1. China’s Geopolitical Gains and Economic Losses

2. What’s Next for Taiwan After Rare Talks in Beijing

China is Back in President Trump’s Firing Line

China reportedly played a key role in pushing Iran to accept a ceasefire with the U.S., scoring diplomatic points and strengthening its status as a regional mediator and peacemaker. Even President Trump gave China credit for nudging Iran to the negotiating table. But after talks aimed at permanently ending the war failed to reach a resolution, the situation for China is far more complex. The U.S. military earlier this week started a blockade of Iranian ports in an effort to force Tehran to open the Strait of Hormuz and accept a deal to end the conflict, and Iran threatened to retaliate, casting doubt on the fragile ceasefire.

Following reports Beijing is preparing to deliver new air defense systems to Iran, Trump threatened to impose a 50% tariff on countries supplying Iran with weapons. Further inflaming tensions, an investigation by the FT found that Iran secretly acquired a Chinese spy satellite that allowed the Islamic republic to target American military bases across the Middle East. China has denied claims by U.S. intelligence that it might have shipped arms to Iran and criticized the U.S. blockade as a “dangerous and irresponsible act.” This comes as Trump and Chinese leader Xi Jinping prepare to meet in Beijing next month for a high-stakes summit.

James’s Take: The main takeaway is that China is moving back into America’s crosshairs. We’ve discussed in recent days how China can emerge as a winner from the Iran turmoil, but it’s increasingly clear what China also stands to lose. As the primary importer of Iranian oil, China is hit harder than any other country by the U.S. effort to cut off those supplies. Even though China is well-positioned to withstand the economic pain — only 6% of its energy consumption depends on imports from the Gulf — it still stings.

What’s more important is China’s military relationship with Iran amid reports citing U.S. intelligence that China is getting ready to deliver new air defense systems to Iran within the next few weeks. A spokesman for China’s embassy to the U.S. strongly denied that his government had shipped missiles to Iran during the war. Other reports suggested a Chinese company’s publication of AI-enhanced satellite images of U.S. bases in the Middle East is helping Iranian forces identify targets. It’s no secret that China has sold arms to Iran in the past, with support in recent years flowing to its ally in the form of components that could be used in both civilian technologies as well as missiles and drones. The critical question is whether military aid has arrived since the war in Iran erupted at the end of February.

Given the twists and turns in this conflict over the past several weeks, don’t be surprised if China returns to its important diplomatic role behind the scenes in a bid to ease the friction. The U.S. and Iran may arrange a second round of peace talks in the coming days. But with Trump warning that imports from countries supplying Iran with military weapons will face immediate 50% tariffs — with no exemptions — the temperature is rising.

Alice’s Take: Hopes for a summit in Beijing between Trump and Xi Jinping next month and improved U.S.-China relations are dimming. The latest developments surrounding the conflict in Iran and the questions over China’s potential military support for its closest strategic partner in the Middle East deal a blow to trade discussions, putting China back in Washington’s firing line and threatening to destabilize an emerging detente.

I’d point to a recent Atlantic Council report, which explored how China enables both Iran and Russia by importing their sanctioned oil and selling them sophisticated dual-use technology. The research institute describes a network of U.S. adversaries, or an “Axis of Evasion,” that bypasses Western sanctions through supply chains, allowing Iran to develop drones, navigation systems and other military capabilities. The authors argued that Trump will need to confront Xi and Putin about their support for the Iranian regime to end the war.

If Trump is worried about China being in the same camp as Iran and Russia, it doesn’t bode well for his ties with Xi. Still, it’s in China’s interests for the Strait of Hormuz to be opened as soon as possible. While China may gain geopolitically from the upheaval Trump has triggered, it will suffer at home economically if the war in the Middle East drags on.

Are Talks With Taiwan Opposition Leader a Sideshow or Significant Moment?

A meeting in Beijing between the leader of Taiwan’s main opposition leader, Cheng Li-wun, and China’s Xi Jinping — the first such visit in a decade — raises intriguing questions. We turned to Eyck Freymann for answers. The Hoover Fellow at Stanford University and author of a new book, Defending Taiwan, A Strategy to Prevent War With China, told us Xi sees it as a prime opportunity to drive a wedge between the U.S. and Taiwan and encourage a more friendly Kuomintang (KMT) political party in the lead-up to Taiwan’s 2028 presidential election.

First, what happens if the KMT wins? According to Freymann, Xi would be happy to negotiate, but this time he’d do so with more leverage. China still lacks confidence that an invasion of Taiwan would succeed, despite building up its military capabilities and America shifting its focus to the Middle East, he says. As a result, diplomacy remains the preferred way to achieve what Xi calls reunification. China’s leader doesn’t care if it’s democratically acceptable. He wants to put Taiwan in a position where it has no choice. What he will likely offer is akin to what was presented to Hong Kong: one country, two systems. If Taiwan accepts, they can maintain self-government and control over economic affairs and perhaps gain subsidized energy and other benefits. But Taiwan also knows what this means: If it steps out of line, China will seize the opportunity to bring the hammer down. Taiwan will capitulate only if it has nowhere to turn.

One of the main questions we’re asked is whether China will invade Taiwan. Freymann walked us through the different paths that China could take. Xi has a menu of options the country could implement, either simultaneously or sequentially. An amphibious invasion is plausible given the overwhelming size of China’s military, he says, but China recognizes that many things could go wrong. Other possibilities include launching missile, drone, cyber or false-flag attacks, squeezing Taiwan economically, or taking gradual steps to erode Taiwan’s morale.

The stakes are immense. Bloomberg Economics analyzed five potential scenarios for how tensions in the Taiwan Strait could play out, from war to rapprochement. In the most extreme case, a U.S.-China conflict over Taiwan would cost the global economy $10.6 trillion, about 9.6% of global GDP, in the first year alone, surpassing the impact of the Covid-19 pandemic.

Freymann argues that the U.S. should deter a crisis, not just a war. That means showing China it can respond proportionately to Xi’s steps along the road to war, while also showing restraint, “a delicate” balancing act. If China invades Taiwan and stops its chip exports to U.S. companies, it would be devastating for the American economy, with China potentially seizing leadership in AI. That would lead not only to a recession but a Lehman Brothers-like moment, he says. With Taiwan making about 90% of the world’s high-end computer chips, the economic shock could occur before any bullets and missiles fly. That means we need to prepare now.

Alice’s Prediction: China’s producer price index last month rose for the first time since 2022 as the war in Iran boosted energy costs. While China’s consumer inflation slowed in March, more than three years of factory deflation came to an end. Producer prices rose 0.5% from a year earlier after a decline of 0.9% in the prior month. If this trend persists, it will eat into the profitability of Chinese manufacturers, some of which won’t be able to pass on the costs. Inflation driven by higher oil prices rather than strengthening demand is not what China wants.

China, meanwhile, has effectively banned exports of diesel, jet fuel, and fertilizers as it tries to preserve energy and food reserves. If the conflict in the Middle East continues and the blockade is sustained, China will probably expand the list to plastics, additional petrochemicals and other goods, doubling down on controlling supply chains and protecting the domestic market.

James’s Prediction: Japan’s automotive industry is on the brink of survival. That’s the stark warning issued by Honda Motor’s Chief Executive Officer Toshihiro Mibe at a recent industry event. Mibe, whose company has warned of its first annual loss since going public in the 1950s, walked into a car part supplier in Shanghai keen to check out the highly automated facility and walked out with an unsettling assessment: The Japanese company has “no chance” to compete due to the cost, speed, and quality advantages of Chinese EV makers. My first thought: What took you so long? We’ve been talking about China’s EV edge for months. I have a forecast of my own: This year at least one Japanese auto maker will experience a major shock — a collapse in its share price, a sale at a fire-sale price, or another shakeup.

1. How China brokered the Iran ceasefire

2. The Trump-Xi Summit Is Coming. The Relationship Isn't Fixed

3. China's AI Agent Takeover

China’s Peace Plan for the Iran War Has More Behind It Than Posturing

A ceasefire has paused the Iran war. Trump declared a two-week halt to US bombing, Iran agreed to reopen the Strait of Hormuz, and talks are set to begin in Islamabad. Trump told AFP he believed China had persuaded Iran to negotiate. According to the New York Times, three Iranian officials confirmed that a last-minute intervention by Beijing asking Iran to show flexibility was what secured their acceptance. To what extent the White House and China were actively coordinating remains unclear, but that public acknowledgment was a key moment. The US was more willing to work alongside Chinese efforts than seemed likely just days ago.

The ceasefire is fragile. JD Vance called it a fragile truce. Israel and Iran have already traded accusations of violations in Lebanon. As of April 9th, the Hormuz blockade had not been lifted, and Iran’s 10-point proposal and the US 15-point framework remain far apart.

China and Pakistan’s five-point plan, which set this in motion, called for an immediate ceasefire, diplomatic talks, protection of civilian infrastructure, safe passage through the strait, and a comprehensive peace framework. Pakistan was the public face of the initiative. China was pulling the strings. The plan was always more than posturing. Multiple rounds of talks between Beijing and Islamabad, meetings between their foreign ministers, and credible reports of a four-way consultation involving Pakistan, Turkey, Saudi Arabia, and Egypt suggest serious work was done behind the scenes.

China had a material stake in seeing this resolved. It sources roughly 50% of its seaborne oil imports from the region, and while strategic reserves and rerouted Russian supply had provided a buffer, that window was closing within two months.

A Shanghai-based firm called Mitsa Vision had been publishing real-time satellite imagery of American military movements in the region on X, including footage posted ahead of the US operation that began February 28th. Whether China was actively sharing this data with Iran is not clear, but it was publicly accessible, and that alone raised serious questions about US force exposure in the region.

Alice’s Take: China’s goal here is a familiar one: claim the moral high ground. By positioning itself as a peacemaker while the US reserves the right to escalate militarily, Beijing reinforces the narrative it has been building for years. That said, China has a genuine material interest in seeing the strait reopen. The longer this drags on, the more acute the energy crunch becomes. I expect Beijing to continue to push harder bilaterally, working through its leverage with Iran to secure preferential access to oil shipments, regardless of what happens with the formal peace process. As for Trump, I think he ultimately needs China more than he’s letting on. It may be that come May he’ll want to claim a quick victory in the form of “good” relations with Beijing. If Operation Epic Fury stalls or becomes a quagmire, a positive China relationship may be his best available diplomatic off-ramp. We may look at the situation in a month’s time and find that Operation Epic Fury was a botched effort at regime change in Tehran that simply paved the way for “Operation Tollbooth,” whereby Iran calls the shots on tolling oil flows and China succeeds in pressuring the Gulf states to accept more yuan, not dollars.

James’s Take: The peace plan matters, but China’s fundamental credibility problem as a mediator is that it cannot and will not act as a security guarantor. Mediation can take you only so far. If a ceasefire breaks down, someone has to be willing to step in and hold the line, and China has made clear it will not use its military to keep peace on behalf of Iran, let alone risk a confrontation with the US and Israel. That is a structural hole in the initiative that no amount of diplomatic groundwork can fill. What the plan does accomplish is keeping China at the table, building its profile as a responsible power, and leaving the US looking like the party blocking peace. That’s a significant soft power gain, even if the hard security outcome remains out of reach.

Trade Probes and a Major Hack Put The Trump-Xi Summit on Shaky Ground

China launched two trade investigations into US practices this week, retaliating against Section 301 probes the Trump administration initiated after IEEPA was struck down by the Supreme Court. The targets: American policies Beijing says are choking global supply chains and shutting out Chinese green tech. The timing is pointed. A Trump-Xi summit is reportedly being planned for May, though Beijing has yet to confirm it.

The same week, the FBI declared a suspected Chinese hack of a US surveillance system a “major cyber incident,” with indications that sensitive data across agency networks was compromised. It echoes the 2015 OPM breach, when Chinese actors accessed records on millions of federal employees. The pattern holds: two countries trying to choreograph a diplomatic reset while their security establishments operate in deep mutual distrust. Whatever mood music a summit produces, the underlying dynamic does not change.

The economic picture is harder to spin. US exports to China fell 26% in nominal terms in 2025. By some estimates, bilateral trade was roughly $90 billion lower than it would have been absent the trade war. The administration has talked extensively about closing the deficit, but the actual mechanism for doing so, rigorous rules-of-origin enforcement to catch Chinese goods rerouted through Vietnam, Mexico, and elsewhere, has not materialized. The rhetoric has outpaced enforcement.

Alice’s Take: I’ve watched these cycles repeat long enough to be skeptical of the framing. The FBI hack will almost certainly be deployed politically, as these incidents usually are, to apply pressure ahead of talks rather than to reflect genuine outrage. My concern is more structural. Even setting aside the surveillance story, the underlying conditions for a meaningful summit aren’t there. The trade numbers are moving in the wrong direction. Yes, the bilateral trade deficit between the U.S. and China is at a two-decade low but the U.S.’s overall trade deficit has grown and simply shifted to Vietnam and Mexico, which are clearly used as re-routing hubs for Chinese goods. The security states are at each other’s throats, and the US approach to reducing the deficit remains more rhetorical than operational. If Washington were serious about curbing the deficit, they would go after “rules of origin” but they haven’t. The worse things get in Iran, the more Trump needs China, particularly if Iran becomes a sustained military commitment. That shifts the negotiating dynamic considerably.

James’s Take: What strikes me about this moment is how much it illustrates the chasm between the diplomatic track and everything happening beneath it. Summits, even when they go well, are fundamentally about managing the surface. But the security relationship between the US and China operates on a completely different plane, one defined by surveillance, cyber operations, and proxy conflicts where trust is essentially zero. The FBI hack is not an anomaly. These incidents are a permanent feature of the relationship. Every time the two governments try to build something at the diplomatic level, the security track erodes it. I don’t see that changing regardless of what happens in May.

China’s OpenClaw Moment

A free, open-source AI agent built by Austrian programmer Peter Steinberger has become one of the fastest-growing open-source projects in GitHub history since its release in November 2025.

OpenClaw is not a chatbot. It executes tasks: connecting to large language models, integrating with messaging apps, managing calendars, writing code, handling bookings. In China, it has taken on a life of its own. The local term for the frenzy, “Yang Longxia,” or lobster farming, is now ubiquitous. Chinese users are forking it, building new applications on top of it, and folding it into existing platforms. One developer built a version called QClaw that deploys the agent directly inside WeChat.

Alice’s Take: I’m calling it “Lobster Mania.” Token consumption, the key measure of AI usage in China, jumped from 100 trillion in December to 140 trillion in March, a 40% surge in three months. A KPMG survey found 93% of Chinese respondents already use AI for work. In the US, only 35% of people believe the benefits of AI outweigh the risks. In China, that figure is 69%.

Title: % of People Who Trust AI

Subtitle: 2025

What the numbers reflect is something deeper than enthusiasm for a new tool. China did this with super apps a decade ago. WeChat and Alipay built ecosystems so embedded in daily life that the West still has not replicated them. OpenClaw looks like the same instinct playing out in agentic AI, so in a way, I foresee the era of “super apps” being replaced by “super agents” in China. The government’s posture right now is permissive but that can’t be sustainable over the long-term. AI dominance is a national priority and regulators do not want to slow the momentum. But the Cyberspace Administration issued quiet guidance in December on anthropomorphic AI services, flagging concerns about systems that simulate family relationships for elderly users and calling for restrictions to protect minors. That is not a crackdown. It is just a signal that the let-it-rip phase has a shelf life, as has often been the case in China’s history of technological innovation.

James’s Take: I spent just over two weeks in China researching this topic, and OpenClaw was the dominant conversation everywhere I went in tech circles. What matters is not just the scale of adoption but what kind of tool people are actually adopting. A chatbot answers your questions. An agent executes tasks for you. That distinction has enormous implications for employment. Roughly 67% of Chinese industrial firms have already deployed AI agents in production, compared to about 34% in the US. But outside the tech sector, the mood I encountered was anxious. Almost everyone I spoke to who does not work in AI was worried about their job, or watching peers struggle to find one and drawing the obvious conclusion. Youth unemployment among urban 18-to-24-year-olds hit 18.9% last year. I think it exceeds 20% this year. The government can hold the let-it-rip line for now, but if that number keeps climbing, the political pressure to respond will be very hard to ignore.

Alice’s Prediction: China’s Cyberspace Administration may try to kill or delay Meta’s acquisition of Manus, a Chinese agentic AI company. Regulators are already looking into whether the deal violates tech transfer laws. While Manus isn’t directly national security related, AI is getting increasingly charged as a topic in China. My suspicion? Regulators will throw up obstacles mainly because it’ll make Mark Zuckerberg’s life a little bit worse.

James’s Prediction: I think 2026 will be a landmark year for the EU strengthening resilience against foreign cyber threats, especially Chinese technology. We’re going to see the European Commission expand restrictions to Chinese cars, cellular modules, wind farms, and other sectors where Chinese companies collect data throughout Europe.

You’d think China would have been more vociferous in condemning the U.S. and Israeli strikes on Iran, a close diplomatic ally in the Middle East. China’s leader, Xi Jinping, made a state visit to Iran in 2016, signing a strategic partnership, and five years later Beijing agreed to invest $400 billion in the country over 25 years in exchange for a steady supply of oil. Today the country gets almost half of its crude via the Strait of Hormuz.

But while China was quick to criticize the attack, warning against a “return to the law of the jungle,” the country’s reaction over the past month has been muted. It was Donald Trump, not Xi, who asked to delay their summit until May. And critically, China hasn’t offered military or financial support to the Iranian regime. China’s response, or lack thereof, isn’t a sign of indecision or inaction. It’s a calculated decision.

James’s Take: What we’re seeing play out today is China’s game theory, with three parts to the strategy: First, instead of flexing its military or diplomatic muscle, China is concentrating on its economic power. China doesn’t want to antagonize the U.S. and risk reprisals that could hinder its ability to keep its cities and factories humming. Maintaining the flow of oil through the Strait of Hormuz is crucial. There’s an ancient Chinese strategem that’s relevant today: Sacrifice the plum tree to preserve the peach tree. That means giving up on short-term objectives to achieve the long-term goal — in this case bringing Trump to the table in Beijing.

Secondly, China is determined not to spread itself too thin and take its eye off its main theater of interest. Iran and the strait are important, but not nearly as important as the regions much closer to home: Taiwan, the South China Sea, Japan and Korea. China likes to keep its powder dry.

Finally, China is highly transactional. Aside from a treaty with North Korea signed in 1961, China doesn’t have any obligations to protect and defend other countries. Instead it has a series of “strategic partnerships,” which China signs when it wants something from another country. In the case of Iran, it’s about oil — and perhaps to some extent undermining America on the world stage. These alliances ultimately mean very little.

Alice’s take: Don’t be fooled by China’s reticence on Iran. The back channel between Washington and Tehran via Pakistan — which receives military and technical support from Beijing — is a key sign that China is probably strongly involved behind the scenes.

To be sure, the gulf between the U.S. and Iran remains wide. Iran dismissed a 15-point American plan to end the war and issued its own counterproposal. Trump, meanwhile, has indicated that he may send troops to seize control of Iran’s key oil export terminal at Kharg Island. Still, if there is a peace agreement, China could play a prominent role. That gives China an opportunity to score diplomatic points with the Gulf states, and even the G7, while keeping the war in Iran separate from trade talks with the U.S. Trump’s visit to Beijing would be the first for a U.S. president since he traveled to the country in 2017.

It’s important to turn to the history books for lessons.

In the Suez Crisis seven decades ago, Egypt’s president, Gamal Abdel Nassar, nationalized the joint British-French company that had operated the canal. A secret military intervention by Britain, France and Israel to gain control over the artery ended in humiliation amid pressure from the U.S., paving the way for Britain’s decline as a global power and America’s rise. Is Iran the Suez Crisis of today, with China ascendant this time and the U.S. on its way down?

Although China has an advantage it can exploit amid the conflict, it’s important not to underestimate the economic challenges that the war in Iran poses for Beijing.

Tailwinds Overseas Are Set to Fuel the BYD Phenomenon

Elon Musk once mocked BYD. But he’s not laughing now. While BYD experiences slowing sales at home, China’s leading automaker is recording rapid growth abroad. After surpassing Musk’s Tesla as the world’s biggest seller of electric vehicles, the company signaled to analysts that exports this year will likely exceed its previous target by 15%. Those overseas ambitions are becoming even more critical after the company reported its first annual decline in profit in four years. Citigroup estimated BYD’s car sales in China will turn unprofitable in the first quarter.

Still, BYD is on a roll. The Shenzhen-based company recently leapfrogged Ford in vehicle sales for the first time, soaring to the No. 6 spot on the global rankings. At the same time, BYD’s German sales climbed more than ten-fold in January. The company also unveiled the next generation of its “blade batteries” along with ultra-fast charging architecture that can recharge a battery from 10% to 70% in five minutes and reach close to fully charged in nine minutes.

Alice’s take: With the war continuing to rage in Iran, China’s EV industry is likely to emerge as a winner. Surging oil prices will give consumers even more incentive to buy the vehicles. I’ve driven both Teslas and BYDs. From my standpoint, BYD has the edge. In fact, it’s probably a no-brainer given the cost, style, energy efficiency and intuitive operating system. BYD in February sold more vehicles outside China than in its home market for the first time. That’s not a fluke. It’s a turning point that the company will be able to build on in the coming months as it expands manufacturing in regions ranging from Latin America to Southeast Asia.

If consolidation plays out as expected, and the number of Chinese brands shrinks, more companies, including BYD, should be able to profit. Government efforts also could help at least partly reduce the brutal cost pressures car manufacturers face at home. Regardless of how the story plays out domestically, the tailwinds overseas could drive growth for years to come.

James’s take: Not only is the company’s technology world-class but its prices blow Western competitors out of the water. I drove an Atto 2 in Germany a couple of years ago — an EV that BYD sells for as little as €22,990 in Europe, a lot less than Teslas and other EVs on sale across the continent. I also remember spending 35 minutes trying to charge the BYD car, worrying we’d miss our plane. Those days are over. The new BYD batteries are a game changer. Yet there’s a wider point to make: BYD is among the first in a wave of Chinese companies that are finding it much easier to make money overseas than in a hyper-competitive local market.

Attending an event in Hong Kong this past week, I admitted to someone that I drive a gas-guzzler back in London, not an EV. They seemed taken aback, almost offended. Peer pressure is going to play a bigger role in the future, pushing more consumers into the EV camp.

China Turns on an Escalator That Takes 21 Minutes to Ascend

China has switched on what is believed to be the world’s longest outdoor escalator on the edge of the Yangtze River. Known as the “Goddess,” the project stretches almost a kilometer, gains more than 800 feet in elevation and takes 21 minutes to ascend. About 9,000 people are already using the escalator in China’s Chongqing municipality every day, paying a small fee — equivalent to 43 cents — to ride in each direction. Almost half a million people used it during last month’s Spring Festival. If you’ve been to Hong Kong, you’ve no doubt seen the mid-levels escalator system. Think of that, only something much bigger and more complex.

James’s take: China is a country of superlatives. It boasts the longest sea bridge — a 55-kilometer span connecting Hong Kong and Macau with the Chinese mainland — as well as the longest high-speed rail network. From the Great Wall of China to the Three Gorges Dam, China has a long history of building huge projects and making bold statements. It’s a reflection of how China sees itself: as a civilization at the center of the world.

Still, even China has its limits. At a height of roughly 1 kilometer, a proposed tower in Wuhan would have overtaken Dubai’s iconic, 830-meter Burj Khalifa as the world’s tallest building. But in 2021, China’s national development and reform commission, the country’s top planning agency, banned new skyscrapers taller than 500 meters.

Alice’s take: I’ll turn from history to economics. Local governments in China have an incentive to build these vanity projects to get promoted in the next party congress in 2027. These mega-projects can help raise a region’s profile, but they also provide an employment boost. Whether they’re a smart way to deploy funds and stimulate the economy is another question.

China is keen to shatter records, and this is just the latest sign.

Newsletter Extra: Pharma Companies Hunt for New Drugs in China

Eli Lilly’s $2 billion deal with a Hong Kong-listed biotech company is yet another sign of the increasingly important role that China is playing in the global pharma industry. The American drugmaker will acquire exclusive rights to sell a GLP-1 diabetes treatment from Insilico Medicine, just weeks after announcing plans to invest $3 billion in China over the next decade. Insilico, which went public in Hong Kong in December, uses AI for drug discovery.

Lilly’s moves are the latest examples of big pharma’s rush into China. A record number of non-Chinese companies licensed treatments made by Chinese firms in 2025. In January, U.K. drugmaker AstraZeneca signed a licensing deal with China’s CSPC Pharmaceuticals to develop weight-loss and diabetes drugs. Those won’t be the last.

Alice’s Prediction: I was skeptical the Trump-Xi summit would happen at the end of March. Now I don’t think it’s going to happen in May either. The U.S. will continue to be distracted by Iran, and China won’t want to host Trump if he’s unprepared to talk about anything substantive. China has opened two probes into U.S. trade practices, retaliation against similar investigations by the Trump administration, while U.S. arms sales to Taiwan also complicate matters.

James’s Prediction: Chinese exports last year climbed to almost $3.8 trillion as a trade boom helped counter the impact of a domestic slowdown. This year, exports will probably surpass $4 trillion for the first time. I expect Chinese exports as a proportion of total global shipments will hit a historic high, overtaking a previous record set by the U.S. almost six decades ago.

1. Apple Under Fire in China as Beijing Demands More from Tim Cook

2. Trump’s Beijing Summit Delay Exposes the Limits of China’s Global Leverage

3. Insides China’s Museum Boom

4. Newsletter Exclusive: Inside China’s Mental Health Crisis

Apple Under Fire in China as Beijing Demands More from Tim Cook

Tim Cook was in Chengdu last week for a splashy Apple Store event marking the company’s 50th anniversary. The optics were unmistakable: America’s most valuable company, worth roughly $3.7 trillion on public markets, flying its CEO to China to open a retail location and make nice with regulators. iPhone sales in the mainland are up 23% so far in 2026, outperforming a shrinking broader smartphone market. But the trip was as much damage control as celebration.

The pressure started earlier this month when the People’s Daily, the official mouthpiece of the Chinese Communist Party, ran an editorial calling Apple’s App Store practices monopolistic. This came just days after Apple announced it would cut its App Store commission for Chinese users from 30% to 25%, dropping below what US users pay. Beijing said it was not enough. Cook’s response at the China Development Forum was carefully worded: a commitment to “collaborating with partners across China,” conspicuously short on specifics.

Apple is not alone. Qualcomm, Texas Instruments, Micron, Broadcom, Tesla, ASML, Volkswagen, BMW, BASF, Siemens, Richemont, and Rio Tinto all derive a significant share of global revenues from China. When Beijing issues an instruction, these companies face the same calculation Apple does: comply, or risk a market that in many cases accounts for 20% or more of total revenue. China still manufactures roughly 80% of Apple’s iPhones, 80% of its iPads, and 55% of its MacBooks.

The deeper problem for Apple is AI. Apple Intelligence, its generative AI product, is not yet available in China, held up by regulatory approval that was delayed further by last summer’s trade disputes. Meanwhile, Chinese competitors like Huawei and Xiaomi are shipping phones with on-device AI already embedded. The iPhone 17’s orange colorway went viral on Chinese social media partly because the word for orange in Mandarin sounds like the word for success, but virality alone will not close the AI gap.

Alice’s Take: The 23% growth number is impressive, but I think it reflects a market that is becoming more stratified. Two years ago I would have said the writing was on the wall for Apple in China. Chinese phones have caught up on hardware, cameras, and now AI. But there still seems to be a segment, probably upper income, for whom an iPhone is a status object, not just a device. The orange phone going viral for its lucky connotation is a great example of how Apple benefits from cultural dynamics it did not engineer. The real risk is what happens when Apple Intelligence finally launches in China and has to compete with Tencent’s and Alibaba’s agentic AI offerings on their home turf. That is the test that will actually tell us whether Apple has a durable future in this market.

James’s Take: The key framing here is not Apple in China, it is China capturing Apple. Beijing has figured out that companies that derive a substantial share of global revenues from China become leverage, and it is using that leverage systematically. The App Store commission cut is a concession. The Tim Cook visit is a concession. The mollifying language at Davos-for-China is a concession. China wants more, and the pattern suggests it will get more. The same dynamic plays out across every major Western company with a big China book. The commercial logic of staying is so strong that each individual concession looks rational, even as the cumulative pattern amounts to a significant loss of corporate sovereignty.

Trump’s Beijing Summit Delay Exposes the Limits of China’s Global Leverage

Trump’s postponement of the Beijing summit with Xi Jinping, which had been expected around April 1, sent a clear signal: Washington still holds the scheduling leverage in the relationship, no matter how much Beijing tries to position itself as a peer superpower. Chinese officials are frustrated. State media, including the Global Times, has been mocking the delay, framing the Iran war as an American-made catastrophe and arguing that the US is now asking the world to help put out a fire it lit.

China’s public stance on Iran has been notably restrained. There has been little vocal criticism of the US campaign in Chinese media, and Beijing has not moved to actively obstruct American military operations. Instead it has sent a special envoy to the Gulf region and signaled interest in a longer-term diplomatic role. Premier Li Qiang used the China Development Forum, China’s version of Davos, to position Beijing as a “harbor of stability” in a world of rising protectionism and “upheavals in the rules-based international order.” He did not mention the United States by name.

The People's Bank of China governor Pan Gongsheng was less oblique. Speaking at the China Development Forum in Beijing in March 2026, an annual gathering of senior Chinese officials and global business leaders that included Trump administration officials in the audience, he criticized countries whose persistent trade deficits he attributed to an international monetary system "dominated by a single sovereign currency." The context was unmistakable: China wants to accelerate de-dollarization, and the Iran crisis is giving it cover to move faster. Since 2022, China has facilitated a 2,500-fold increase in cross-border digital yuan settlements through central bank bridges with Hong Kong, Thailand, the UAE, and Saudi Arabia, totaling roughly $55 billion, with around 95% denominated in renminbi. CNY currently accounts for about 8% of global trade settlement through SWIFT, and that number is likely to continue to rise.

The geopolitical logic is clear. If oil prices stay north of $100 WTI and the Strait of Hormuz remains disrupted, China pays a real economic price as a major oil importer. But every week the US is bogged down in the Middle East is a week it is not pressing on Taiwan, not tightening technology export controls, and not building coalition pressure on Beijing. The war may be bad for China’s energy balance sheet. It may be good for almost everything else.

Alice’s Take: I want to make one historical comparison that I think captures the moment. What is happening now rhymes with Suez in 1956. Britain and France moved on the Suez Canal without American backing. Eisenhower refused to support them, backed Egypt’s Nasser, and the old imperial order took a decisive blow to its credibility. China today is playing the Eisenhower role: declining to help police a conflict it did not sanction, positioning itself as the neutral party, and waiting to step in as a mediator once the shooting stops. The 2023 Saudi-Iran rapprochement that Beijing brokered gives them real diplomatic credibility to do this. If that is the play, it is a patient and sophisticated one.

James’s Take: China is making propaganda capital from the Iran war, but I would caution against assuming that capital is permanent. If the US manages to restore shipping through the Strait of Hormuz, bring oil prices down, and achieve something that looks like a stable outcome, the pendulum of international opinion could swing back. Trump would get to play statesman. The narrative that the US is a global wrecking ball would weaken. The more interesting long-term question is the one Alice raised on de-dollarization. These are tectonic shifts that move slowly, but when they move, they do not reverse easily. The Gulf states becoming more like Russia in their use of the yuan for trade settlement would be a structural change to the global financial architecture, not a news cycle story.

Inside China’s Museum Boom

China had a handful of museums in 1949. It now has more than 7,000, with roughly 1.5 billion annual visits as of late 2025. A new museum opens approximately every two days. The range is striking: from the Zigong Dinosaur Museum, built directly over the excavation pit where its fossils were found, to a Black Museum dedicated to immersive experiences of mental illness, to a sex museum that relocated from Shanghai to the smaller city of Tongli in Jiangsu province after becoming politically sensitive. There is also a paper airplane museum in Wuhan and a Chinese meme museum for the digital age.

The boom is not accidental. The Chinese state has been deliberate about linking museum expansion to heritage, urban development, tourism, and soft power. State-backed cultural districts now dominate the landscape. Even private and contemporary art spaces operate within a structured ecosystem that shapes which histories get told and how China projects itself abroad. Xi Jinping’s installation of a museum dedicated to his father in Shaanxi, the family’s ancestral village, is the clearest example of how museum-building is also history-making: a curated account of the CCP’s past, including the rehabilitation of figures whose legacies were complicated by the Cultural Revolution.

But the deeper cultural thread is older than the party. China has a millennia-long tradition of collecting. Grave goods, the terracotta army at Xi’an, the imperial collections now split between the Palace Museum in Beijing and the National Palace Museum in Taipei, all reflect a civilization that has long understood physical objects as carriers of history and legitimacy. China’s top collecting power couple, Liu Yichen and Wang Wei, have spent $36 million on a Ming dynasty chicken cup and $45 million on a Tibetan tapestry. There is now even a secondary market for Mao-era badges from the Cultural Revolution, a period many Chinese would rather forget but some are choosing to collect.

Alice’s Take: What strikes me is how deeply this collecting instinct runs in Chinese political culture, not just among private collectors. Wang Qishan famously instructed top Chinese leadership to read history books, including Tocqueville’s Democracy in America. Xi’s own obsession with historical legitimacy runs through everything from the museum dedicated to his father to the rhetoric around China’s “century of humiliation” and its reversal. The museums being built now are not neutral archives. They are arguments. The question of what gets included, what gets airbrushed, and who controls the framing matters enormously for how the next generation of Chinese understand their country’s place in the world.

James’s Take: There is a George Orwell line from 1984 that applies here: he who controls the past controls the future. That sits alongside the traditional Chinese expression, examine the past to understand the present. Both are valid simultaneously, which is what makes this topic so rich. The collecting culture is genuine and deep. The state’s use of that culture for ideological purposes is also real. They are not in contradiction. The money side is also worth noting. This is a massive and growing art market. The secondary market for Chinese antiques, contemporary Chinese art, and even Cultural Revolution memorabilia is significant and not well understood in the West.

Newsletter Exclusive: China Wants You To Go To Therapy. Just Don’t Talk About It

China has a mental health crisis it is trying to treat with one hand and censor with the other.. A 2024 meta-analysis of nearly 1.5 million Chinese children and adolescents found that 1 in 4 showed symptoms of depression. That is higher than the US, where about 1 in 5 teenagers reported a major depressive episode the same year.

Among high school students preparing for the gaokao, the national college entrance exam, depression and anxiety rates are significantly higher than in younger students. Students in gaokao-track schools average 11.2 hours of study per day. Suicide rates for children between the ages of five and 14 have increased more than 5x since 2010.

The structural causes are well understood. The gaokao remains the single most consequential event in a young Chinese person’s life, routing them into a tier of university that largely determines their economic trajectory. Youth unemployment hit 18.8% in August 2025, the highest since records began, with other estimates placing the real figure above 25%. Young people who fought through the gaokao grind and graduated into a contracting job market have a phrase for what they feel: neijuan, or involution, the sensation of being trapped in an unwinnable competition. The counter-culture responses have their own vocabulary: tang ping, lying flat; bai lan, letting it rot; and runxue, the study of how to emigrate.

The government’s official response to all of this has been to invest in mental health infrastructure. In January 2025, China’s National Health Commission designated 2025 to 2027 the “Years of Pediatric and Mental Health Services,” committing to expand the professional workforce, improve standards, and build more specialized centers. A nationwide 12356 mental health hotline has been rolled out across 18 provinces. The therapy app market has grown significantly, with platforms like Jiandan Xinli and Know Yourself attracting millions of users and substantial venture capital. Private psychiatric hospitals now outnumber government-run facilities.

But in September 2025, the Cyberspace Administration of China issued new guidelines ordering platforms including Weibo, Douyin, Xiaohongshu, Bilibili, and WeChat to detect and remove content that “deliberately amplifies pessimistic, depressed, or anxious moods.” Platforms must deploy AI filters and human reviewers around the clock. First-time violators face account suspension; repeat offenders face permanent bans or fines of up to 100,000 yuan. Within a week of the crackdown, four prominent influencers with tens of millions of followers combined were banned and their archives wiped. Hashtags like #LyingFlat and #CantAffordToHaveKids, which had accumulated billions of views, disappeared overnight. The censorship went further than topics: phrases like “the economy is bad” or “I am tired” began triggering shadow-bans. In February 2026, the CAC went further still, mandating that platforms remove content deemed to spread “fear of marriage” or “anxiety about childbirth.”

Therapy is politically useful to the Chinese state precisely because it individualizes problems that are structurally caused. A young person in therapy is working on themselves. A young person on Xiaohongshu telling millions of followers they cannot afford to get married or have children is doing something else entirely. The government wants citizens to process their despair quietly and privately, not to aggregate it publicly into a legible critique of economic policy, the education system, or the housing market.

The therapy boom and the censorship crackdown are not in tension. They are two sides of the same governing strategy.

James’s Prediction: China will eventually step out from behind the scenes on both the Iran and Ukraine conflicts and take a visible mediating role. It will position itself as the peacemaker, and it will use that positioning to secure infrastructure and reconstruction investment opportunities in both countries once the fighting stops. The after-game is already being planned in Beijing.

Alice’s Prediction: China will be the first country to achieve mass adoption of agentic AI in everyday life. Not because of any single breakthrough, but because Alibaba and Tencent’s super app ecosystems already have the infrastructure for an AI personal assistant embedded in daily routines: booking travel, managing schedules, texting, dating advice, financial planning. The Tencent agentic AI announcement was disappointing, but the direction is clear. Within two years, China will be ahead of the West on how deeply AI agents are woven into ordinary life.

1. China May Emerge From Iran Disruption as a Winner

2. Can China’s Universities Become Truly International?

3. F1 Sparks Headlines in Beijing as Well as Hollywood

4. Newsletter Extra: To the Moon: AI Developer’s Valuation Soars

China Plays the Long Game as War in Iran Escalates

Just last year, U.S. Defense Secretary Pete Hegseth pledged to work more closely with Indo-Pacific allies to strengthen the region’s security and deter China from trying to seize disputed territory, including Taiwan. “No one should doubt America’s commitment,” he said. Today, however, the escalating war in Iran and a shift in U.S. firepower to the Middle East are raising questions about whether the U.S. will remain focused on the region — and giving China an opening it will likely be able to exploit.

About one-third of China’s oil and a quarter of its gas imports pass through the Strait of Hormuz, where maritime traffic almost stopped in the wake of the U.S. and Israeli strikes on Iran. But China has a buffer. The country is sitting on some of the world’s biggest stockpiles of oil and other strategic commodities, while investments in clean energy are providing the country with additional insulation. China has shifted from gas-powered cars to electric vehicles faster than any other major economy. The country has another advantage: Although the war in the Middle East has disrupted wider supplies, Iran has reportedly continued to send significant quantities of oil through the waterway to China.

How the war plays out and what happens to Iran remain uncertain. However, Dr. John Sfakianakis said what is clear is that the Middle East will be fragmented and even more unstable when it’s over. The Gulf Research Center’s chief economist is willing to make another prediction: China will emerge from the chaos as “more of a winner than a loser.” Beijing is playing the long game. The country, he told us, is likely to take its time on Taiwan and stay out of a conflict that could be more drawn out and deeper than the U.S. had anticipated.

Chinese Universities Jump Ahead in Global Rankings

Those aren’t the only opportunities China sees today. Decades of Chinese investment in the country’s top universities is paying dividends. While the Trump administration reduces funding for U.S. institutions, attacks science, and undermines America’s traditional advantage in attracting the world’s best and brightest, China is leaping ahead in the global rankings.

In 2010, only one mainland Chinese institution ranked in the top 50 of the QS World University Rankings. By 2025, the number had risen to five, as Chinese universities narrowed the gap with elite U.S. and U.K. institutions such as MIT, Imperial College London, Stanford, Oxford, and Harvard. The CWTS Leiden Ranking, meanwhile, found that 19 of the top 25 global universities are Chinese. Another report — the annual Times Higher Education list — showed the number of universities in China and Hong Kong ranked in the top 100 doubled to 12 over the past six years. The number of American universities slipped to 35 from 40.

James’s take: The rise of Chinese universities isn’t a coincidence. It’s a strategy. These universities may be independent, but there’s no doubt they’ve benefited from the Chinese Communist Party’s effort to raise their profile. You need to look at the rankings one-by-one. The Leiden report focuses on research, while the QS list is more comprehensive, looking at an array of factors such as internationalization. This is a category in which China falls short. Trust me, I know. I went to a Chinese university. (As foreigners, we were a rare breed.)

Some observers challenge the findings of the global rankings and the quality of Chinese research. The FT cited data from Retraction Watch, which tracks publication trends. The co-founder of the organization recorded almost 3,000 retractions of Chinese-authored papers in 2024, compared with 177 for U.S. authors. Others rightly argue that you can reach almost any conclusion you want based on the criteria you include. Times Higher Education — a British organization — unsurprisingly rates Oxford and Cambridge as No. 1 and No. 3.

Still, it doesn’t matter which list you rely on. The story is clear. Even the skeptics acknowledge that Chinese universities have made significant strides. Researchers at Princeton’s Paul and Marcia Wythes Center on Contemporary China have estimated that 80 to 90 professors in the U.S. return every year to China. Among the prominent scientists are Nieng Yan, a Princeton biologist who headed to Shenzhen Medical Academy of Research and Translation, and Song-Chun Zhu, a computer scientist who left UCLA for Peking University.

Alice’s take: I went to universities in the U.S. for both my undergraduate and graduate degrees, so I can’t speak from personal experience. But the conversations I’m having reinforce the data that show China is outpacing everyone else in AI research. In 2024, AI publications produced by China-based scholars exceeded the output of the U.S., U.K., and EU combined — but the sheer volume of research also raises questions about the quality. China has also been distancing itself from the U.S. in the number of STEM PhD graduates it produces. However, how do you measure the productivity and innovation that results? That’s not easy to answer.

One of the biggest questions for Chinese universities is the extent to which they can truly become international. I’m skeptical. For now, Chinese institutions can’t compare with their American and British peers. Fewer Americans today want to study in China. We’re mostly seeing foreign-educated Chinese students and professors return to China. That’s often for personal reasons — because they want to be closer to their aging parents, for example. I’m planning to take part in an event soon at NYU Shanghai. From what I understand, this program is reliant on Chinese students who want the NYU brand name on their CVs.

The Next Big Tech Disruption in China?

The F1 movie, co-produced by seven-time world champion Lewis Hamilton, won an Academy Award for Best Sound after being nominated for four awards. But while F1 generated a lot of buzz in Hollywood, the sport also captured headlines in China.

Seeking to boost its global brand, BYD, the Chinese company known for its electric and hybrid vehicles, is now looking into Formula One and other motorsport options, Bloomberg reported last week. That’s big news in a sport long dominated by European and American teams and comes at a time when BYD is expanding globally after overtaking Tesla in global EV sales. Still, gaining access to the sport won’t be easy. It often takes years of negotiations and costs as much as $500 million a season.

James’s take: BYD’s electric Yangwang U9 Xtreme recorded a top speed of more than 308 miles per hour (496 kilometers per hour) in a test last year in Germany. Speed isn’t the only factor. But based on that measure alone, this electric supercar on an open road would lick any modern F1 car with a combustion engine.

When I heard the news about BYD’s ambitions, my mind immediately turned to ByteDance’s AI video model, Seedance 2.0, which is generating hyper-realistic, cinema-quality clips from a few written prompts. F1 is potentially the next Chinese tech disruption story. Chinese consumers are fascinated with technology — it’s not uncommon for people to ask questions about your devices. Imagine racing technology combined with the glitz and glamor of the sport. This couldn’t be better designed for a Chinese audience.

Alice’s take: It’s clear Chinese consumers are crazy about F1, especially young women. Consider the Chinese Grand Prix in Shanghai. The three-day event attracted more than 230,000 spectators, the highest attendance reported by the Chinese financial center in almost two decades. The government is keen to back spectacles like the Grand Prix to spur spending. Trip.com reported huge increases in inbound tourists and hotel bookings.

Hamilton, who wasn’t able to attend the Oscars because of the F1 event in China, won over fans with his travel posts raving about the country’s natural beauty. But China has a local hero, too. Zhou Guanyu, who became the first Chinese F1 driver in 2022, is hugely popular. These anecdotes all point in one direction: Motorsports will probably take off, just as snow sports surged in popularity with support from the Chinese government.

It’s unclear whether an EV maker will gain entry into the sport. I love Formula 1 Drive to Survive, and I have to say it’s hard to beat the roar of a conventional motor. Can an electric vehicle deliver the same satisfaction? I doubt it. But the head of F1’s governing body has floated the possibility, and you have to take BYD seriously.

If a Chinese company gets the green light, BYD would be in pole position.

Eye-Watering Valuation for Chinese AI Developer

In another sign of the mounting interest in Chinese AI developers, Moonshot AI is seeking to raise money in a funding round that would value the company at an eye-watering $18 billion. Bloomberg reported that the company behind the popular Kimi chatbot aims to raise as much as $1 billion after securing more than $700 million earlier this year. In Hong Kong, meanwhile, competitors Zhipu and MiniMax have traded at valuations ranging from $30 billion to $40 billion.

As these Chinese AI companies expand globally and seek to take on the Silicon Valley giants, they’re also running into roadblocks. Anthropic last month accused Moonshot, DeepSeek, and MiniMax of improperly extracting capabilities from its Claude model to advance their own. With China spending billions to transform itself into an AI superpower and betting on the technology to drive economic growth, the story about the country’s AI companies is just beginning.

Alice’s Prediction: I expected Trump’s scheduled visit to Beijing to be delayed. Now the U.S. president is saying he plans to push back his trip by about a month due to the conflict in Iran. “It’s very simple,” he said. “I have got a war going on.” But what happens next is anything but easy, and the stakes are significant. If the summit with China’s Xi Jinping doesn’t happen, it opens the door to new risks for the U.S.-China relationship.

James’s Prediction: Virtual companions are already popular in China. This year, they’re going to take off. The market for AI avatars that remember your birthday, lend a sympathetic ear, and never ghost you will grow to about $1 billion this year, almost doubling from last year’s levels. I’ve yet to try one of these apps, but I might have to give it a go.

1. Why China Is Caught in the Middle at the Strait of Hormuz

2. Beijing’s Cautious New Five-Year Plan

3. Newsletter Exclusive: China’s Baby Problem, and the Billionaire Trying to Fix It

China is Caught in the Middle at the Strait of Hormuz

The war in Iran is squeezing the world’s most critical energy chokepoint. Tanker traffic through the Strait of Hormuz has plunged as attacks on ships and energy infrastructure escalate, leaving hundreds of vessels stranded and oil prices surging. Roughly 20 million barrels pass through the strait every single day, nearly three times Russia’s total export volume. When global oil markets panicked at the start of the Ukraine war, that was a problem a third the size of what we are looking at now.

China gets roughly 40% of its oil through the strait, and is pressing Tehran to allow safe passage for its ships. For now it appears to be working: Iranian forces don’t dare fire on Chinese vessels. But that’s a fragile arrangement, not a structural fix. There are simply no viable alternatives to Hormuz. Pipelines and other routes cannot replace the volume moving through that narrow waterway, leaving the global economy entirely dependent on a single corridor that is currently in the middle of a war.

Markets are already registering the shock. Brent and WTI crude both surged more than 20% before pulling back. Chinese energy majors like CNOOC and China Shenhua closed up over 3%, while property companies sold off on fears that inflation could delay rate cuts. Some analysts are warning that Brent could climb from $100 toward $150 in short order, which would make this one of the largest collapses in affordable global oil supply in recorded history, worse than either of the 1970s shocks.

Alice’s Take: What makes this moment so interesting geopolitically is that China is simultaneously a victim of the Hormuz disruption and one of the few countries with real leverage over it. Beijing has been notably quiet in its criticism of the US and Israel, and for good reason: it wants to position itself as the stable actor in an increasingly chaotic situation of America’s own making. It has roughly three to four months of strategic oil reserves, which gives it runway to watch and wait.

But here is the question I keep coming back to: could we see the US quietly ask China for convoy assistance? It happened before. In 1987, during the Iran-Iraq war, the US and Soviet navies cooperated to escort oil tankers safely through this same strait. Secretary Bessent is meeting Vice Premier He Lifeng in Paris in the coming days, and Trump’s trip to China is expected in early April. History says that kind of cooperation is possible, but asking Xi for help after the tariff standoff and the Supreme Court striking down some of those measures is a very different dynamic. China holds more leverage in this negotiation than it did at the start of the year, and I don’t think Washington has fully reckoned with that yet.

James’s Take: This disruption is three times the scale of what triggered the oil market panic at the start of the Ukraine war, and the knock-on effects are compounding. Rising oil prices feed inflation. Inflation threatens higher interest rates. Higher rates hammer debt servicing costs. China carries a debt-to-GDP ratio of around 340%, so there is no clean escape from this crisis regardless of its diplomatic positioning.

The core question is whether US military action produces regime change quickly and restores stability. If it does, Washington wins. If it doesn’t, which is where things appear to be heading, China emerges by comparison as the more dependable superpower, even as it absorbs real economic pain. The West’s deeper problem is that we are making calculations about a war zone we barely understand, with no meaningful influence over the country at the center of it, while Beijing holds the one relationship that actually matters in Tehran.

Beijing’s Cautious New Five-Year Plan

Beijing quietly laid out its economic roadmap for the next five years this week. Premier Li Qiang delivered the government work report setting a growth target of 4.5 to 5% for 2026, the lowest since 1991. That number is a deliberate signal: Beijing is not trying to overheat a fragile economy. It is preparing for slower, more uncertain global conditions and betting that targeted investment beats the blunt instrument of infrastructure-led stimulus.

Two new financing instruments define the approach. The national venture capital guidance fund, formally approved last December, is designed to act as a public-private angel investor for early-stage tech companies, pairing state-backed capital with private VCs to direct money toward genuine innovation rather than prestige projects. Alongside it, an additional 800 billion yuan financing instrument was introduced specifically to stimulate private investment in AI, the digital economy, and consumption.

The broader ambition of the 15th Five-Year Plan is hard to miss: AI was mentioned 373% more than in the previous plan, the single largest increase of any word in the entire document, with a stated goal of deploying AI across 90% of the Chinese economy by 2030.

Running through every section of the plan is one word: self-reliance. Technological self-reliance. Energy self-reliance. Supply chain resilience across semiconductors, advanced materials, software, and biotech. Beijing is explicit that it wants to ease China off every chokehold the West holds over it, while simultaneously asserting its own chokepoints over the rest of the world.

Alice’s Take: My biggest takeaway is that there was more seriousness around consumption than I expected. A larger share of the special treasury bond issuance was directed toward consumption-boosting programs, which is a genuine shift from the infrastructure-heavy playbook of the past decade. Whether the fiscal multiplier is strong enough to move the needle on growth remains to be seen, but the intent is real.

One thing worth flagging: a little inflation from Hormuz-driven energy prices might actually be welcome in Beijing right now. China has been fighting deflationary pressure for the better part of two years, and energy prices nudging CPI toward 1.5% would not alarm the PBOC. It might even give the economy some warmth it badly needs. That connection between the two stories this week matters. China is structurally vulnerable on energy, and this plan is a serious attempt to do something about that over the next five years.

James’s Take: I have been describing China as a techno-authoritarian superpower for about a decade. After reading the 15th Five-Year Plan, I think that descriptor needs updating: China is now an AI-animated, techno-authoritarian superpower. The plan is not just about building more technology. It is about using AI to enforce the authoritarian model more effectively, accelerate productivity to offset a rapidly aging population, and achieve the kind of self-sufficiency that makes Western pressure progressively less relevant. Five years from now, if this plan works, China wants to be in a position where a crisis like the Hormuz disruption barely registers domestically because it no longer depends on anyone else for what it needs. That is the ambition. Whether execution matches it is another question entirely, and China’s track record on translating plans into outcomes is genuinely mixed. But the direction is unmistakable, and I don’t think the West has begun to seriously grapple with what it means.

Newsletter Exclusive: Can China Buy Its Way Out of a Baby Crisis?

China just recorded its lowest birth rate since the founding of the People’s Republic. In 2025, only 8 million babies were born, down 17% from the year before, erasing the brief Dragon Year bounce of 2024 entirely. The population shrank for the fourth year in a row. There are now 323 million people over 60, 23% of the total population, and that share keeps rising as the working-age population shrinks. The UN projects China could lose 786 million people by the end of the century.

James Liang, co-founder of Trip.com, Stanford PhD, and Peking University economics professor, has spent a decade as China’s most prominent public intellectual on demography. His core argument is that population decline is not just a pension problem, it is a creativity problem. Aging societies become gerontocracies: hierarchical, risk-averse, and culturally stagnant. In 2023, he committed 1 billion yuan to a childcare subsidy fund for Trip.com’s 32,000 employees. Last November he went further, launching the HK$500 million Genovation Foundation in Hong Kong, with grants for PhD students who have children and an annual global forum on declining birth rates.

The Chinese government has also finally stepped in directly. In 2025 it introduced a national childcare subsidy of 3,600 yuan per year for every child under three, started taxing contraception, and added daycares and matchmaking services to the tax exemption list. Some cities have gone much further, with Hohhot offering families up to 100,000 yuan for a second or third child.

None of it is working, and the evidence from comparable countries suggests it probably won’t. South Korea has spent decades on generous subsidies and extended parental leave. Its birth rate remains the lowest in the world. The deeper issue is structural, and it falls disproportionately on women. In China, women face a genuine career penalty for having children: demotion, wage cuts, and in some cases dismissal. Housing costs are prohibitive, education competition is ferocious, and a generation raised under the one-child policy has internalized small families as the cultural norm. There is also a darker irony not lost on China’s millennials and Gen Z: the government spent 35 years fining and coercing people for having too many children. Trust, once destroyed at that scale, is not rebuilt with an annual subsidy.

America would do well to pay attention. The US fertility rate has fallen to around 1.6, well below the replacement level of 2.1, and the same structural forces are at work: unaffordable housing, a labor market that penalizes women, and a generation deeply skeptical about the future. The difference is that America still has immigration as a pressure valve, something China does not. But if Washington closes that valve while failing to fix the conditions that make raising a family feel impossible, it will find itself staring at the same chart Beijing is staring at now, just a decade behind.

Predictions:

Alice’s Prediction: Watch the Besant-He Lifeng meeting in Paris closely. The trade talks have been moving quietly in the background, but the Hormuz crisis has handed China new leverage and Washington is not negotiating from a position of strength heading into Trump’s Beijing trip. If anything substantive comes out of Paris, it will set the tone for everything that follows in April.

James’s Prediction: 2026 will be a landmark year for the EU toughening its posture on Chinese technology. We are going to see the European Commission expand restrictions to Chinese cars, cellular modules, wind farms, and other sectors where Chinese companies are collecting data across Europe. Brussels has been watching Washington’s approach and concluded it needs its own framework, one that is not built around billionaire deal-making.

1. Challenges — and Opportunities — for China After U.S. Attacks Iran

2. China’s New Five-Year Economic Plan and the Race for Self-Reliance

3. How a Fatal Crash and Safety Reckoning Impacts China EV Industry

4. Newsletter Extra: Who’s the Winner in the Anthropic-Pentagon Fight?

China Denounces Trump. Now Xi Jinping Gets Ready to Host Him

After sending special forces into Caracas to capture Venezuelan President Nicolas Maduro, Donald Trump has taken out a second leader with close ties to Beijing, ordering strikes on Iran that killed Ayatollah Ali Khamenei. The joint U.S.-Israel assault has drawn condemnation from China and raised doubts about Trump’s planned visit to Beijing, which would mark the first trip to the country by a U.S. president since 2017.

The U.S. attack has also sparked concerns in China over the supply of oil. Venezuela and Iran combined accounted for about 17% of China’s oil purchases last year, although it’s hard to know the actual scale of imports with some Iranian supplies masked as shipments from other countries to avoid U.S. sanctions. Still, China is positioned to withstand any shocks — and take advantage of opportunities amid the turmoil.

Alice’s take: Don’t fully bet on Xi Jinping rolling out the red carpet for Trump on March 31. China was definitely taken aback by the U.S. military action in Iran, calling it “unacceptable to openly kill the leader of a sovereign country and institute regime change,” and the government doesn’t like instability in the lead-up to important leader-level negotiations. That could increase the odds of a delay.

China, however, isn’t walking away. Beijing doesn’t want simmering tensions with the U.S. to reach a boiling point over trade and technology and will likely pursue an equilibrium strategy to maintain engagement, even if it’s more symbolic than substantive. U.S. and Chinese trade negotiators, meanwhile, are set to meet in the middle of this month in Paris in a sign of the countries’ commitment to make this summit happen despite the strikes against Iran.

And while the turmoil clearly puts pressure on China — oil prices surged as the U.S. and Israel stepped up their war against Iran and Tehran vowed a full closure of the Strait of Hormuz — Russia is far more important. China has spent months building up stockpiles of oil and bolstering its strategic buffers, and it’s likely to adopt a wait-and-see approach.

James’s take: Trump’s campaigns targeting China’s allies, following U.S. support for Ukraine in the conflict against Russia, raise an important question: Is the U.S. on the verge of a proxy war of some kind with China? The president’s comments floating a “friendly takeover” of Cuba add fuel to the debate. While it’s fair to ask whether a “new Cold War” is warming up, it’s probably not the primary driver of Trump’s moves in Iran and Venezuela.

The upheaval poses challenges for China, which has invested billions of dollars in overseas projects in a bid to court U.S. rivals. A $400 billion China-Iran strategic partnership signed in 2021 could be in jeopardy. But it also presents an opportunity for China to tout itself as the more predictable and stable superpower at a time when the Trump administration is blowing up the rules-based system that the U.S. helped to build and carrying out military action without the backing of international law. At the World Economic Forum, Vice Premier He Lifeng called for economic globalization rather than a return to the “law of the jungle.”

AI Will Be a Cornerstone of China’s Five-Year Economic Plan

China this week adopts its next five-year plan — its 15th — outlining Beijing’s ambitions to spur the economy and support sectors including artificial intelligence and clean energy. The blueprint, unveiled at China’s most important annual political gathering, will provide clues on how and where the world’s largest consumer of commodities plans to expand, signaling a sharper focus on resilience, supply-chain security, and advanced technologies.

Alice’s Take: The five-year plan is always worth reading. In the past these roadmaps have unleashed support for wind turbines, solar panels, EVs, batteries, and other technologies.

This time these KPIs take on even more importance. One question: Is the government putting its money where its mouth is in supporting consumption and the services sector?

The document will also shed light on China’s military spending and strategic direction following Xi’s purges of senior officials, with implications for both Taiwan and the U.S. More than half of the People’s Liberation Army’s top leadership has been purged since 2022, according to the Center for Strategic and International Studies, raising questions about the army’s capabilities and whether the military is at risk of being hollowed out.

James’s Take: Self-reliance was already at the top of the agenda for Xi. Trump’s intervention in Iran only strengthens the case. Achieving breakthroughs to reduce China’s dependence on Western technologies, including AI, semiconductors, quantum computing, aerospace, 6G telecom, biomanufacturing, robotics, and other sectors will be critical.

The five-year plan puts the spotlight on China’s “AI Plus” strategy, which is aimed at integrating AI into every sector of the economy. By 2030, China wants to achieve an AI penetration rate of 90%. By 2035, it hopes to achieve a complete AI transformation. What kind of products is China embracing in the race to deploy AI? Alibaba’s smart glasses are a prime example. The new technology, powered by its Qwen AI model and app, provides everything from real-time translation to instant price comparisons while browsing in shops.

Source: South China Morning Post

A Crash and Fatal Fire Raise Questions for China’s EV Sector

China’s electric vehicle industry is facing scrutiny following a fatal crash involving Xiaomi’s bestselling SU7 sedan. Investigators found that the door handles of the EV failed and trapped the car’s driver in a fire in 2025. The tragedy could have a ripple effect for the EV industry at a critical moment.

James’s Take: Stronger safety regulations are emerging, Xiaomi is responding, and China’s overseas expansion is going to continue. However, this tragedy — and the dramatic footage of the fire and chaotic rescue attempt — are likely to make consumers nervous both in China and beyond, dealing a blow to the country’s EV success story.

Alice’s Take: There’s no doubt this is a PR crisis for Xiaomi. But it’s not going to stop the advance of Chinese EVs, which have a competitive advantage over their European and American peers. We’ve seen Chinese EV sales rise sharply and BYD overtake Elon Musk’s Tesla as the world’s biggest seller of EVs, marking the first time it has outpaced U.S. rivals in annual sales. That trend is likely to continue — and intensify — in the coming months. You can also expect BYD to launch more of its luxury vehicles under different names. Those advances, combined with efforts to minimize association with Chinese brands, will help overcome the bad PR and win over customers around the world.

The next questions are safety and data security surrounding autonomous vehicles as they start to be rolled out more widely and regulators try to keep pace. As China rapidly innovates, the country is bound to encounter more setbacks.

Newsletter Exclusive: The Journal Declares China the Winner in Pentagon-Anthropic Dispute

China is surely keeping a close eye on an ugly fight over military AI that’s playing out in the U.S. The San Francisco-based startup late last month accused three Chinese competitors — DeepSeek, Moonshot and MiniMax — of improperly extracting large amounts of data from its AI technologies. The company said the three companies used 24,000 fraudulent accounts to generate more than 16 million conversations with its Claude models that could be used to teach skills to their own chatbots, relying on a practice known as distillation. The company said the activity raised national-security concerns for the U.S.

That was just the start of the drama for Anthropic. Trump on Feb. 27 ordered all federal agencies to stop using AI technology made by Anthropic, describing the company as a “radical Left AI company run by people who have no idea what the real World is all about.”

Soon after Trump’s announcement, Defense Secretary Pete Hegseth designated Anthropic a “supply-chain” risk to national security,” an unprecedented action against a U.S. company, after it refused to give in to demands about the use of its technology. Who else has previously been deemed a supply-chain risk? Chinese companies including Huawei.

The WSJ’s editorial board wrote that if there’s any winner, it’s China. “The administration is making what is a modest dispute over the military uses of AI into a self-destructive show of brute political force that will hurt the U.S. military and the rest of the government.”

Alice’s Prediction: North Korea could return to Donald Trump’s radar. The president may opt to exert more pressure on North Korean leader Kim Jong-un or seek to revive negotiations with him over nuclear containment. Kim at the same time may be more emboldened to expedite his nuclear program as he watches the attacks unfold in Iran.

James’s Prediction: The space race with the U.S. is going to shift into high gear this year. China is aiming to launch its uncrewed Chang’e-7 mission to explore the lunar south pole this year as it sprints toward its goal of sending Chinese astronauts to the moon by 2030. The U.S. has its own plans to put humans back on the moon.

1. How the Supreme Court Just Undermined the IMF’s Warning to China

2. China’s Unlikely Rise as a Global Medical Tourism Destination

3. Seedance 2.0 and the AI Threat Hollywood Can’t Stop

4. Newsletter Exclusive: Why Tang Jackets Are Everywhere Right Now

IMF Warns China to Pivot as Supreme Court Reshapes the Trade War

The IMF released a major report on China last week with a clear message: the export-driven model has run its course. China grew 5% last year, but the IMF projects growth slowing to 4.5% this year, warning that the current strategy is not sustainable. Nearly a third of that growth came from net exports, and the yuan is estimated to be significantly undervalued, a combination that has fueled a record trade surplus and rising tensions with the US and Europe. The IMF’s prescription: pivot inward, boost domestic consumption, and reduce reliance on exports.

Title: China’s Goods Trade Surplus

Subtitle: 2010-2025

However, the pressure to do any of that got a lot lighter. The US Supreme Court ruled 6-3 last week that President Trump overstepped his authority in imposing sweeping global tariffs under emergency powers. For China specifically, the effective tariff rate has dropped by 7%. The ruling also weakens Trump’s negotiating hand ahead of his first meeting with Xi Jinping in Beijing, expected in early April and the first visit to China by a US leader since 2017.

Alice’s Take: The IMF’s advice won’t be followed. China is too committed to its current trajectory to reverse course. When the National People’s Congress convenes in early March, the government work report will almost certainly double down on China’s identity as a high-tech manufacturing superpower, not pivot dramatically toward domestic consumption.

Trump is actually giving China a modest assist. The Supreme Court ruling lowers the effective tariff rate, and Trump remains in a conciliatory mode toward Beijing in advance of his proposed trip to Beijing in April. He wants a strong photo-op with Xi in April and is actively working to ease tensions. Meanwhile, private Chinese companies facing headwinds at home are finding every available export route, whether to APAC, Europe, or through US subsidiaries. The direction of travel isn’t changing.

James’s Take: The IMF report is wishful thinking. China will not overhaul its economic model, will not meaningfully boost consumer spending, and will not walk back the record trade surplus of roughly $1.2 trillion it posted last year. The report reads less like a realistic policy prescription and more like a barometer of Western frustration.

The real problem runs deeper: China’s property market. Around 60% of Chinese household wealth is tied up in real estate, prices are still falling, and property transactions are expected to drop another 10-14% this year. Until the property market finds a floor, which likely won’t happen before 2027, a genuine rebound in consumer spending is off the table.

Title: China’s Property Market

Subtitle: 2019 - 2026

Chinese Hospitals Are Becoming a Global Medical Tourism Hub

A video has gone viral of a British patient who flew to Beijing with stomach pain and walked away with a diagnosis, a treatment plan, and a total bill of around $400. That covered an endoscopy, blood tests, an electrocardiogram, a biopsy, and multiple consultations, all within 12 days. For context, a routine GP appointment with the NHS in the UK can take over a year to schedule — and going private can cost upwards of $3,800.

Last year, Chinese hospitals treated nearly 1.3 million foreign patients, a 75% jump from 2022. Under the government’s Healthy China 2030 initiative, Beijing is actively promoting a mix of modern and traditional Chinese medicine to attract both regional and Western visitors. Hainan Island has been designated a special medical zone by the State Council, giving international travelers easier access to cutting-edge foreign-approved treatments including stem cell therapies and cochlear implants.

The medical tourism market in China is projected to grow from $1.2 billion in 2025 to $3.4 billion by 2035.

Alice’s Take: This fits squarely into China’s broader push to develop its services sector, historically one of its weakest areas. Beyond the headline numbers, there’s a specific cultural angle worth watching: Yuezi, the traditional Chinese postnatal confinement practice. New mothers spend 30 - 40 days in a clinic receiving spa-level care, nutritious meals, and full infant support for roughly $1,000 to $2,000. Comparable offerings in the US cost ten times that. I can see this becoming a genuine lifestyle trend for women overseas seeking better affordable post-natal care.

If China can pair its cost advantage with consistent quality, it becomes a natural rival to Turkey and South Korea as a medical destination. I’d expect the next five-year plan to formalize that ambition.

James’s Take:This will happen and faster than people expect. That said, a word of caution from personal experience. About a decade ago, I was on a business trip in Beijing when a colleague’s lung collapsed. At the hospital, we were told he could either wait a couple of days for standard treatment, clearly not an option for someone gasping for breath, or pay 10x the price for immediate care. They could see I was from a foreign company and knew we were desperate. Things may have improved since then, but I would not assume those practices have disappeared entirely.

Seedance 2.0: ByteDance’s AI Video Model is Threatening Hollywood

ByteDance’s AI video model Seedance 2.0 is generating hyper-realistic, cinema-quality clips from a few written prompts. Tom Cruise and Brad Pitt brawling on a rooftop. Donald Trump fighting kung fu masters in a bamboo forest. Kanye West in Imperial Chinese attire performing a traditional music video. None of it is real, yet millions are watching it as if it is.

Hollywood is not taking it well. Paramount, Disney, Warner Bros., and Netflix have all sent cease and desist letters to ByteDance, accusing the company of systemic infringement and treating their intellectual property as “free public domain clip art.” SAG-AFTRA is pushing back, and critics warn the technology will accelerate deepfakes and fundamentally reshape the film industry.

Seedance 2.0 also charges roughly $0.60 for a 10-second video. Google’s comparable VO3 model costs $2.50 for the same output.

Alice’s Take: I’m genuinely worried about what’s been let out of Pandora’s box. The gap between what Seedance 2.0 produces and what I see on actual TV screens is shrinking fast. What’s striking is that China actually moved early on domestic regulation. The Cyberspace Administration penalized more than 13,000 accounts and removed hundreds of thousands of unlabeled AI-generated posts inside China. They saw this coming and built guardrails. America hasn’t and likely won’t anytime soon.

The result is that Chinese AI companies effectively have free rein outside their own borders, infringing on Hollywood IP with no real legal consequence. Studios can’t threaten market access because China largely pushed out American films around 2016, and you can’t compel a Chinese company through a US court. The only realistic path is government-level regulation. Right now, nobody is moving fast enough.

James’s Take: 2026 will be the year of mass Hollywood litigation against Chinese AI video apps, and those lawsuits will consistently fall behind the pace of the technology itself. It reminds me of the Chinese piracy DVD era of the early 2000s, when you could walk down any street in China and buy a bootleg film for one yuan, shot by someone sitting in a cinema with a camcorder. Hollywood was essentially powerless until China’s own government decided to crack down, and that’s probably the only realistic parallel here too.

The lawsuits will pile up, the apps will keep advancing, and the film industry will be disrupted in the meantime. The one slim hope is that Trump and Xi use their April summit to open a conversation about AI cooperation, but I wouldn’t hold my breath on anything substantive coming out of it.

Newsletter Exclusive: Why is Everyone Suddenly Wearing a Tang Jacket?

Adidas released a limited-edition “Tang-style” jacket at Shanghai Fashion Week in October. Available only in Greater China, it sold out immediately. Within weeks, there was even a version for pets.

This month, Adidas brought the jacket to Paris.

Fashion influencers and Western brands are jumping onto this bandwagon with the Tang jacket being one of the key fashion trends for 2026.

Western retailers call this a “mandarin jacket,” after the standing collar. The actual name is Tangzhuang (唐装). Tangzhuang evolved from the Qing dynasty’s Manchu riding jackets, combining the collar with frog button closures. China revived it in 2001, presenting it as official attire at Shanghai’s APEC summit after decades of obscurity.

APEC 2001

The rise of the Tangzhuang has been driven by three converging forces.

First, domestic demand. What started several years ago as guochao (国潮, “national tide”), a surge in national pride among younger Chinese consumers, has become a powerful commercial force. Chinese Gen Z and millennials are rejecting Western luxury brands in favor of homegrown designs that celebrate Chinese heritage.

Second, a Western cultural backlash. Across TikTok and social media, younger Americans are proclaiming they’re at “a very Chinese time” in their lives. They’re wearing mandarin jackets, eating hot pot, buying Labubus, and celebrating Chinese products and technology. In the past year, search volume for Mandarin jackets has risen by 112%. The viral “Chinamaxxing” trend isn’t really about China. It’s a projection of American frustrations with their own country’s failures. China serves as a symbol, however selective or superficial, of what younger Americans believe their own country has lost.

Third, manufacturing leverage is converting to cultural power. China accounts for about 30% of global apparel exports. For decades, that manufacturing was invisible, the final product branded as American or European. What’s changed is that Chinese companies now control the full value chain: design, production, branding, and increasingly, distribution. When Li-Ning, Anta, and other Chinese sportswear brands outperform Nike and Adidas in their home market, Western brands have to adapt. That domestic dominance has given Chinese companies the capital to acquire Western brands outright. Anta just bought 29% of Puma for $1.8 billion, adding the German brand to their portfolio that includes Salomon and Wilson.

Other Western brands are also capitalizing on this shift. In October, Moncler debuted its first Chinese collaboration with designer brand Qiuhao. Prada opened its first independent dining space in China. Amsterdam-based brand Rohe launched its own signature “Mandarin” jackets.

For decades, China manufactured most of the world’s clothing invisibly while Western brands claimed the credit. Now that dynamic is flipping. Western brands are the new cultural copycats, designing first to appeal to Chinese consumers, then bringing those aesthetics to global markets. When a German sportswear company markets traditional Chinese design elements under their Chinese names to Parisian audiences, its recognition that Chinese aesthetics now carry commercial value on their own terms.

Alice’s Prediction: Chinese mainland stocks will see positive momentum heading into the NPC meeting on March 4, driven by market anticipation around semiconductor hardware, upstream and downstream chip industry players, and AI-related policy announcements. Historically the lead-up to NPC meetings has been positive for markets, and I expect the same pattern here.

James’s Prediction: 2026 will be the year of mass Hollywood litigation against Chinese AI video apps, and the lawsuits will fall behind the pace of the technology. The apps will march ahead while the legal cases pile up, and the film industry will be thoroughly disrupted in their wake.