the police said in a statement, adding it was using illegal means to overthrow China's power over the region.

UK plans to allow Hongkongers to be extradited on a 'case-by-case' basis (HKFP)

London is planning to make legislative changes allowing Hongkongers to be extradited on a “case-by-case basis,” a UK politician has said, voicing concerns that activists overseas could be sent back to Hong Kong.
UK Shadow National Security and Safeguarding Minister Alicia Kearns revealed the plan on Thursday, sharing a letter from Security Minister Dan Jarvis to Shadow Home Secretary Chris Philp on the changes to the Extradition Act 2003.

Wall St Journal set to plead not guilty in lawsuit filed by HKJA head (HKFP)

The Wall Street Journal is set to plead not guilty in a lawsuit against Selina Cheng, Hong Kong Journalists Association (HKJA) chairperson, who accuses the American newspaper of unlawful dismissal after she took the helm of the press union.
Acting Principal Magistrate David Cheung on Wednesday reserved four days in December for the trial of the case between Cheng and her former employer, after the legal representative of Dow Jones Publishing Co. (Asia) Inc, the parent company of the Journal, indicated that the company would plead not guilty.

Taiwan

Taiwan move to recall opposition lawmakers fails (Reuters)

Taiwan opposition lawmakers survived a major recall election on Saturday, thwarting a bid to oust one-fifth of the island's parliamentarians - a move supporters had hoped would send a message to China but that opponents said was an assault on democracy.
All recall votes against 24 lawmakers from the largest opposition party, the Kuomintang (KMT), were rejected, according to live vote counts by Taiwanese media. The voting followed a campaign begun by civic groups.
The election result will come as a blow to President Lai Ching-te's Democratic Progressive Party, which has missed an opportunity to reshape the Taiwan legislature and regain its majority.
The government said the island's largest-ever recall vote had faced "unprecedented" election interference by China, which claims the democratically governed island as its own - a claim Taiwan rejects.
While Lai won last year's presidential election, the DPP lost its legislative majority. The opposition has flexed its muscles since then to pass laws the government has opposed and impose budget cuts, complicating efforts to boost defence spending in particular.

DPP acknowledges failure of mass recall campaign (Focus Taiwan)

DPP Secretary-General Lin Yu-chang (林右昌) said the recall should not be reduced to a political victory or defeat. "This was not a confrontation between parties, but a demonstration of civic power," he said at a news conference.
He added that the DPP humbly accepts the result and will reflect on public sentiment. As the ruling party, it will adjust its approach to better meet the expectations of the people.
Calling the recall campaign "unprecedented" in Taiwan's democratic history, Lin praised all voters who participated, regardless of their stance.
At a separate event in Taipei, recall campaign co-leader and retired semiconductor tycoon Robert Tsao (曹興誠) attributed the results to what he called "Beijing's pervasive influence in Taiwan."

Taiwan Aims to Strike US Trade Deal in New Round of Talks (Bloomberg)

Taiwan’s trade negotiators have arrived in the US for tariff talks to clinch a deal with President Donald Trump’s team, according to a person familiar with the matter.
Vice Premier Cheng Li-chiun and trade negotiator Yang Jen-ni have arrived in Washington, DC, for the fourth round of talks, the person confirmed Wednesday, while asking not to be identified due to the sensitivity of the matter.
Exchanges between the two sides have, so far, been “constructive,” the person added, while noting the final tariff rate is Trump’s decision and still remains unclear.
Cabinet spokesperson Michelle Lee did not respond to a request for comment. Taiwan’s Liberty Times newspaper first reported the delegation’s arrival in Washington.

Chinese try to seize congratulatory letter for Taiwan’s taekwondo silver at world games (Taiwan News)

Two Chinese individuals on Wednesday attempted to seize a congratulatory message intended for Taiwan’s men’s taekwondo team after they won silver at the 2025 FISU Summer World University Games in Germany.
The team — Hung Jiun-yi (洪俊義), Jung Jiun-jie (鍾俊傑), and Huang Cho-cheng (黃卓乘) — earned Taiwan’s second men’s team silver in the history of the international games, following the 2017 Taipei Universiade, per CNA. After the match, Sports Administration officials presented a message of congratulations from Education Minister Cheng Ying-yao (鄭英耀) to the athletes.
As the team prepared to speak with reporters, a Chinese man and woman rushed forward and tried to grab the letter. A scuffle broke out with media, who demanded, “What are you trying to snatch?” and “Why are you taking our things?”
The Chinese nationals claimed the message violated event rules and questioned whether it was addressed to “Chinese Taipei.”

German mayor apologizes for call to remove Taiwan flag from games (Taiwan News)

The mayor of Essen, Germany, apologized to Taiwan after the city government, under pressure from China, advised a property owner to remove the Taiwan national flag from a building serving as the team's relay station during the FISU Summer World University Games.
Sports Administration Director-General James Cheng (鄭世忠) on Thursday said on Threads that after Taiwan's men’s table tennis team defeated China to win gold, the Chinese team repeatedly provoked the Taiwanese delegation, per CNA. During a table tennis match, Chinese nationals tried to silence spectators chanting “go Taiwan” claiming it violated match regulations.

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World

Asia & Pacific

Beijing’s South China Sea Campaign of Intimidation Has Run Aground (War on the Rocks)

China is in no greater control of the South China Sea today than it was four years ago. In some areas, it has even lost ground to other claimants. The disputes are now focused on locations of particular symbolic, strategic, or economic value to Southeast Asian governments, and at which they are willing to accept some degree of risk to stand up to China. And they have discovered that they can, in fact, stand up to gray zone pressure. China, at least so far, remains unwilling to escalate to lethal force despite its setbacks in the gray zone. The result has been a cycle of escalations, in which Chinese commanders ordered to avoid military force confront Southeast Asian counterparts with ever-more dangerous and supposedly non-lethal tactics, including ramming, high-pressure water cannons, dazzlers (military-grade lasers), and acoustic devices. Upon failure, they partially de-escalate only to have the cycle begin anew elsewhere.

China Reacts to Deadly Thailand, Cambodia Border Fight (Newsweek)

China has expressed its concern after Thailand launched airstrikes against forces from Cambodia along their disputed border on Thursday in a major escalation of tensions between the Southeast Asian neighbors.
"We are deeply concerned with the ongoing developments and hope that the two sides will properly address issues through dialogue and consultation," Chinese foreign ministry spokesman Guo Jiakun told a regular briefing in Beijing on Thursday, July 24.
Thailand and Cambodia are members of the Association of Southeast Asian Nations, which aims to promote economic cooperation in the fast-growing region where the United States and China have competed for influence for years.
China has good relations with both countries but is particularly close to Cambodia, where the government has given the Chinese navy access to a naval base on the Gulf of Thailand, close to the disputed South China Sea, where China has extensive claims.

China, Vietnam Plan First Joint Army Drill Amid US Tariffs (Bloomberg)

China and Vietnam plan to hold their first joint army training exercise this month, a sign of deepening military ties as the two countries grapple with US tariff policies.
The exercise aims to strengthen practical cooperation between the two militaries, the Chinese defense ministry said in a Sunday statement. It will take place in southern China’s Guangxi region, which borders Vietnam.
China and Vietnam have carried out joint naval patrols in previous years, but the coming exercise would be the first such exchange between their armies.

India resumes issuing visas to Chinese nationals after a 5-year freeze (CNBC)

India has resumed issuing tourist visas to Chinese citizens for the first time in five years starting Thursday, according to a Weibo post by the Indian embassy in China on Wednesday, marking a significant step in de-escalating tensions between the two countries.
Tensions between China and India escalated after their military clashed in June 2020 over their disputed Himalayan border, which resulted in casualties on both sides, according to Reuters.

Americas

Trump administration issues plan to limit AI exports to China (SCMP)

The White House on Wednesday released proposals to restrict exports of American AI equipment and limit the spread of Chinese AI models as part of a sweeping plan to shape the rules governing the fast-moving technology.
The 28-page AI Action Plan marks US President Donald Trump’s administration’s first comprehensive strategy on the topic and comes as national security hawks have raised concerns that superior American chips may reach China – including through third countries – and advance its AI and military development.
Under the plan, the US Commerce Department will lead an effort to develop new export controls on chipmaking subsystems to close “loopholes” in current restrictions that now focus on major systems.
The department will also lead efforts to increase the monitoring of exported US chip end users and to explore using new chip location verification features to keep them out of “countries of concern” – a term often used to refer to China, Iran, North Korea and Russia, among others.
The plan also directs the Defence and Commerce departments to coordinate with allies on adopting US export controls and to prohibit American adversaries from being involved in their defence supply chains.

Washington China hawks slam US approval of H20 chip sales (SCMP)

[…] Rush Doshi, director of the China Strategy Initiative at the New York-based Council on Foreign Relations, claimed on social media that he “independently” knew the H20 chip was not part of the London talks.
“The Trump team previously said the H20 wasn’t part of the London talks and then reversed itself,” Doshi said, in a post shortly after China’s Commerce Ministry said on Friday that the US had “taken the initiative”, suggesting the move was unilateral and not part of the reciprocal deal.
The “evidence for a unilateral cave,” Doshi said, “is “is overwhelming.”
Doshi, a long-time China hawk, is not alone in questioning the latest action of the “tough on China” president, who since taking office in January has appeared fixated on striking a grand deal with Beijing.
Jack Burnham of the Foundation for Defense of Democracies, a Washington think tank, said in a July 16 policy paper it would be a “mistake to allow Nvidia to resume the sale of H20 chips”.
“It will offer short-term aid to the most promising aspect of Beijing’s technology sector while giving Chinese firms time to reduce their dependence on imports,” he said.
House Select Committee on China Chairman John Moolenaar, a Republican from Michigan, last week, wrote to Lutnick, asking for a briefing on how Commerce will handle potential export licence applications for the H20 chip.
[…]
Paul Triolo of Washington-based Albright Stonebridge Group, a consulting company, said it was ultimately Huang’s ability to convince “enough” Trump administration officials, including the AI and crypto tsar David Sacks, on the issue.
Triolo said that Huang argued that “there was major downside to forcing Chinese firms to move away from the Nvidia AI stack over the longer term” and that the H20 chip “would not make a significant difference in the ability of Chinese firms to train more advanced models.”

Back to the Future: From Freeze-in-Place to Sliding Scale Chip Controls (Rhodium Group)

The Trump administration’s decision to grant NVIDIA licenses to sell its H20 chips to China is an attempt to wind the clock back to before October 2022, reversing the Biden administration’s paradigm shift on export controls that turbocharged China’s technological self-reliance drive. But the geopolitical climate has evolved dramatically in the past three years, and the Trump administration’s vision of keeping its chief adversary hooked on a US-made AI technology stack does not comport with China’s mission to shed itself of US dependencies. There are multiple variables at play that will test whether the H20 reversal will ultimately be remembered as a shallow transactional move or a more enduring policy shift on US tech controls and the US-China bilateral relationship more broadly.

Nvidia AI chips worth $1bn smuggled to China after Trump export controls (Financial Times)

At least $1bn worth of Nvidia’s advanced artificial intelligence processors were shipped to China in the three months after Donald Trump tightened chip export controls, exposing the limits of Washington’s efforts to restrain Beijing’s high-tech ambitions.
A Financial Times analysis of dozens of sales contracts, company filings and multiple people with direct knowledge of the deals reveals that Nvidia’s B200 has become the most sought-after — and widely available — chip in a rampant Chinese black market for American semiconductors.
The processor is widely used by US powerhouses such as OpenAI, Google and Meta to train their latest AI systems, but banned for sale to China.
In May, multiple Chinese distributors started selling B200s to suppliers of data centres that serve Chinese AI groups, according to documents reviewed by the FT. This was shortly after the Trump administration moved to prevent sales of the H20 — a less-powerful Nvidia chip tailored to comply with Joe Biden-era curbs.
It is legal to receive and sell restricted Nvidia chips in China, as long as relevant border tariffs are paid, according to lawyers familiar with the rules. Entities selling and sending them to China would be violating US regulations, however.

US State Department's China House gets new head, new structure (Nikkei Asia)

The U.S. State Department's "China House," the one-stop-shop for China strategy, has a new head: Joshua Young, Nikkei Asia has learned.
While the unit -- officially called the Office of China Coordination -- will continue to be based in the Bureau of East Asian and Pacific Affairs (EAP), "It's clear the department is looking to elevate its focus on China," a State Department official said. "Young will be responsible for coordinating China policy across the department."
Young will be the fourth China House coordinator since its inception in 2022, following Rick Waters, Mark Lambert and Kevin Kim. Similar to his predecessors, Young will be dual-hatted as the deputy assistant secretary for China and Taiwan, the official said.
The official said Young has the strong backing of seventh-floor leadership. The seventh floor of the Harry S Truman Building houses the office of Secretary of State Marco Rubio and Undersecretary of State for Political Affairs Allison Hooker, who Young will coordinate closely with.

Chinese Officers Questioned U.S. Government Employee About His Army Service (The New York Times)

Chinese intelligence officers began tracking an employee of the U.S. Commerce Department this spring, when he was in southwest China and where he has family members, at one point interrogating him about his prior service in the U.S. military, according to a U.S. government document.
The man, who is an American citizen, has been prevented from leaving China since mid-April, according to the document, a State Department cable that was obtained by The New York Times.
The cable, from the U.S. Embassy in Beijing, was dated May 2 and sent to officials in Washington, including Secretary of State Marco Rubio and White House aides on the National Security Council.
On April 14, the Chinese officers seized the man’s passport, credit card, cellphone and iPad while he was in Chengdu, the capital of Sichuan Province, the cable said. The officers, who worked for the Ministry of State Security, China’s main intelligence and counterintelligence agency, returned the passport on April 22 but told the American he could not leave the country. His wife is in the United States.
The cable gives a glimpse into the operations of the secretive Ministry of State Security as it increased pressure on the American during his stay in China. It also lays out efforts by U.S. diplomats to get him to Beijing from Chengdu in early May, while Chinese officers continued to conduct surveillance on him.
The man’s situation became public over the weekend, after American news organizations reported on his plight. The cable obtained by The Times did not identify the man by name or give details about his background, but it offers new information about his situation.

China says US Wells Fargo executive is banned from leaving country due to ‘criminal case’ (SCMP)

China has confirmed that it barred a senior Wells Fargo executive from leaving the country, saying it banned her exit because of a “criminal case” investigation.
Last week, reports surfaced that Chenyue Mao, an Atlanta-based managing director at the American banking giant and a United States citizen, had been stopped from leaving China. In response, Wells Fargo has suspended all business travel to China.
“Ms Mao Chenyue is involved in a criminal case currently being handled by Chinese law enforcement authorities and is subject to the exit restrictions in accordance with the law,” Chinese foreign ministry spokesman Guo Jiakun told a press conference on Monday.
He said the case was still under investigation and that Mao “cannot leave the country for the time being”.

US embassy in China warns exit bans risk straining bilateral relations (Financial Times)

The US embassy in China has expressed concerns about damage to bilateral relations from exit bans, following reports that a commerce department employee had been prevented from leaving the country.
The tensions over exit bans come as the two superpowers are locked in a trade war, and ahead of a potential meeting between US President Donald Trump and Chinese leader Xi Jinping.
The US “closely” tracks exit bans on American citizens in the country, a spokesperson for the embassy said on Monday, in response to a query about the commerce department employee.
The person added that they had “raised our concern with Chinese authorities about the impact these arbitrary exit bans have on our bilateral relations and urged them to immediately allow impacted US citizens to return home”.
The case is likely to prompt concerns among business groups, officials and others planning to travel to China. Wells Fargo, the US bank, halted travel to China last week after an Atlanta-based managing director was hit with an exit ban.
Exit bans are usually issued without an official public explanation. Individuals in China are prevented from leaving for reasons that can range from alleged espionage and corruption investigations to business disputes.

BlackRock Restricts Use of Company Devices for China Travel (Bloomberg)

BlackRock Inc. has told staff traveling to China for business trips to use temporary loaner phones and not to bring company laptops, underscoring growing concern among some global firms about employees working there.
The world’s largest asset manager detailed the “policy enhancement” on business travel to China in an internal memo seen by Bloomberg News, saying it is effective July 16.
The US firm told staff that using BlackRock issued employee devices, including iPhones and iPads, isn’t permitted, according to the memo. Using BlackRock laptops or remote access via VPN will also not be allowed. Employees were notified they wouldn’t have access to the BlackRock network during personal travel in China.
A BlackRock spokesperson didn’t immediately reply to requests for comment.
The latest changes come amid growing jitters around business travel to China. Wells Fargo & Co. last week suspended travel to China after one of its top trade financing bankers, Chenyue Mao, was blocked from leaving the country. This week, Foreign Ministry spokesman Guo Jiakun said the case was related to a criminal matter.
China has also stopped an American citizen who works for the US Commerce Department from leaving the nation for several months, according to media reports.

Microsoft: Chinese hacking groups were part of SharePoint attacks (CNBC)

Microsoft on Tuesday said Chinese hacking groups were part of the recent attacks on its SharePoint collaboration software.
As early as July 7, the Chinese nation-state actors it calls Linen Typhoon and Violet Typhoon have been trying to exploit the vulnerability, as has a China-based actor called Storm-2603, Microsoft said in a Tuesday blog post.
On Monday, Charles Carmakal, technology chief of the Google-owned Mandiant cybersecurity consulting group, said in a LinkedIn post that “we assess that at least one of the actors responsible for the early exploitation is a China-nexus threat actor.”
On Sunday, the U.S. Cybersecurity and Infrastructure Security Agency said it was “aware of active exploitation” of the vulnerability, and Microsoft rolled out patches for two versions of its on-premises SharePoint releases. The software company issued a fix for a third version on Monday.

Microsoft SharePoint Hack: Probe on Whether Chinese Hackers Found Flaw Via Alert (Bloomberg)

Microsoft Corp. is investigating whether a leak from its early alert system for cybersecurity companies allowed Chinese hackers to exploit flaws in its SharePoint service before they were patched, according to people familiar with the matter.
The technology company is looking into whether the program — designed to give cybersecurity experts a chance to fix computer systems before the revelation of new security concerns — led to the widespread exploitation of vulnerabilities in its SharePoint software globally over the past several days, the people said, asking not to be identified discussing private matters.

TikTok will go dark in US without Chinese approval of sale deal, US commerce secretary says (Reuters)

U.S. Commerce Secretary Howard Lutnick said on Thursday that TikTok will have to stop operating in the United States if China does not approve a deal for the sale of the Chinese-owned short video app that is used by some 170 million Americans.
Lutnick, speaking on CNBC, also said the United States must control the algorithm that makes the social media platform work.

Europe

Sanctioned German China expert visits Beijing in sign of easing restrictions (SCMP)

The head of a German think tank sanctioned by Beijing four years ago has returned from a trip to China, suggesting that travel restrictions on the organisation may be easing.
Mikko Huotari, the executive director of the Mercator Institute for China Studies (Merics) was in Beijing from July 14 to 17, after being invited by a leading Chinese think tank.
Merics was among the European institutions hit with travel bans and asset freezes in March 2021, in retaliation for EU sanctions on Chinese officials accused of perpetrating human rights violations in Xinjiang, charges it denies.

EU Wrestles With China’s Chokehold Over Crucial Defense Supplies (Bloomberg)

European metals traders are engaged in an increasingly frantic scramble to secure rare-earth metal supplies after it became all but impossible to directly source them from China.
While defense manufacturers say they can rely on stockpiling and diversified supply chains to keep their operations running, with traders turning to the secondary market, the supply crunch may soon start to bite unless a solution is found.
The seeds of this crisis were planted in early April, when Beijing cut off exports of critical minerals, such as terbium, yttrium or samarium, used in missiles, satellites and fighter jets — and implemented a far more restrictive system to oversee their release. China holds a quasi-monopoly over the mining and processing of many critical minerals, and the country’s ability to choose winners and losers has nudged leaders in Brussels towards an alarming realization, according to people familiar with their thinking: Europe’s ability to protect itself relies heavily on China.
“Companies and politicians view this topic differently, and governments obviously have to look at the bigger picture,” said Jakob Kullik, a researcher studying metals supplies at the University of Technology in Chemnitz, Germany. “That’s why I would be careful about what companies report, because the market figures tell a different story.”
There isn’t a quick fix to securing Europe’s critical mineral supply. While European Commission chief Ursula von der Leyen has vowed to respond firmly to what she has described as blackmail by China, a longer-term plan requires substantial investment and political will — neither of which the 27 member states are able to generate easily.
Under the new licensing system, Beijing holds veto power over which countries and sectors can access its rare earths. Like other nations that supply dual-use materials, it also requires applicants to fill out questionnaires certifying what they will ultimately be used for. Since April, China has approved a total of 1,500 six-month licenses to individual companies, and rejected an EU request to grant multi-year licenses, according to European officials.
While Chinese officials have eased off on export restrictions somewhat since a squeeze in April, that’s still not enough to offer confidence to their European counterparts.

Exclusive: BYD to delay mass production at new Hungarian plant, make fewer EVs, sources say (Reuters)

China's BYD will delay mass production at its new electric vehicle factory in Hungary until 2026 and will run the plant at below capacity for at least the first two years, two sources familiar with the matter said.
At the same time, China's No. 1 automaker will start making cars earlier than expected at a new plant in Turkey where labour costs are lower, and will vastly exceed its announced production plans, one of the sources said.
Shifting production away from Hungary in favour of Turkey would be a setback for the European Union, which has been hoping that its tariffs on EVs made in China would bring in Chinese investments and well-paid manufacturing jobs.
BYD's 4 billion euro ($4.64 billion) plant in Szeged, in southern Hungary, will start mass production in 2026 but only make a few tens of thousands of vehicles over the whole year, the sources said.
That would be a fraction of the plant's initial production capacity of 150,000 vehicles BYD. It should eventually have a maximum capacity of 300,000 cars per year.
A third source confirmed the slower 2026 start-up.
BYD has said it will launch operations at Szeged in October, but has not said publicly when mass production will start. Production at Szeged is due to increase in 2027, but will still be below planned capacity, the sources said.
[…]
The change in production plans comes as BYD overhauls its European operations following strategic missteps that included failing to sign up enough dealers and hire executives with local-market knowledge, and offering hybrids in markets resistant to fully-electric cars.

Chinese engines, shipped as 'cooling units', power Russian drones used in Ukraine (Reuters)

Chinese-made engines are being covertly shipped via front companies to a state-owned drone manufacturer in Russia, labelled as "industrial refrigeration units" to avoid detection in the wake of Western sanctions, according to three European security officials and documents reviewed by Reuters.
The shipments have allowed Russian weapons-maker IEMZ Kupol to increase its production of the Garpiya-A1 attack drone, despite the U.S. and E.U. sanctions imposed in October designed to disrupt its supply chain, according to the sources and documents, which included contracts, invoices and customs paperwork.
An internal Kupol document, reviewed by Reuters, showed it signed a contract with the Russian defence ministry to produce more than 6,000 Garpiya this year, up from 2,000 in 2024. The document stated that more than 1,500 drones had already been delivered by April.
The long-range drone is being deployed to attack civilian and military targets deep within Ukrainian territory, with around 500 being used by Russia per month, the Ukrainian military intelligence agency said in a statement to Reuters.
The European security officials asked that neither they nor their organisation be identified due to the sensitivity of the information. They also requested some specific details in the documents be withheld, such as their dates and the cost of contracts.

New Russian Drone Made Completely Of Chinese Components: Ukrainian Intelligence (The War Zone)

Russia is now using decoy drones with 100% of its components made in China, Ukraine’s Defense Intelligence Directorate (GUR) claimed on Tuesday. While Russian weapons have long contained parts from China as well as many other nations, this marks likely the first time one of its drones is completely made up of Chinese parts. The discovery is additional proof of Beijing’s growing support for Moscow’s war in Ukraine.

EU fires warning shot at Spain over Huawei reliance (Financial Times)

Brussels has warned Spain about relying on Huawei in the wake of controversy sparked by Madrid’s decision to use the Chinese company’s hardware to store state wiretaps.
The European Commission said that “Huawei represents materially higher risks” than other telecoms suppliers, a retort that came days after two senior US lawmakers asked Washington to review intelligence sharing with Spain because of the Huawei contract.
Last week, it emerged that Spain had signed a €12mn contract with the Chinese company for it to provide the hardware to store wiretaps authorised by judges for law enforcement and the intelligence services.
The move came as Spain marks itself out as one of the EU’s most China-friendly governments. Prime Minister Pedro Sánchez has met President Xi Jinping three times in China in just over two years as he seeks Chinese investment and commercial deals.
Spain’s wiretap contract runs against Brussels’ message that EU countries should impose restrictions on “high-risk suppliers” such as Huawei, as well as its Chinese rival ZTE, and stop them from installing new equipment.

Sub-Saharan Africa

China’s Citic to Develop Large Soybean, Corn Farms in Angola (Bloomberg)

A unit Chinese state-owned conglomerate Citic Ltd. will develop large-scale soybean and corn farms in Angola, as the world’s second-largest economy seeks to secure long-term supply amid a trade war with the US.
Citic Construction Co. is leading a group that will invest $250 million over five years with an aim to develop as much as 100,000 hectares (386.1 square miles) of land, according to Fan Juntao, the managing director of the company in Angola.
While China and the US have agreed on a trade framework to resolve tariffs disputes, details remain unclear. The North Asian nation last month booked a rare shipment of soybean meal from Argentina and has sought out a range of other suppliers to reduce its dependence on the US.
Angola is focused on tapping the “opportunity created by global geopolitics, trade wars, blocked markets,” Agriculture and Forestry Minister Isaac dos Anjos said at a briefing in Luanda. “This first agreement with Citic gives us a guaranteed buyer for Angolan soy. We’ll sign another deal Thursday with a second Chinese firm to expand exports beyond 500,000 tons of food products.”

Congo Is Targeting Cobalt Price That Boosts Local Processing (Bloomberg)

The Democratic Republic of Congo is seeking a cobalt price that encourages domestic processing, as the government considers its next steps to follow a ban on exports of the battery metal, according to the chairman of the state mining company.
Congo, which accounts for about three-quarters of global cobalt supply, suspended shipments for four months on Feb. 22, before extending the ban by three months in June. The decision came after prices slumped in recent years as output soared, particularly from two mines operated by China’s CMOC Group Ltd.
“No one can invest in a refinery in the country because the price was not sustainable,” Gecamines Chairman Guy-Robert Lukama said in a discussion this week with the Washington-based Center for Strategic and International Studies.
Congo’s mines export an intermediate product called cobalt hydroxide which is transformed into battery-grade material or metal elsewhere, mainly in China.
The initial ban was introduced shortly after benchmark prices dropped toward historic lows of less than $10 a pound. They have risen almost 60% since Congo closed its borders to cobalt shipments, while the price of hydroxide has more than doubled, according to Fastmarkets data.
Congo doesn’t want a return to peaks above $40 a pound — experienced in 2018 and 2022 — but “it was our duty as a country to stabilize the price,” Lukama said. A period of “totally insane” supply growth had led to more than 12 months of inventory being held outside the country, he said.

Global Institutions & Multilateral Relations

China AI action plan (CNBC)

The tech race between the world’s two largest economies just intensified.
China on Saturday released a global action plan for artificial intelligence, calling for international cooperation on tech development and regulation.
The news came as the annual state-organized World Artificial Intelligence Conference kicked off in Shanghai with an opening speech by Premier Li Qiang, who announced that the Chinese government has proposed the establishment of a global AI cooperation organization, according to an official readout.
Days earlier, U.S. President Donald Trump announced an American action plan for AI that included calls to reduce alleged “woke” bias in AI models and support the deployment of U.S. tech overseas.
“The two camps are now being formed,” said George Chen, partner at the Asia Group and co-chair of the digital practice.

Trump left a power vacuum at the UN. China saw an opportunity (Financial Times)

China is making a concerted effort to expand its influence throughout the UN, taking advantage of Donald Trump’s disdain for multilateralism to place officials and push Beijing’s agenda more aggressively, according to western diplomats.
After cuts to US foreign aid prompted what could be the UN’s most radical restructuring in decades, China has stepped up attempts to fill the vacuum, particularly in the Swiss diplomatic hub of Geneva, multiple officials and diplomats told the Financial Times.
This has included increasing its personnel footprint, building voting coalitions, and in some cases, financial contributions to entrench its position in a city called the “kitchen of global diplomacy”, with more than 450 international bodies.
Agencies of particular interest to China include the International Telecommunication Union (ITU), which sets global communications standards, and the World Health Organization (WHO), according to western officials.
China has long sought to bolster its sway in Geneva and has steadily expanded its presence in UN agencies for almost a decade, particularly those tied to development, technology and technical standards. Although China contributes more than 15 per cent of the UN’s regular budget, second to Washington’s 22 per cent, it remains under-represented in staff.

As Trump Quits UNESCO, China Expands Influence (The New York Times)

Any traveler who has picked up an international guidebook knows the UNESCO designation as shorthand for a must-see cultural destination that’s worthy of a detour.
But the United Nations Educational, Scientific and Cultural Organization has also become the target of an intense Chinese influence campaign in recent years as Beijing has sought to increase its reach over educational curriculums, historical designations and even artificial intelligence.
President Trump’s decision Tuesday to withdraw the United States from the group removes a powerful check on China’s effort, in the latest example of how the White House retreat from international institutions offers an opening for China to advance its soft power.
The United States was once the largest UNESCO backer, accounting for nearly 25 cents of every dollar. But Washington has had an on-again-off-again relationship with it for years, especially since Mr. Trump first took office in 2017, and China has stepped up to take its place. A Chinese official is now UNESCO’s deputy director general, a post that diplomats said is often awarded in exchange for political or monetary favors.
UNESCO has lent support to major priorities for China’s top leader, Xi Jinping, including the global infrastructure program known as the Belt and Road Initiative. Beijing has also lobbied heavily for World Heritage designations and is jockeying to surpass Italy as the country with the most culturally significant sites. Some of those sites are in oppressed regions like Tibet and Xinjiang, where many local residents view them as an attempt to appropriate and control their culture and history.
And while UNESCO wields tremendous clout over what counts as history, it is also the U.N. agency in charge of setting artificial intelligence guidelines. UNESCO has an agreement with iFlytek, a major Chinese A.I. company, to cooperate on higher education in Asia and Africa, according to Chinese state media. (UNESCO said it has partnerships with many artificial intelligence companies worldwide.)
“UNESCO is a battleground for cultural and intellectual power and influence,” said David Killion, who was an ambassador to UNESCO under President Barack Obama. “We are conceding the soft power realm to an expansionist, authoritarian great power.”

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Business, Economy & Finance

China Budget Gap Hits Record in Spending Blitz to Offset Tariffs (Bloomberg)

China’s budget deficit climbed to a fresh record in the first half, highlighting intensified government efforts to shore up domestic demand as Donald Trump’s tariffs reduce exports to the US.
The broad fiscal gap reached 5.25 trillion yuan ($733 billion) in January-June, according to Bloomberg calculations based on data released by the Finance Ministry during a briefing on Friday. The shortfall widened 45% from a year earlier.
Chinese authorities have front-loaded fiscal stimulus to boost infrastructure investment and household consumption, aiming to support growth in the face of a sluggish property market and mounting deflationary pressures. Despite a recent tariff truce, exports to the US have contracted as average American levies on Chinese goods remain about 30 percentage points higher than last year.
Government spending and resilient shipments to markets other than the US underpinned China’s growth in the first half, with gross domestic product expanding 5.3% — well above the official annual target of around 5%.
Top leaders are set to convene toward the end of this month to discuss economic policy for the rest of the year, just as Chinese and US negotiators prepare to meet next week for another round of trade talks. Their outcome will be key to deciding whether more stimulus is needed.

China Premier Links Factory Boom to Hard Work, Not Subsidies (Bloomberg)

China’s second-in-command Li Qiang had a self-deprecating response when confronted with criticism from a top European Union official that Beijing’s government subsidies played a role in contributing to global imbalances in manufacturing output and demand.
The winning formula is working hard — perhaps too hard.
“Right now, many companies — especially in manufacturing — feel quite deeply that China’s manufacturing capacity is so strong, and the Chinese people are incredibly diligent,” Li said at the closing of an EU-China summit in Beijing on Thursday. “Factories run 24 hours a day.”
China’s premier added that “some feel that this created new issues for the balance of global supply and demand.” But that’s “a separate issue, and we’re aware of it,” he said.
The rejoinder is unlikely to convince European Commission President Ursula von der Leyen, who made overcapacity in China’s economy a central issue of her visit. China’s newly won dominance in global manufacturing has partly come at the expense of countries like Germany, with risks for Europe on the rise as Donald Trump’s tariffs steer exports away from the US.

Goldman Finds China Enduring Worst Wage Growth Outside Covid (Bloomberg)

China’s wage growth is so anemic it’s slowed to the weakest pace outside the pandemic, an alternative indicator compiled by Goldman Sachs Group Inc. showed, revealing an obstacle to stronger consumption at home as risks abroad mount.
Wages grew 3.9% from a year ago in the second quarter — the lowest reading on record, with the exception of the pandemic years, according to a tracker published Sunday by Goldman economists led by Andrew Tilton.
That’s about a percentage point lower than shown in official statistics so far this year, they said, with the expansion “trending down” since China reopened from the pandemic in early 2023.
“Our wage tracker suggests that sluggish wage growth may impose headwinds to consumption growth in the second half of 2025,” the economists said. “We anticipate incremental and targeted easing measures in the second half of the year to alleviate labor market pressures.”

China's affluent harbor pandemic-era pessimism about economy (CNBC)

China’s affluent are feeling just as poorly about the economy as they did during the pandemic.
That’s according to a study of affluent Chinese released this month by consulting firm Oliver Wyman, which found 22% of respondents were negative about the economy when surveyed in May. It just exceeds the 21% seen in October 2022, just before Beijing announced plans to ease its stringent zero-Covid policy.
When asked about the five-year horizon, respondents were far less upbeat than they were back in 2022.
“That to us is a fundamental shift in mindset,” Imke Wouters, partner at Oliver Wyman, told CNBC. “If you think, ‘I’m not having a good financial situation now,’ your spending, saving patterns will be very different.”
“The longer this [drags] on, the more negative they become about the long term future and the more cautious they come on spending,” Wouters said.

China's Gambit: Assessing Beijing's Consumer-Driven Economic Strategy (Asia Society)

Enodo Economics and the Asia Society Policy Institute’s Center for China Analysis jointly convened a private roundtable examining how consumer demand will reshape China’s economic future. The session brought together leading China analysts to dissect Beijing’s consumption-led growth ambitions using four lenses:
Structural versus cyclical barriers and measurement challenges. What prevents Chinese households from driving economic growth? Are obstacles fundamental or temporary, and how does data quality affect our understanding?
Historical consumption patterns. How has China’s spending behavior evolved, and where do traditional drivers stand?
Beijing’s consumption playbook. What is the potential of recent policy interventions to meaningfully boost household demand?
Policy contradictions. Can consumption-led growth coexist with the state’s parallel drive for technological dominance through industrial investment?

China’s Local Gov’t Debt Faces Test Over Next Five Years, Economist Says (Yicai)

China’s local governments have doubled their debt in five years and that debt’s sustainability will be tested during the 15th Five-Year Plan period that starts next year, according to the chief economist at Yuekai Securities.
Local government debt management will undergo a profound change in the coming half decade, Luo Zhiheng said in an interview with Yicai. China should further restrain the growth of hidden debt by improving local fiscal management to ease liability risks and address the contradiction between ongoing local debt and fiscal balance, Luo Zhiheng said in an interview with Yicai.
As the local government debt pile grows, interest payments will take up an increasing share of fiscal expenditure, thereby impacting spending on the population’s of some financially weaker regions, Luo explained.

China’s Cosco Eyes Veto Rights in Deal for Li Ka-shing’s Overseas Ports (Bloomberg)

China’s biggest shipping company is set to join the global consortium that’s acquiring Hong Kong tycoon Li Ka-shing’s overseas ports, and is requesting a powerful role in the group in order to secure Beijing’s blessing for the controversial deal, people familiar with the matter said.
State-owned China Cosco Shipping Corp. is asking to have veto rights or equivalent powers in the entity taking over the 43 ports, including two strategically important ones along the Panama Canal, the people said, asking not to be identified discussing private matters. Cosco has argued such rights are necessary to block any decisions that are potentially harmful to China’s interests, the people added.
Li’s CK Hutchison Holdings Ltd. and the original buyer group, which includes BlackRock Inc.’s Global Infrastructure Partners unit and Italian billionaire Gianluigi Aponte’s Terminal Investment Ltd., have agreed that Cosco should have full informational access to the operation, the people said. But talks are still ongoing as to the powers that Cosco will have in the consortium and no final decisions have been made, they said.
A 145-day period for exclusive talks between CK Hutchison and the consortium is likely to lapse on July 27, and details of Cosco’s role in the consortium could be settled by the end of September, some of them said.

China land sales in smaller cities hit lowest level in a decade (Financial Times)

Land sales across smaller and less wealthy Chinese cities have fallen to their lowest levels since at least 2011, highlighting the bleak prospects for a full recovery across a national real estate market mired in a slowdown.
Data from financial information provider Wind shows the total value of all land transactions in third-tier mainland Chinese cities, as ranked by population and economic development, fell 4 per cent to Rmb362bn ($50bn) in the first half of this year on the same period last year, despite a slight rise in sales for residential use.
The value of land transactions, including for residential, commercial and other uses, slipped to Rmb87bn in fourth-tier cities and Rmb51bn in fifth-tier cities — both also the lowest since Wind began compiling the data series in 2011.
The data showed that across 337 cities in China, sales rose 8 per cent to Rmb1.2tn in the first half, fuelled by increased activity in first- and second-tier urban areas. But after a collapse in volumes that began in 2021, the total was still the fourth-lowest recorded by Wind.
The worsening picture outside the largest and wealthiest cities points to the challenge for policymakers in Beijing as they try to revive a real estate market that for years anchored economic growth and provided local authorities with vital revenue.

China auto industry group publication corrects report on 'zero-mileage' crackdown plans (Reuters)

A publication of China's top auto industry association said on Monday that its report about China's industry ministry planning to ban the resale of cars within six months of their initial registration was "inaccurate", and it deleted that line from its story.
Auto Review, the official media outlet run by the China Association of Automobile Manufacturers, said in a statement to Reuters that its article published on Saturday "contained inaccurate descriptions related to the Ministry of Industry and Information Technology (MIIT) and other relevant authorities concerning zero-mileage used cars."
"These inaccuracies have since been deleted and corrected," it said.
The publication updated its story to read: "MIIT plans to regulate the zero-mileage used cars together with relevant departments and manage the issue from its source."
Auto Review had reported on Saturday that MIIT planned to ban the resale of new cars within six months after their registration as part of efforts to combat sales of so-called zero-mileage used cars.

BYD distracted the world while Chinese EV peers staged a coup (Rest of World)

Everyone watched BYD overtake Tesla, and missed the quiet march of a pack of other Chinese automakers.
Six of the world’s top 10 electric-vehicle sellers last year were Chinese. From Geely and Li Auto to the lesser-known Wuling, Chinese automakers are building automotive empires that span from Brazil to Thailand. These companies are building full manufacturing and service ecosystems overseas rather than simply exporting cars.
It represents the maturation of China’s EV industry from domestic price warriors to global contenders. The next phase, however, will test whether they can maintain cost advantages while building brand loyalty and service quality.
“Chinese EV companies are not just exporting products,” Robert Khachatryan, CEO of Freight Right Global Logistics, told Rest of World. “They’re exporting capability.”

China to Put Alipay, Tenpay Under Tighter Anti-Money Laundering Scrutiny (Caixin)

China’s central bank is moving to bring the country’s two payment giants, Ant Group Co. Ltd.’s Alipay and Tencent Holdings Ltd.’s Tenpay, under its direct anti-money laundering supervision, a significant escalation in Beijing’s campaign to manage financial risk at its most systemically important institutions.
The move is part of a proposed regulatory overhaul that would subject 27 major financial firms — including top banks, brokerages and insurers — to the direct oversight of the People’s Bank of China’s (PBOC) headquarters for compliance with rules against money laundering and terrorism financing.

Chinese Investors Face 20% Tax Bill on Offshore Trading Profits (Caixin)

China is stepping up enforcement of its long-standing tax rules on overseas investments, a move that indicates deeper scrutiny of the country’s expanding class of global retail investors.
Tax authorities across the country have begun proactively contacting individuals who trade U.S. and Hong Kong stocks, instructing them to declare their income and settle tax liabilities.

Beijing Brings Legacy Brokerage Back to Life with State-owned Firm’s Takeover of Credit Suisse Securities (Caixin)

Nearly two decades after helping reshape China’s securities industry, Beijing’s state-owned capital firm is making a bold comeback — by taking control of a foreign-invested brokerage and reviving a long-retired name: Beijing Securities.
On Wednesday, Founder Securities Co. Ltd. announced that it had formally transferred its 49% stake in Credit Suisse Securities (China) Ltd. to Beijing State-owned Assets Management Co. Ltd. (BSAM), an investment vehicle owned by the Beijing municipal government.

China Aims to Make Hainan Even More of a Free Trade Port (Caixin)

South China’s Hainan province will expand the categories of goods that qualify as duty-free as part of a broader effort to open up trade on the island, an official at the nation’s top economic planner said Wednesday.
The effort marks another step in China’s trade liberalization plans for the island, which has already been designated a free trade port and granted certain allowances, such as duty-free imports of certain products.

20 Years of Missed Opportunities in China’s Exchange Rate Policy – Rhodium Group (Rhodium Group)

We review the most important moments of China's exchange rate reforms since 2005, what has changed in twenty years, and more remarkably, what has remained the same.

Notarized Will Secures Wahaha Heiress’s Succession Amid Family Dispute (Caixin)

A notarized will established by the late billionaire founder of Wahaha Group shortly before his death was the key to his daughter inheriting a major stake in the Chinese beverage giant, insulating her control of the company from a wider family feud.
The document, an inheritance certificate from a notary office in Hangzhou, reveals the legal maneuver that secured Zong Fuli’s claim to her father’s 29.4% stake in Wahaha. The move came even as a bitter dispute unfolds in a Hong Kong court over $1.8 billion of her father’s fortune involving several alleged half-siblings.
Zong Qinghou, the founder of Hangzhou Wahaha Group, one of China’s best-known beverage makers, died in February last year. His death set off a period of internal turmoil over the highly-watched succession before his daughter, Zong Fuli, formally took control.
Corporate records were updated in August 2024 to show that Zong inherited her father’s entire 29.4% holding, making her the company’s new legal representative. A state-owned investment firm, Hangzhou Shangcheng Investment Holding Group Co. Ltd., remains the largest shareholder with a 46% stake, while an employee union holds the remaining 24.6%.
The inheritance certificate, obtained by Caixin, shows that on Mar. 1, 2024, Zong Fuli applied for a notarized certificate of inheritance. She submitted 12 pieces of evidence, including her father’s death certificate, her parents’ marriage certificate, and her own “Only Child Glory Certificate,” a document issued under China’s former one-child policy.
Crucially, she also provided a notarized will her father had created in 2024, the same year he died.

How the diamond industry lost its sparkle (Financial Times)

It takes the Earth more than a billion years to forge a diamond. Feng Canjun can grow one in the space of a week.
On a sweltering summer afternoon in Zhengzhou, capital of the central Chinese province of Henan, Feng’s Jiaruifu diamond factory hums with energy. Inside, 600 machines, each larger than an African elephant, simulate the crushing geological pressure and diabolical heat deep in the Earth’s surface, where diamonds grow. The machines can turn out three-carat diamonds, the size of a large engagement ring, in just seven days.
“We can mass-produce diamonds,” Feng says, proudly pointing to the rows of machines. He has another two factories working around the clock. “Currently, I produce about 100,000 carats a month,” he adds.
Over 70 per cent of the world’s lab-grown diamonds for jewellery — many destined for the ring fingers of newly engaged couples — originate in a Chinese factory, with Henan at the centre of the synthetic trade.
“Essentially, we dominate this industry,” says Feng, who trained as an aerospace materials engineer and looks like one in a sober black suit. The only indication of his vocation is the diamond-encrusted watch glittering on his wrist.
For the natural diamond industry, Feng’s factories and others like them have been devastating. The explosion of lab-grown diamonds on the international jewellery market has coincided with a slump in demand, sending the price of smaller natural diamonds to their lowest levels in a decade.
Marty Hurwitz, head of the Grown Diamond Trade Organisation, says lab-grown diamonds have “been a massive disruption. People in the industry at first didn’t believe it and, second, couldn’t accept it.
“This has been the first competitive product that mined diamonds have ever faced.”

Tech & Media

Amazon shuts down Shanghai AI research lab (Financial Times)

Ecommerce group Amazon is shutting down its Shanghai artificial intelligence lab, becoming the latest US company to retreat from Chinese research efforts amid rising geopolitical tensions.
Amazon’s pullback in China follows similar moves by US tech groups, including IBM and Microsoft, which have scaled back their China-based research and development efforts as US officials intensify scrutiny of all China-related AI work.
Wang Minjie, a scientist in the Shanghai lab established by the Amazon Web Services cloud arm in 2018, said in a post on social media that his team was “being dissolved due to strategic adjustments amid US-China tensions”.

McKinsey bars China practice from generative AI work amid geopolitical tensions (Financial Times)

McKinsey has stopped its China business from undertaking consultancy work related to generative artificial intelligence amid geopolitical tensions, excluding it from one of the most potentially lucrative markets for consultants in the country.
The US firm instructed its mainland Chinese operation to refrain from projects deploying generative AI in recent months, according to two people with knowledge of the matter. One of the people said the move was prompted by Washington’s growing scrutiny of US companies operating in sensitive sectors such as AI and quantum computing in China.
The ban extends to projects in the mainland offices of multinational clients, but does not stop McKinsey’s China business from working with companies that have more established forms of AI in their products.
One person with knowledge of the matter said the policy could constrain McKinsey’s ability to secure new business, given the central role generative AI now plays in corporate strategy and IT systems through products such as chatbots.

Chinese regulator approves 134 games in July, including Blizzard’s Diablo IV for NetEase (TechNode)

On Tuesday, China’s National Press and Publication Administration (NPPA) approved 134 games for July, including 127 domestic titles and seven imported ones. NetEase’s Diablo IV, developed by Blizzard and previously released overseas in June 2023, was among the most notable imported titles approved. Diablo IV is a dark fantasy action role-playing game that features open-world exploration, real-time combat, and loot-driven progression.

Science, Health & Environment

China is catching up to the US in brain tech, rivaling firms like Elon Musk’s Neuralink (CNN)

As of May, Beinao-1 says a total of five patients, the same number as Elon Musk’s Neuralink, has its implants. Another US company Synchron, whose investors include Jeff Bezos and Bill Gates, has undergone trials with 10 patients, six in the United States and four in Australia.
Maximilian Riesenhuber, a professor of neuroscience at Georgetown University who was not involved in the Beinao trials, told CNN that despite starting later than the US, China is making advances.
“China has definitely shown the ability to not just catch up, but also then be competitive, and now actually to start, also to drive the field in some areas,” he said. “Excitingly, there’s a lot of research activities in both countries, because they’ve realized the potential in BCI.”

Analysis: China’s clean-energy exports in 2024 alone will cut overseas CO2 by 1% (Carbon Brief)

China’s exports of clean-energy technologies such as solar panels, batteries and electric vehicles are increasingly helping to cut emissions in other countries.
Such exports in 2024 alone are already shaving 1% off global emissions outside of China and, in total, will avoid some 4bn tonnes of carbon dioxide (GtCO2) over the lifetimes of the products.
Moreover, the global CO2 savings from using these products for just one year acts to more than outweigh the emissions from manufacturing them.
This new analysis for Carbon Brief is based on a detailed assessment of clean-technology export flows, the carbon footprint of manufacturing these products and the “carbon intensity” of electricity generation in destination countries.

Arts & Culture

Chinese Football on a football pitch + “unpleasant dance music” (

Concrete Avalanche

)

In this issue: “lower-tier city” compilations (one from Guizhou, one from a Lanzhou label), folk act Wild Children return with an animated film soundtrack, a rebellious alt-pop and hip hop record, a recording of someone clipping their nails, text-to-speech technology hallucinations, and Chinese Football playing songs on a football pitch.

Architect Ma Yansong Creates Otherwordly Constructs Across Europe (RADII)

Ma Yansong’s name might not be familiar to the mainstream audience yet, but you have most likely seen his work somewhere. A Yale graduate, this Generation X architect has steadily built his reputation on the global architectural stage.
The Beijing-born creative is known for blending traditional Chinese philosophies like feng shui with modern architectural forms. He rose to fame in China for his innovative designs that harmonize natural landscapes with urban environments, establishing his architecture practice, MAD Studio, which has garnered worldwide acclaim.

Sports

China crushes South Korea to claim bronze at FIBA Women's Asia Cup (Xinhua)

China wrapped up its 2025 FIBA Women's Asia Cup campaign in dominant fashion, routing South Korea 101-66 in the third-place game on Sunday.
Determined to finish on a high note after a semifinal loss to Japan, China came out firing from long range and pushed fast in transition. Luo Xinyu and Yang Shuyu each hit early 3-pointers as the host raced into a 13-2 lead.

China sweeps team golds in artistic swimming at World Aquatics Championships (Xinhua)

China won the World Aquatics Championships team acrobatic title in artistic swimming on Friday, concluding its campaign with gold medals in all three team events.
Performing a routine titled "Soul of the Terracotta Army", the Chinese squad topped the preliminary round with 225.7993 points and carried that momentum into the final, where they scored 229.0186 points to secure the gold. The team finished ahead of Neutral Athletes B (NAB) and Spain.

Events

China Connections – Bridging Generations of U.S.-China Education Exchange: American Scholars to China (US-China Education Trust)

Tuesday, July 29 | 8:00 – 9:30 pm ET
Online via Zoom
The U.S.-China Education Trust will feature three Americans who spent time in China to reflect on their experiences abroad, and how their time overseas and educational exchange strengthened and transformed their understanding and impacted the bilateral relationship. Over many generations, Americans have leveraged the first-hand exposure, gained during time abroad, to further US understanding of China’s governance, culture, and society. With low numbers of Americans studying in China, is this still possible in the years ahead?
Peter Hessler, Staff Writer at the New Yorker, Susan Shirk, Director Emeritus at UC San Diego, and Savannah Billman, Senior Digital Communication Associate at the National Committee on US-China Relations, will be joined in dialogue by Neysun Mahboubi, Director of the Penn Project on the Future of U.S.-China Relations at the University of Pennsylvania. The panelists will reflect on their motivations to go abroad, the global and political contexts at the time, and how those experiences shaped their personal and professional trajectories.

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