Welcome back to What’s Happening in China, your weekly update on the latest news and developments from the country.
Trump is back—and so is TikTok.
In 2020, Trump declared “As far as TikTok is concerned, we're banning them from the United States.” On August 6 of that year, he made it official, signing an executive order addressing the “threat posed by one mobile application in particular, TikTok.”
A legal battle ensued, and after initially revoking Trump’s ban, the Biden administration eventually renewed efforts to restrict the app. On January 17 this year, the Supreme Court upheld the Protecting Americans from Foreign Adversary Controlled Applications Act, effectively supporting a TikTok ban.
Now, back in power, Trump shifted his position. “I’m asking companies not to let TikTok stay dark!”, he wrote on Truth Social the day before his inauguration. His proposed solution? “I would like the United States to have a 50% ownership position in a joint venture. By doing this, we save TikTok, keep it in good hands and allow it to say up. Without U.S. approval, there is no Tik Tok. With our approval, it is worth hundreds of billions of dollars - maybe trillions.”
After a brief shutdown, the social media app was back online. “Thanks for your patience and support. As a result of President Trump’s efforts, TikTok is back in the U.S.!” the company announced.
On Monday, nearly five years after first declaring his intent to ban TikTok and signing an executive order to that effect, Trump—now back in the White House—signed a new order suspending Biden’s TikTok ban for 75 days.
Meanwhile, millions of U.S. TikTokers, fearing the ban and as a form of protest, migrated to Xiaohongshu, a Chinese lifestyle-sharing platform. Many of these users—dubbed ‘TikTok refugees’—are saying they plan to keep posting there.
One can almost imagine Xi Jinping sitting in Zhongnanhai, watching it all unfold with amusement.
Since this will be the last newsletter before the Lunar New Year, may the year ahead bring you prosperity and good health. Happy Year of the Snake!
Let’s get into it.
— PC
Keywords: TikTok ban • Xiaohongshu • DeepSeek • U.S. export controls • Trump 2.0 • Marco Rubio • Wang Yi • Lunar New Year • anti-corruption campaign • Panama Canal • Davos • panda diplomacy • science education • healthcare • generic drugs • trade surplus • Country Garden • stock market • GDP growth targets
Through the Lens
In Focus
I. DeepSeek
Last month, a Chinese start-up called DeepSeek astonished the international tech community with its latest open-source artificial intelligence model. DeepSeek-V3 delivers a performance comparable to that of better-funded US rivals such as OpenAI. This week it impressed once again with R1, its foray into AI reasoning.
DeepSeek is not a one-off. Since the middle of last year, Chinese tech companies such as Alibaba, Tencent, ByteDance, Moonshot and 01.ai have been steadily narrowing the gap with US peers, matching their capabilities and surpassing them in cost efficiency.
China’s achievements in efficiency are no accident. They are a direct response to the escalating export restrictions imposed by the US and its allies. By limiting China’s access to advanced AI chips, the US has inadvertently spurred its innovation.
To reduce reliance on high-end chips from overseas, Chinese AI companies have experimented with novel approaches in algorithms, architecture and training strategies. Many have embraced a “mixture-of-experts” approach, focusing on smaller AI models trained on specific data. These can deliver powerful results while reducing computing resources.
DeepSeek-V3 embodies the success of this resourceful approach. According to its technical report, the model was trained using a data centre powered by Nvidia H800 GPUs — a less advanced chip than Nvidia’s latest releases. Despite this, DeepSeek completed training in just two months at a cost of $5.5mn — a fraction of the sums reportedly spent by US companies such as OpenAI.
Read: Chinese start-ups such as DeepSeek are challenging global AI giants (Financial Times)
Related: China's DeepSeek AI Model Toes the Party Line ()
II. China Shock 2.0
The first “China Shock”, after China’s accession to the WTO, left a social and political legacy that transcended its economic consequences, fueling populist movements on both sides of the Atlantic. The effect accounted for just under 60% of the manufacturing job losses in the United States between 2001 and 2019, but it was the speed and concentration of the impact on specific industrial sectors and geographies that had the starkest effects. Europe and the United States now face a shock of even greater breadth. Where the first China shock hit legacy industries, the second iteration is also hitting advanced sectors that were supposed to provide the foundation for the West’s future industrial strength.
The proximate cause of the shock is the stagnant Chinese economy and the doubling down of support from Beijing for many of the industries in question. Recent analysis of Chinese production in sectors ranging from construction machinery to lithium batteries finds capacity levels that exceed the entire global demand pool. Unprecedented PRC export surpluses (nearly $1 trillion in 2024), brutal price-cutting, and weak demand in the Chinese market translate into a threefold hit for western companies, which see their market share in China falling and intensifying competition from Chinese firms in their home markets and third markets.
This is not a problem that will be resolved when excess capacity levels diminish. They are a byproduct of Beijing’s long-term push to dominate manufacturing at every level of the value chain, substitute Chinese for Western products, and build greater dependence of the rest of the world on China, all while strengthening China’s own self-reliance. For US and EU policy responses, the effect is to further blur the distinction between trade and economic security, as highly competitive sectors of western economies face being wiped out, reliance on Chinese supply chains continues to grow, and allied industrial capabilities are diminished.
Uncoordinated EU and US measures to address the shock are likely to be inadequate, ineffective, or even mutually harmful. Unilateral US trade defense efforts risk significant diversion of Chinese export surpluses to the EU. US export control, investment, and research security restrictions will fail if the PRC can obtain the same benefits from European economies. Separate efforts to set high, China-focused standards on cybersecurity, data, and labor rights, or to tighten rules of origin to deal with lengthening China-dependent supply chains, risk fracturing transatlantic trade and investment ties if they are not aligned. And none of these steps will address either the competitive hit to western firms in third markets, or the increasing levels of circumvention as Chinese suppliers seek to maneuver around the rising wall of trade restrictions.
Read: China: From Systemic Rival to Systemic Threat (German Marshall Fund of the United States)
III. “I know that the level of dissatisfaction is high. It’s not stable. I can’t predict what will happen, but when it happens, I won’t be surprised.”
When I was in China in February, March, I would talk to people. I’d say, “Who might Xi Jinping listen to? Which advisor might he listen to? Who might have some influence in persuading him to moderate his foreign policy, or moderate his control over the media, or recognise that this love affair with Putin is damaging China?”
Everybody I talked to said, “Oh, forget it, Susan. As long as Xi Jinping’s there, nothing’s going to happen.” They were much more pessimistic than I was. And obviously, they know a lot more than I do. So then I felt, “Am I really just so naïve?” But, as I look back, unexpected stuff has happened all the time. I know that the level of dissatisfaction is high. It’s not stable. I can’t predict what will happen, but when it happens, I won’t be surprised.
Read: The death of U.S.-China engagement and the political future of China — with Susan Shirk ( by )
**Stay informed on China. Upgrade your subscription to unlock exclusive content and help keep this newsletter going. Not ready for a paid subscription? You can still support the newsletter by buying me a coffee. Buy Me a Coffee or Upgrade To Paid**
Politics & Society
Xi Tells Officials Scared of Being Purged: It’s OK to Make Mistakes (WSJ)
Chinese leader Xi Jinping is intensifying a war on corruption that has purged officials in record numbers—with the side effect of leaving many unwilling to act for fear of punishment.
To help his bureaucrats rediscover their mojo and revive a stagnating economy, Xi is also promoting the message that some mistakes are acceptable. His decree to the Communist Party: Enforcing strict discipline shouldn’t fuel a climate of fear that saps the can-do spirit that once helped power China’s economic rise.
The approach is to “combine strict control with loving care,” Xi has said, to “encourage cadres to forge ahead and be enterprising.”
To that end, Xi has ordered party enforcers to absolve blame for honest mistakes and rekindle entrepreneurial verve across the rank and file. The party elite approved a new economic plan that embedded Xi’s directive, dubbed the “Three Differentiates,” which calls for leniency for well-meaning officials who make honest mistakes, and differentiating them from those who willfully break the rules.
Xi’s campaign seeks to tackle a key challenge in his top-down leadership of the world’s second-largest economy: how to wield decisive control over a vast, unwieldy bureaucracy without stifling the local dynamism that he says China needs to overcome deep-seated economic issues.
As part of the push for calibrated clemency, authorities have also pledged to curb false accusations against bureaucrats—a phenomenon that grew amid Xi’s purges—and encourage remorseful offenders to make amends by working harder. State media meanwhile called for reviving a sense of mission among officials who might otherwise stay passive to avoid trouble.
Xi also made clear that he is pressing forward with a crackdown that has punished more than 6.2 million people since he took power in late 2012—and cemented his standing as China’s most powerful leader since Mao Zedong.
“No resting for even a single step, no retreating for even half a step,” Xi said this month at an annual meeting of the party’s Central Commission for Discipline Inspection. “Any hesitation, laxness, or giving up halfway will be subversive mistakes.”
What China Got Right About Big Tech (Foreign Policy)
Five years ago, Jack Ma was not just one of the world’s richest billionaires, but also—perhaps only after President Xi Jinping—the most famous Chinese person in the world.
In the early aughts, Ma built a business empire around his company, Alibaba, which quickly took off as an online shopping juggernaut that first challenged and then outsold Amazon in China, all while branching out into countless other services. For millions of young Chinese people, Ma was their country’s answer to Bill Gates: Ma, a former English teacher, was a self-made man whose example seemed to illustrate the sky-high achievement and wealth that one could attain through a combination of entrepreneurial vision and relentless drive.
In China, Ma was in constant demand, the subject of numerous films and TV shows, while overseas, he became a kind of unofficial face of his country. He operated his own philanthropic organization, paying special attention to Africa just as China was becoming the continent’s leading global partner. He took star turns at Davos. And he bought the struggling English-language Hong Kong newspaper, the South China Morning Post, evincing a willingness to risk losing a great deal of money to revive an old publication with British colonial-era roots and turn it into a globally respected, Chinese-owned news operation.
Then, in 2020, on the eve of what was expected to be one of the biggest initial public offerings (IPOs) in history, Ma’s world was turned upside down as his empire became the target of hostile regulatory actions from the Chinese Communist Party. Authorities canceled the IPO of Ma’s Ant Group (an Alibaba affiliate), levied anti-monopoly actions against his businesses and those of other tech giants, and summoned Ma for hostile lectures and questioning.
Soon, the man who once seemed to be everywhere was scarcely seen at all. To avoid further trouble, without fanfare, he reportedly slipped away to live in a kind of exile in Japan.
In certain ways, Ma’s story is a uniquely Chinese one. It demonstrates the Communist Party’s obsession with control, as the party has long worked to prevent the emergence of a fully independent private sector in China. It is also part of the saga of Xi, who has worked hard to concentrate power in his own hands and who brooks no rivals in public attention and adulation.
Yet the humbling of Ma—and an entire class of other newly minted, mega-rich tech entrepreneurs in China—also speaks profoundly to political developments in the United States surrounding President Donald Trump’s reconquest of power after four years out of office.
In bringing this new class of business titans to heel, China’s leaders made a carefully considered strategic decision about the direction of their country’s political economy. In effect, they were saying that Beijing would never grant a dominant role to the extraordinarily lucrative and freewheeling private technology sector. Put slightly differently, that sector would have no sacred cows and would never be allowed to cast a shadow on the party and state.
In the emerging Trump regime, we are seeing just the opposite. The administration is a collection of billionaires that almost mindlessly celebrates wealth. On his first full day in office, for example, Trump gathered in the White House with two of the world’s richest men—Larry Ellison of Oracle and Masayoshi Son of Softbank—along with OpenAI CEO Sam Altman to salute the launch of a new project called Stargate, billed as a $500 billion joint venture to build artificial intelligence infrastructure.
Trump’s explanation for why this merited his support was almost childishly vapid. “AI seems to be very hot,” he said. “It seems to be the thing that a lot of smart people are looking at very strongly.”
So far, few details about the project are known. But as Washington Post coverage suggests, the companies investing vast amounts of money in AI are almost giddy that, unlike the Biden administration, the new White House seems willing to largely let the tech giants make up their own rules as free from regulation as possible.
The centrality of tech titans to Trump’s ambitions is, of course, best captured by one man: Elon Musk. Many of the richest and most powerful U.S. businesspeople were on hand for—and helped fund—Trump’s inauguration festivities, including Amazon founder Jeff Bezos. But it is Musk who has dominated the scene ever since Trump tapped him to help downsize the government and streamline regulations outside of any traditional institutional framework.
To say that this invites concerns about conflicts of interest doesn’t begin to capture the extraordinary partnership between Musk and Trump. In contrast with Xi’s China, Musk and big tech capital are rubbing out the lines between business and the state.
China readies for Lunar New Year, amid worries about the economy (Reuters)
Travellers thronged railway stations and airports on Friday, clutching large suitcases and gifts such as boxes of fruit as they joined millions of Chinese returning to their hometowns to celebrate the Lunar New Year festival with family.
The holiday, China's biggest, this year falls between Jan. 28-Feb. 4 and marks the arrival of the Year of the Snake.
The festivities usually give a boost to businesses such as shops, cinemas and restaurants as families enjoy time together feasting and shopping.
Authorities are especially keen for people to open their wallets this year to boost the sluggish economy, and have increased the official holiday period from seven days to eight, in keeping with last year.
Official efforts to revive weak consumption also include promoting winter-themed holiday destinations and ensuring affordable airfares throughout the country, authorities said on Friday at a State Council press conference in Beijing.
More broadly, the government has been trying to boost the economy with an aggressive raft of stimulus measures including interest rate cuts, raising basic pensions and widening trade-in programmes for consumer goods.
But businesses and travellers told Reuters they were seeing signs that people were continuing to tighten their belts in the face of a prolonged property slump and worries about job security.
A Beijing-based sales professional named Liu, who was at a railway station in the Chinese capital preparing to return to his hometown in the northeast, said concerns about the economy and employment were widespread.
He preferred not to share his full name because of the sensitivity of the issue.
"It's become even more difficult to earn money and find a job. There are many more unemployed people, and they all say it is more difficult," he said.
Qiang, a hairdresser working in central Beijing who wanted to be known only by his nickname, said that while people were still getting their hair cut for the holiday, they were being more selective about other services.
"At this time of year, we usually have many customers who come to dye their hair or get a perm. But we have fewer of those lucrative clients now," he said. "We used to have eight to 10 such clients a day during this season in normal years. But last year and this year, we only have about two to three."
China’s Lunar Mission: Make a Snake That’s Not Scary (WSJ)
Li Bingnan got his orders in October: Design a snake-themed sculpture for his hometown——and make the scaly, legless creature cute.
The Year of the Snake is slithering closer, arriving on Jan. 29. That means that across China and wherever the Lunar New Year is celebrated, the race is on to figure out how to create a commercially viable version. For designers of everything from children’s trinkets to parade floats, it is the toughest assignment in the traditional twelve-creature zodiac.
“On the one hand, you can’t make it too realistic. On the other hand, for the style we’re going for, it can’t be too cartoonlike,” Li said. “It was a real headache.”
For about a month this time each year, zodiac animals appear just about everywhere in China and many parts of Asia. They adorn the cash-filled red envelopes that are exchanged among families and friends, they feature in product packaging, advertising campaigns and promotional tie-ins and they loom over shopping mall entrances and public plazas in the form of sculptures and giant inflatable balloons.
It’s the biggest holiday on the calendar, and a time to ring up big sales.
But it’s tough to build a marketing campaign around a coldblooded, sometimes poisonous creature with no arms or legs.
“Who isn’t afraid of snakes?” asked Zhang Xiaqing, out shopping in the eastern Chinese city of Yiwu. The 57-year-old, born in the Year of the Monkey, offered a tip: “As long as the snake doesn’t look like a snake, then I’m not afraid.”
Keep reading with a 7-day free trial
Subscribe to What's Happening in China to keep reading this post and get 7 days of free access to the full post archives.