Incremental policies to support the economy - Just a day after the State Council Executive Meeting readout said that “practical additional policies should be introduced”, the People’s Bank of China announced Tuesday adjustments to several structural monetary policy tools and the Ministry of Finance, the People’s Bank of China and the National Financial Regulatory Administration jointly issued a notice stating that a mortgage interest subsidy for homebuyers will take effect nationwide on October 1.

Lots of pomp, limited substance in the Xi-Trump meetings. But before we get to a discussion of the Trump-Xi bonhomie, it is worth highlighting the signals from the Monday State Council Executive Meeting. Based on the readout, translated here, the leadership is now worried about economic performance for the rest of the year and may be looking at a Q4 supplementary stimulus

We do not have much more visibility today than we did yesterday about possible outcomes from Xi’s visit. Treasury Secretary Bessent met again with He Lifeng today, and in brief comments held out the possibility of an even bigger deal. Perhaps part of the deal could be the F-35 parts that are now in China? - China Holds Sensitive F-35 Parts Diverted to Hong Kong From Australia The PRC made a good fentanyl-related gesture today, issuing new rules about prosecuting and sentencing fentanyl-related crimes, and “placing orphine-type substances as an entire class under control”.

Listen now | Show Notes:

Xi Jinping should land in DC in about 24 hours. We still have little visibility on what the outcomes may be, beyond a reaffirmation of the US and PRC versions of the “constructive relationship of strategic stability”, with the US addition of “on the basis of fairness and reciprocity”. Taiwan will be a focus for Xi, and we should expect continued efforts to get Trump to say he “opposes” Taiwan independence and stop arms sales to Taiwan. Reuters reports that Xi may “press US President Donald Trump to halt Taiwan arms sales under a 1982 joint statement during a visit to Washington this week, which he could do at the US National Archives”, with the carrot being an offer “to put pressure on Iran over the war in the Middle East”. That would be a bad trade.

The Politburo held its September meeting Monday and announced that the Fifth Plenum will convene October 26-29. The PRC officially confirmed that Xi will travel to the US to meet with Trump from September 23-25. Trump will greet Xi on arrival an Andrews Air Force Base, host him for meetings and a state dinner Thursday, and then Xi will leave Friday. So much for those rumors about Xi last week…

Xi visit to DC - More details are coming about the plans for Xi’s visit to DC next week, with the most interesting report today coming from Politico, which says that Trump will personally greet Xi on the tarmac when he deplanes. Earlier today, Wang Yi and US Secretary of State Rubio had a call. From the brief Xinhua readout

There is a new round of rumors about Xi’s health. I think it is BS but since I have been getting lots of pings about it, it makes sense to address them

Show Notes:

In this issue: 1. More weak August data 2. Advance work for Xi-Trump meeting 3. ICBC documents leak 4. New exit-entry rules go into effect

A structured U.S.-PRC government dialogue on strategic artificial intelligence risk reduction - The US and China should be talking about AI safety and governance, and while I am skeptical this can happen given the politics I thought it is still constructive to make some suggestions. I created this proposal with Astra after much back and forth. If the two sides are going to dialogue about AI, the AI should have a say

Today has been a whirlwind of news about calls to pace AI development, triggered by Anthropic CEO’s “We Must Pace the Frontier” essay over the weekend. The reaction from the Trump Administration, and President Trump himself, make it clear the US government has no interest in slowing AI development, so the low expectations for any progress at the mooted US-China AI dialogue should now be even lower

Anthropic’s September report is not just about China but includes multiple examples of what it says is problematic behavior by Chinese firms and individuals. The report documents clear violations of PRC law by PRC entities. Anthropic should offer to forward its detailed findings to the Ministry of Public Security through the FBI’s channel, would be a good example of US-China law enforcement cooperation: these findings raise concerns about the misuse of user data by PRC AI labs. DeepSeek, Xiaomi, and Moonshot fed conversations between their own models and users into Claude. These labs then used Claude’s responses as training data with which to distill Claude’s capabilities. Some of these exchanges included sensitive information, including from individual users, major multinational companies, and state-affiliated actors. Many of these exchanges were relayed from users of third-party model routing services commonly used by users in the United States and Europe. Those sessions contained names, email addresses, company data, and other sensitive data of hundreds of end users in at least a dozen languages. These practices are likely inconsistent with privacy laws and the labs’ own terms of service.

Expectations should be low for US-China AI discussions around Xi’s upcoming visit, not only because of this advisory and the response but also because the US side is far from having any sort of coherent approach to regulation, or even empowered staff to figure out what to do. Politico just reported that Sam Corcos, CIO at the Treasury Department and Secretary Bessent’s top AI advisor, has been “reassigned.. away from AI policy after the adviser relayed private misgivings over White House policy to AI companies.” Dialogue is needed, especially after the tweet today by a former Anthropic researcher saying “the people building AI earnestly believe that it could kill us all by the end of the decade”. Perhaps the best thing we can hope for out of any Trump-Xi discussion of AI is that two sides assign competent and relevant people to join the dialogue. One person who absolutely should be on the PRC side is Huang Ru at the NDRC. US incoherence around AI regulation certainly the PRC make the case to the rest of the world that they are taking a more responsible approach to AI development.

The PRC has still not confirmed that Xi Jinping will travel to India for the BRICS Summit 2026 in New Delhi this weekend, but the expectation is that he will attend. In this issue: August trade data Capital boost for state financial firms Preparations for Xi’s DC visit AI on the the Trump-Xi agenda China and Rubio’s South America visit

Listen now | This episode of Sharp China is outside the paywall.

PRC explanation of why there was no G20 communiqué NDRC wants to accelerate “Six Networks” projects EU-China Q2 carbon emissions fall China and AI The Memory Museum

In this issue: Xi’s Egypt visit G20 Finance Ministers and Central Bank Governors meeting Bond issuance for rest of the year EU-China trade

In this issue: Xi at the SCO China’s global strategy Li Qiang meets US business delegation Tax changes for foreigners Auto industry overseas conduct guidelines Latest issue of Qiushi

In this issue: The disaster in Nepal and Tibet Xi at the SCO State Council Executive meeting Measures to expand and upgrade consumer goods consumption Revised National Defense Mobilization Law Signals for PRC-US AI dialogue Cracking down excessive competition in the domestic auto market New era for real estate

This month’s digest pulls in different directions—insofar as we can follow a single thread, it is that of traditional systems being swept away and of “changes unseen in a century” coming to pass: in discussions of nuclear proliferation, the Cold War nuclear order has “irreversibly come to an end”; in the Middle East, the US security architecture is crumbling; in the maritime domain, volatility threatens sea lanes; and overseas, Chinese firms’ modus operandi is shifting. While most scholars identify the increasing security risks attendant on such changes, what comes next and what China should do about it are open questions. More hawkish scholars advocate stronger unilateral action in the international system, while others caution against such measures.

Listen now | Show Notes:

Xi to attend SCO Summit and visit Egypt - Xi will travel to Bishkek, Kyrgyzstan to attend the SCO summit and pay a state visit there. He will then go on to Egypt for a state visit. He leaves August 30 and returns September 3. Xi’s most-watched meetings at the event may be with India’s Modi and Russia’s Putin. We still do not know why the director of the CIA flew to Russia yesterday for two hours, but it may have been to warn Putin about escalating in Ukraine and perhaps against NATO. If Xi and Putin meet in Bishkek, will Putin give Xi any advance notice of his plans? If he is planning to escalate, will Xi try to talk him out of it, or at least issue another call that nuclear weapons must never be used?

PRC response to “Economic D-Day” - The Foreign Ministry spokesperson said Tuesday: China’s cooperation with Iran has always been conducted within the framework of international law and should not be interfered with or undermined. China is closely following relevant developments and will take all necessary measures to resolutely safeguard its rights and interests. The US government may have set another trap for itself around the Iran quagmire. If they only sanction mostly meaningless PRC entities like they did Monday, Trump and team look like paper tigers, but if they move against major PRC financial institutions or central SOEs then the PRC may again play the rare earths card, as well as the “Xi is not coming to DC next month” card. And if China does not participate in this “economic D-Day” then it has even less of a chance of success.

In this issue: Xi meets Jordan’s king Sixth Plenum of the CPC Central Commission for Discipline Inspection “Zhong Caiwen 钟才文” on the economy Fiscal revenue grew in July Formaldehyde-dipped cabbage US-China

Given the PRC’s economic relations with Iran, Trump is clearly threatening “TREMENDOUS Economic Consequences” for China. But can he really follow through on this threat, or will Xi just respond with two words: “rare earths”? Treasury Secretary Bessent said this on CNBC today about possible actions against China: we are confident that everyone wants the strait reopened and for energy prices to come back down. And, Sara, keep in mind that the Chinese get 50 percent, 5-0, of their energy from inside, from the Gulf. So it would do them a big service to get with the program And then later Thursday Bessent tweeted “any remaining tie to Tehran will hasten a nation’s economic oblivion, whether that tie be purposefully constructed or willfully ignored.” I am skeptical the Trump Administration will do anything meaningful that risks slowing the trickle or rare earths, or Xi postponing his visit to DC next month.

This episode of Sharp China is outside the paywall.

Unitree priced its IPO at RMB150.80, opened at RMB1,100, and closed at RMB845, up 460.3% from the offer price. Its market capitalization is now about RMB341.8 billion. Unitree’s valuation is difficult to defend using conventional fundamentals. It reported approximately RMB1.70 billion of 2025 revenue, RMB278 million of reported net profit and roughly RMB591 million of adjusted profit. At Wednesday’s close, the company was therefore valued at approximately: 201 times 2025 revenue 1,230 times reported 2025 earnings 578 times adjusted 2025 earnings But who cares about fundamentals for a hot IPO in the sweet spot of the new quality productive forces push… Unitree sucked a lot of money from other robot-related stocks. The Guozheng Robot Industry Index dropped about 9.0%, the CSI Robot Index fell 7.9%, more than 100 humanoid-robot-related A-shares declined, and several component and motion-control suppliers plunged by their daily limits. It was a great day for Unitree, its shareholders and the people lucky enough to win an IPO allocation lottery ticket, but for just about everyone else it was another ugly day in the PRC stock markets.

Wang Yi will visit South Korea for two days starting Wednesday. According to the Korea Herald: A Seoul Foreign Ministry official, requesting anonymity, said Tuesday that Lee’s broader vision for peaceful coexistence on the Korean Peninsula is expected to feature naturally in Wang’s meetings in Seoul. Lee’s latest proposal is part of his administration’s efforts to improve strained inter-Korean relations and support the resumption of dialogue between North Korea and the United States, with Seoul casting itself as a “pacemaker” for diplomacy. It is not clear when the Wang trip was arranged, but even if scheduled weeks ago, the timing, just after Trump’s post about his instructions to the US Secretary of War to “substantially reduce the Joint Military Exercises!”, is certainly interesting. Is it just a coincidence?

Jiang Zemin Commemoration - There were few surprises at the Monday commemoration for the 100th anniversary of the birth of Jiang Zemin. All living, retired Standing Committee members except Hu Jintao, Li Ruihuan, Wu Guanzheng, and Luo Gan attended. Xi Jinping laid out five things the Party should learn from Jiang Zemin at Monday's centenary commemoration, and linked them to his agenda: We must learn from Comrade Jiang Zemin’s rock-solid political faith. 我们要学习江泽民同志坚定如磐的政治信仰。 We must learn from Comrade Jiang Zemin’s sincere and profound feeling for the people. 我们要学习江泽民同志真挚深厚的为民情怀。 We must learn from Comrade Jiang Zemin’s innovative spirit of keeping pace with the times. 我们要学习江泽民同志与时俱进的创新精神。 We must learn from Comrade Jiang Zemin’s strategic thinking marked by deep foresight and careful planning. 我们要学习江泽民同志深谋远虑的战略思维。 We must learn from Comrade Jiang Zemin’s extraordinary courage, which was resolute and bold. 我们要学习江泽民同志坚毅果敢的非凡胆略。

Former Premier Zhu Rongji died on August 11 at the age of 98. His memorial service will be on August 18. Zhu has not been politically relevant for many years, and his death should not cause any issues for Xi and the leadership. There is a playbook for managing any outpouring of grief or reminiscences hinting at dissatisfaction with the current Era after the passing of a senior leader, and for the memorial service. The Party has recent practice in managing the deaths of retired Premiers, as Li Peng died at 90 in 2019 and Li Keqiang died at 68 in 2023. The People’s Daily treatment of the respective announcements is identical

US-China & Global Order | Europe | Chinese Economy & Going Out | Middle East | South China Sea | Neighbourhood Diplomacy | Regional Relations | AI & Tech | Society

I thought I would be on vacation already but there too many interesting things over the last few days to not do one more newsletter before heading off on my version of the “Beidaihe Break”. The Beidaihe Break has officially started, signaled by the CCTV report on Cai Qi visiting “experts vacationing in Beidaihe”:

The Politburo held its July meeting today. Some of the highlights: Fifth Plenum scheduled for October, agenda is “to study major issues concerning the unremitting advancement of full and rigorous Party self-governance”; Diagnosis of economic situation section includes “it is necessary to attach great importance to the difficulties and challenges in economic performance 要高度重视经济运行中的困难挑战”, which suggests increasing concern about the state of economy; Readout language signals at least some additional, marginal policy support - promptly plan and introduce practical and effective incremental policies 及时谋划出台务实管用的增量政策

Show Notes:

We are still waiting for the July Politburo meeting. Gita Gopinath, Pierre-Olivier Gourinchas and Hélène Rey - two former IMF chief economists and the incoming chief economic advisor at the Bank for International Settlements, respectively - wrote “Don’t blame global imbalances on the undervalued yuan” for The Economist arguing that calling on the PRC to revalue the yuan to fix imbalances, as German Chancellor Merz has done, “gets both the diagnosis and the cure wrong”. They conclude the piece: The G7 and the IMF locate the problem correctly: it lies in the constellation of domestic macroeconomic choices on both sides of the imbalance. A policy package, whereby China pivots to consumption and services-led growth, and America reins in fiscal deficits, is less spectacular than a grand currency bargain. But it has the advantage of being both effective and achievable.

In this issue: Xi meets Slovak president “Excess capacity” or “Overcapacity”? CXMT IPO the day after Xinhua’s mid-year review of the Chinese economy Li Qiang commemorates the 50th anniversary of the Tangshan earthquake National Conference on Overseas Chinese Affairs Work AI and chips US to ban new PRC robots

The July Politburo meeting should happen this week, and should include as part of its agenda “analyzing and studying the current economic situation, and deploying economic work for the second half of the year 分析研究当前经济形势”. The 2025 July meeting was on Wednesday, July 30th, and also announced the date for the Fourth Plenum. And then on or around August 1 the top leaders will disappear from public for two weeks or so for the “Beidaihe Break”, even though we do not know if they all go to the seaside resort. Last year at this time there were lots of crazy rumors about Xi and possible coups; this year the rumor mill so far has been very quiet.

President Trump confirmed that Xi will visit the US on September 24. That is not a surprise, the Rubio-Wang meeting readouts were clear they were working towards that visit. Vice Foreign Minister Ma Zhaoxu, one of the top contenders to eventually replace Wang Yi, has been in the Washington, DC this week, and today visited the Pentagon. A MOFCOM official said on Thursday that “at present the Chinese and US economic and trade teams are maintaining close communication on specific arrangements for the trade council, including its structure, functions, and mode of operation, and are discussing advancing reciprocal tariff-reduction framework arrangements of 30 billion US dollars in scale on each side.” So we are seeing practical applications of “constructive strategic stability” as the two sides try to manage the relationship while competing.

The head of the White House Office of Science and Technology Policy, the Treasury Secretary and a senior State Department official all tweeted similar things about Kimi and distillation today. Secretary Bessent was most specific about possible policy responses - ”sanctions and Entity List designations will be on the table”. Kratsios, the head of the OSTP, accused Moonshot of “a sophisticated internal platform to conduct large scale distillation against U.S. models, allowing them to quickly switch between multiple methods of access to avoid detection. Moonshot AI has also acquired GB300-equipped servers and has accessed GB300s in Thailand, likely to train its AI models.”

“Strengthening the guidance of capital-market expectations” likely means more positive talk about market prospects, and “further institutionalizing mechanisms for market stabilization” sounds like a call for more “national team” support, SOE buybacks, and long-term institutional money, in a more institutionalized way...“Industry institutions would step up counter-cyclical positioning and earnestly raise the level of their investor services; and that experts and scholars would actively offer advice and proposals and speak out rationally, so as to jointly foster a sound market environment” sounds like an instruction to not sell into weakness while ensuring commentary and analysis about the market are positive. The monster CXMT IPO is imminent, and they need it to go off well. Even more importantly, regulators need investors to keep putting money into the market to fund the national technology strategy.

Show Notes:

Operation stock market rescue - The National team is back to try to turn around the stock market, after losses approaching ten trillion RMB this month. China Reform Holdings Corp. Ltd. and China Chengtong Holdings Group Ltd. announced Sunday they were buying around 60B RMB of ETFs and domestic stocks, five insurance firms and multiple SOEs announced Monday they were buying stocks, and CSRC head Wu Qing held an “investor symposium” at a brokerage branch in Beijing to meet “with 8 representatives from various categories of investors — large, medium, small, and retail — to hear their opinions and suggestions on promoting the stable and healthy development of the capital market.” According to the readout, translated here: Wu Qing said that the broad mass of investors are the foundation of the market and the most important participant group in the capital market. The CSRC will persist in advancing capital-market risk prevention, strengthened regulation, and the promotion of high-quality development as an integrated whole; do everything possible to maintain the smooth operation of the market; work to improve the transparency and authenticity of listed companies and better reward investors; urge industry institutions to operate in a regulated manner and raise the level of investor services; continuously improve long-term mechanisms for investor protection; resolutely uphold an open, fair, and just market order; and let investors better share in the fruits of the high-quality development of the economy and the capital market. 吴清表示，广大投资者是市场之本，是资本市场最重要的参与群体。证监会将坚持一体推进资本市场防风险、强监管、促高质量发展，全力维护市场平稳运行，着力提高上市公司透明度和真实性、更好回报投资者，督促行业机构规范经营并提升投资者服务水平，不断健全投资者保护长效机制，坚决维护公开、公平、公正的市场秩序，让投资者更好分享经济和资本市场高质量发展成果。 So is a bottom in?

Moonshot is the latest PRC firm showing the way to building open-source AI, with the release today of Kimi K3, which from early reviews is a frontier-class model. Kimi obviously timed the release for the eve of the WAIC, and I will assume they coordinated it with the relevant organs. If it is as good as the initial reviews say it is, this could change lots of assumptions.

On today’s show, Andrew and Bill begin by parsing the economic data released by the PRC this week, including slower-than-expected growth, the Party’s response to the status quo, export-powered growth that is widening trade imbalances, and the questions all of this will raise for foreign policymakers. From there: The Party's findings on Ma Xingrui, questions that remain unanswered, and cadre risk aversion for the next 18 months. Then: PRC messaging around openness in AI, an ongoing U.S. debate over open-source AI models, three chip bills that may end up in the NDAA, and the continued adventures in China policy on Capitol Hill. At the end: Reflections on the 10th anniversary of The Hague ruling on the PRC’s territorial claims in the South China Sea, as well as the state of play today.

The PRC economy slowed more than expected in Q2. Real GDP growth declined from 5.0% year-on-year in Q1 to 4.3%, below the 4.5% consensus and the lower bound of the government’s 4.5–5.0% full-year target. First-half growth was 4.7%. Sequential Q2 growth of 0.9% was in line with expectations. AI, high-tech manufacturing, exports and selected modern services are expanding rapidly. Property, private investment, conventional infrastructure and household consumption remain weak. The official Q&A noted that “new growth drivers” contributed more than 40% of economic growth, while officials largely avoided explaining why aggregate investment is contracting. The GDP deflator turned positive for the first time in 12 quarters. The data is not great but probably not bad enough for significant new policy measures coming out of the upcoming July Politburo meeting that will discuss the economy. But in his meeting with experts and economists earlier this week, Premier Li, whom I assume already knew today’s data, said “counter-cyclical adjustment must be stepped up; existing policies must be used well and to the full while incremental policies are studied and reserved in advance”.

At present two entirely different logics of development exist in the AI field: some media have summed them up as "oil thinking" and "water-flow thinking" — the former treats data and computing power as exclusive scarce resources, fostering barriers, blockades and zero-sum games; the latter treats AI as a universally beneficial public good, nurturing connectivity, sharing and mutual benefit. The vitality of technology lies in open flow. The development of AI must never move toward a technological monopoly that walls itself in, but should always be anchored to the fundamental goal of serving humanity. - People’s Daily commentary previewing the themes of the upcoming World Artificial Intelligence Conference

The July Politburo meeting is usually about the economy, and adjustments needed for the rest of the year, and as part of the work ahead of that meeting the Premier solicits feedback. Today he held a meeting with several experts and entrepreneurs to “hear their views and suggestions on the current economic situation and the next steps in economic work.”

A joint investigation by The Insider, Der Spiegel, and Le Monde provides shocking but unsurprising revelations about China-Russia military cooperation. The reports should destroy any lingering illusions of PRC “neutrality” in the Russia-Ukraine war.

This episode of Sharp China is outside the paywall.