Such doubts are not new. But when they are built on unverified details, selectively presented anecdotes, and missing context, the report goes beyond differing perspectives and raises questions of validity.

Since 2012, China has entered a new phase of poverty alleviation through a combination of industrial development, labor mobility, transport and communication facility expansion, and health insurance subsidies. In November 2020, Guizhou announced that its last nine impoverished counties had been lifted out of poverty, marking the removal of all 832 registered poor counties in China.

A transition period then followed, with continued monitoring and support for those lifted out of poverty and those at risk of slipping into poverty.

Based on our in-depth research and cross-checks with our colleague in Guizhou, we verified the article’s narrative against on-the-ground realities. Unfortunately, a number of its key details prove less than robust, and in some cases fail to withstand even basic verification.

Here’s a point-by-point response to the Financial Times report.

1. Granny Yang revisited: facts behind the story

By most measures Yang Nai Yan Qing lives a frugal life. A member of China’s Dong ethnic minority, the villager in her sixties resides in China’s Guizhou province, one of the country’s poorest, and reckons her monthly living expenses are less than Rmb200 ($29).

Except on special occasions, such as the spring festival when she buys meat if she can afford it, Yang eats only mustard greens, cabbage and sweet potatoes, almost all of which she grows herself in a field a long walk uphill. Her other expenses are limited to cooking staples, clothing purchases every few years and medicine.

The FT’s narrative conjures a heart-wrenching image of an elderly woman struggling in penury, which serves as a pointed metaphor for the country’s much-vaunted poverty-alleviation campaign falling short.

Last week, however, when our colleague in Guizhou visited Yang in the province’s Congjiang County, she found a stark contrast.

Yang’s home is a self-built, three-and-a-half-storey house, one of the larger residences in the village. The ground floor alone measures around 160 square meters. Her family is not impoverished, so the house was not government-provided, but built at their own expense about a decade ago.

With her permission, our colleague took photographs of both the interior and exterior. Judge for yourself whether the allegation of poverty holds up.

Granny Yang recalled that a foreigner arrived at her home by car with a Chinese assistant around January 30 this year. The man, supposedly Langley, did not identify himself as a journalist. Out of hospitality, she invited them inside for a chat. She did not understand the purpose of the visit and simply took Langley and his assistant as tourists. To this day, she still does not know what the Financial Times is.

Granny Yang’s kitchen is huge. She showed her double-door refrigerator, which was well stocked with meat. She explained that she simply does not like eating meat. In the past, when life was more difficult, she could not afford it even if she wanted to, but now she can have it whenever she wishes.

Yang, 63, and her husband, 68, each receive pensions of around 200 yuan (29 USD) per month. Her mother-in-law, who is over 90, receives both a pension and an additional allowance for the elderly. Altogether, the elder members of the household have a stable monthly income of nearly 700 yuan (102 USD).

Her son and daughter-in-law have stable jobs as a driver and a salesperson, respectively. The combined annual income of the household is close to 80,000 yuan (11,702 USD). Her daughter is operating a start-up. Her children also give her an allowance each month. And, the family owns a private car.

The FT also reported, “many of her neighbors were relocated to newer apartment blocks downhill.” However, our colleague has verified that there has been no unified resettlement in the village. The so-called new apartments are mostly self-built homes constructed by villagers in recent years. Granny Yang herself has also retained a traditional wooden house not far away, which has clear ethnic characteristics and is not in disrepair.

Langley wrote that “she says her life has barely changed.” We are not sure whether this reflects a communication gap, but judging from her diet storage and housing conditions, the changes have in fact been quite significant. Perhaps what has remained unchanged is her long-standing habit of frugality. To equate such a lifestyle directly with poverty seems more like a delibrate misrepresentation serving a particular narrative.

The FT report claims that Granny Yang “hand-binds silver links into decorative chains for traditional Dong clothing, a job that can earn her Rmb3 per day when work is available. “

Frankly, such low pay came as a surprise.. In this province, the government’s minimum daily safety-net payment is 63 yuan (9 USD).

However, further investigation again revealed factual inaccuracies. Granny Yang showed our colleague the materials she works with. These are actually iron rings. Her task is to string them together into chains, which are later used as decorative accessories to bags, rather than as silver jewelry. She got the errand through WeChat groups. It is more of a way to pass the time than a primary source of income.

To meet her larger bills, such as her housing costs, she relies on remittances from male relatives who work in China’s wealthier provinces.

At this point, we were puzzled. Although the Financial Times does not explicitly state it, the narrative clearly leans toward portraying her as someone who has been resettled from another area due to poverty. According to relevant policies in China, households officially registered as impoverished and relocated under such programs are provided with free government housing.

As mentioned earlier, Yang’s family is relatively well-off within the village and is not classified as a low-income household. Their current home was built with a loan and their own funds, and they are still repaying that loan. However, the family considers the specific amount to be private and has declined to disclose it.

More importantly, her immediate family members all live locally in the county of Congjiang. The only thing coming from another province seems to be the narrative.

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2. Policy in practice: a different picture from the data

…a collapse in China’s property sector and stubbornly weak consumer demand have dented residents’ ability to boost their incomes further. Meanwhile, growing indebtedness has hampered local authorities’ ability to respond to economic shocks.

Such portrayals may easily resonate with readers who lack a concrete understanding of China. However, once examined against specific data and policy practices, these broad generalizations appear overly simplistic.

Take Congjiang County as an example. It is undeniable that this area is among the least economically developed in Guizhou Province, and its employment structure is far from ideal. Yet the reality of fiscal investment stands in clear contrast to the narrative of being unable to cope.

According to the data we obtained, government spending on assistance for fiscally vulnerable groups in Congjiang amounted to 337 million yuan (49.3 million USD) last year and 332 million yuan (48.6 million USD) the year before. At least 60% of these funds are required to be allocated to industrial development, while the remaining 40% is used to support employment growth, infrastructure improvements, and basic social security.

Since China declared the completion of poverty eradication in 2021, preventing a return to poverty has become a top priority for the country’s local governance. Related funding has not experienced any significant contraction despite broader macroeconomic fluctuations.

China designated the period from 2021 to 2025 as a transitional phase. A key mechanism during this stage is dynamic monitoring and re-inclusion in the policy support:

-Individuals who have been lifted out of poverty continue to be tracked.

-Households whose income falls below the annual monitoring threshold, even if they were not previously classified as poor, are brought into assistance programs.

-The government provides support including health insurance subsidies and targeted career support.

The funding for these programs comes from the central government’s subsidies for promoting rural revitalization, which evolved from the former special poverty alleviation fund. In 2020, this fund amounted to 139.6 billion yuan (20 billion USD). After being renamed in 2021, it increased steadily each year, reaching 177 billion yuan (25.9 billion USD) by 2025. Following the end of the transition period, the fund was again reclassified this year as regular central government assistance funding, with the total remaining at 177 billion yuan.

From local governments to the central level, budgets have shown steady growth rather than contraction. This is not a system retreating under pressure. It is one that continues to expand, adapt, and deliver.

3. Is China’s poverty line really that low?

Xi’s speech signalled the end of an eight-year campaign to bring the last remaining 100mn Chinese people above the poverty line, defined as earning an income of Rmb2,300 per year (336 USD) at 2010 prices. Accounting for inflation and purchasing power, the threshold is significantly higher in dollar terms.

Having consulted relevant authorities, we have confirmed this threshold is a baseline rather than a fixed figure. During China’s poverty alleviation process, it is adjusted annually in line with changes in prices and levels of development, and provinces are free to set higher standards of their own.

In Guizhou Province, for example, the standard was 6,000 yuan (878 USD) in 2020, when extreme poverty was officially eradicated, and has risen to 8,500 yuan (1,243 USD) this year.

According to data from the United Nations, eradicating extreme poverty for all people everywhere by 2030 is a pivotal aim of the Sustainable Development Goals. Extreme poverty means surviving on less than 3.00 USD per person per day at 2021 purchasing power parity.

By this standard, the annual threshold is about 1,095 USD. Even without further adjustment, Guizhou’s benchmark already exceeds this level by a considerable margin. Once purchasing power parity is taken into account, the gap becomes even more pronounced.

4. Does the expert really support the narrative?

“It [eradicating poverty] was an incredible thing to try to do. And in nominal money terms, they did it,” says Robert Walker, a professor at Beijing Normal University and an emeritus fellow at Green Templeton College, Oxford. But, he adds, lifting people out of poverty permanently “is sort of untenable”.

The FT’s story then turns to an academic, a professor emeritus at the University of Oxford who has studied China’s poverty alleviation efforts, to enhance its credibility. Notably, however, Walker himself later published a public response expressing clear disappointment with the way the report was presented. His full statement is lengthy, but one particularly representative line reads:

“Always be aware, then, of the ‘subtle propaganda techniques’ used by Western journalists since truthfulness may be lacking in their attempts at cross-cultural communication.”

In other words, even the scholar cited to “lend credibility” to the report does not, in fact, endorse its presentation. This tension between selective quotation and the original intent only further undermines the overall credibility of the piece.

5. Getting the numbers right, or not

By 2013, Beijing identified more than 80mn officially impoverished citizens living in 832 counties, mostly located in remote mountainous regions populated by members of ethnic minority groups. It swore to bring them above the official poverty line in time for the Communist party’s centenary in 2021.

Regrettably, this is wrong again. According to data from the National Bureau of Statistics of China, the rural poor population in 2013 stood at 82.49 million. The 832 designated poverty-stricken counties, as we found out, were identified in 2012.

These 82.49 million people were not confined to those 832 counties. They were distributed across the country. These nationally registered poverty-stricken counties serve as units for policy identification and resource allocation. They do not represent the full geographical distribution of the poor population.

6. Does China overlook those falling back into poverty?

That static definition means that China’s poverty measures fail to account for people not on the original list who have since slipped into poverty due to personal circumstances or subsequent shocks, such as the coronavirus pandemic, the property sector meltdown or havoc wreaked by a trade war with the US.

As mentioned earlier, each province updates its poverty threshold on an annual basis. Individuals whose incomes decline due to illness, unemployment, or broader economic fluctuations, and who therefore face the risk of falling into poverty, are promptly brought into assistance programs. For example, they may receive higher rates of health insurance reimbursement or be offered government-subsidized public service jobs.

The goal is clear: to ensure that no one is left behind.

7. Was the investment really “wasted”?

But Sister Wu, a 37-year-old Miao woman who was relocated to the area from the village of Zaisong three hours’ drive away, says much of the investment is wasted.Wages in the local factories, many of which appeared empty when the FT passed by, are too low to justify working in them, leaving many unstaffed, and there was scant other employment in the local area, she says. Local officials suggested that she take up traditional handicraft work but the pay was just Rmb30-40 per day and the gruelling labour induces sharp pain in her neck…

Apart from being given a place to live, there’s nothing else.

To begin with, it is important to note that Guizhou is the only provincial-level region in China without any significant plains. Across its roughly 176,000 square kilometers of land, there are more than 1.2 million hills and mountains. For a long time, poor transportation and limited access to healthcare and education have been the primary constraints on local development. Before the completion of the poverty alleviation campaign, it was not uncommon for primary school students to spend several hours each day travelling across mountainous terrain to attend school.

It is precisely for this reason that the core purpose of relocation and resettlement has never been merely to provide housing, but to move people out of extremely disadvantaged natural environments and enable them to access better education, healthcare, and public services. If such improvements are not regarded as effective investment, then perhaps the very definition of “investment” in the dictionary of the FT needs to be reconsidered.

Our colleague also met with Sister Wu in her apartment. More than a dozen certificates of merit awarded to her kids were displayed on the walls of their home. She clearly stated that after relocation, her children’s access to education has improved significantly. It now takes only about 20 minutes to walk to school. In terms of healthcare, a clinic is just a few minutes’ walk from their new home, and staff regularly visit to check on their needs.

As for the report’s mention of idle factories, some context is needed: Langley’s visit took place just before the Chinese New Year, when some businesses had already closed early for the holiday. According to our understanding, a few factories in Congjiang were indeed shut down. At the same time, it must be acknowledged that this happened against the backdrop of a global economic slowdown over the past few years.

However, presenting temporary fluctuations as long-term failure is a line of reasoning that does not withstand even modest scrutiny.

Data from the Ministry of Agriculture and Rural Affairs of China show that between 2021 and 2025, all 832 formerly impoverished counties have developed two to three distinctive leading industries, with a total output value exceeding 1.7 trillion yuan (248.7 billion USD). Nearly three-quarters of those lifted out of poverty have established benefit-sharing mechanisms with new types of agricultural business entities.

In addition, the report’s description of “traditional handicraft work” is somehow misleading. The work in question is not traditional handicraft production in the usual sense, but rather piece-rate mushroom picking. The intensity of such labor is not difficult for readers to judge for themselves. Framing it simply as grueling traditional handicrafts is, at the very least, more suggestive in tone than it is precise in meaning.

8. Are these stories representative?

“There’s nothing for the people who moved here to do: no land and no work,” says Gu Lili, a seller of Dong jewellery and Guandong native who lives nearby…

“Lots of houses are empty …This place is too poor.”

The shop owner is not actually known by the name used in the report, another indication of the inaccuracy of the FT’s “interview,” if it counted as one. She has lived there for ten years and said she had earned a decent income over that time. Her family owns both a car and a home and is fully capable of supporting the education of her three children.

She did mention that many houses are left vacant. However, according to local authorities, around 70% of the town’s residents work outside the area for employment. Some have also chosen to relocate elsewhere because they are not accustomed to living there. This does not support the narrative of community decline implied by the Financial Times.

More importantly, isolated cases cannot represent the overall situation in Guizhou Province, let alone in China as a whole. Among relocated populations in Guizhou, the employment rate of the labor force stands at 96.89%. The per capita net income of relocated individuals has increased from 11,228 yuan (1,642 USD) in 2020 to 16,927 yuan (2,476 USD) in 2024, an increase of 50.76%. Nationwide, the per capita disposable income of rural residents in formerly impoverished areas rose from 14,051 yuan (2,055 USD) in 2021 to 17,522 yuan (2,563 USD) in 2024.

The trends reflected in these data do not align with the overall impression manufactured by the report.

Their experience is typical, according to experts including Bikales, who say that China’s anti-poverty drive was characterised by supply-side interventions such as investing in new homes and infrastructure, with little enthusiasm for the building of social safety nets, such as income subsidies, or for wider contributions to healthcare and education costs.

Congjiang County may not be among the most prominent examples of poverty alleviation in China, but its data alone are sufficient to call into question the conclusions drawn by the experts cited in the Financial Times.

With regard to healthcare support, Congjiang has implemented targeted treatment programs for 30 major diseases, maintaining a treatment rate of 100%. The standardized management rate for key chronic diseases has increased from 98.4% in 2021 to 99.97%. For insured residents, outpatient expenses incurred within policy coverage at designated medical institutions are reimbursed at 90% at village clinics (or community health service stations).

In the field of education, over the past five years, Congjiang has allocated a total of 282.7 million yuan (41.3 million USD) in various forms of educational financial aid, supporting 482,696 student instances. During the same period, 701 million yuan (102.6 million USD) was invested in educational infrastructure, resulting in the construction, expansion, or renovation of 207 primary and secondary schools and kindergartens.

For a long time, mainstream Western media outlets enjoyed considerable credibility and respect in China. Their reporting was often regarded as an authoritative source of information. Publications translating articles from outlets such as The New York Times and The Wall Street Journal into Chinese, both as a way to view China from different perspectives and as material for learning English, were once widely available.

However, over the past two decades or so, the image of some Western media in China has noticeably declined. To be frank, the reasons are not entirely clear. They may be related to the broader decline of traditional media and the loss of experienced professionals, or to shifts in the global geopolitical environment that have led some journalists to adopt more filtered perspectives. Gradually, biases in topic selection and narrative framing have become more apparent or rampant, leaving the balance and accuracy of such reporting increasingly open to question.

Understanding and interpreting a country is never easy, but it should not begin with misunderstanding and misinterpretation.

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Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency.

As the first Kuomintang (KMT) party leader to traverse the Taiwan Strait in a decade, Cheng Li-wun greeted mainland officials at Shanghai airport with a remark carrying political undertones: “Shanghai is closer to Taiwan than one would imagine.” The comment appeared to echo the 2005 ice-breaking trip by Lien Chan, who landed in Nanjing as the first KMT chairman to visit the mainland since 1949 and famously said the distance across the Strait was “not that far after all.”

In that landmark trip 21 years ago, Cheng served as the spokesperson of the KMT delegation and witnessed the first act of leadership-level rapprochement with the Communist Party of China (CPC) from a front-row seat. Today, Cheng has returned to the mainland as her party’s chairwoman, seeking to revive communication channels at a moment when cross-Strait relations have reached a precarious nadir. Her visit this time may be less historic, but more pressing.

As she commented on the physical distance of her journey, the political chasm across the Strait is now at its widest in decades. For Cheng, the historical barriers her predecessor once sought to overcome have been replaced by a set of more intractable realities that have locked the Taiwan question into structural tensions: the island’s increasingly toxic political environment, the yawning gap in overall strength across the Strait, and the intensifying great-power competition between China and the United States.

Confronting the Status Quo Disruptor

At a pre-departure press briefing, Cheng said that “attaining peace in the Taiwan Strait is actually not difficult.” The claim doubled as a mission statement of her self-styled “journey for peace.” Yet it hints at a grimmer reality that the island is edging ever closer to the brink of war. Last December, mainland military drills encircling Taiwan came within nine nautical miles of its shores. While this has led Western observers to make a fashion of predicting when Beijing might resort to force, a deeper source of the tensions has often been overlooked: the rise of populism in Taiwan’s politics.

Over the past decade, the island was ruled under the pro-independence Democratic Progressive Party (DPP), which launched a wholesale campaign aimed at manipulating historical narratives and political correctness. The party has played a version of identity politics reminiscent of Zootopia, recasting the KMT party, historically dominated by mainland-originated elites, as the “carnivore” foreign oppressors burdened with an original sin.

Such framing has propelled a distinct “Taiwanese subjectivity” into the mainstream, while the “greater China” idea once firmly upheld by the KMT has been pushed to the political margins. At the end of the last century, when Taiwan just introduced electoral politics, advocacy of “Taiwan independence” was still the ultimate vote loser. Today, however, even politicians in the pan-blue camp (ideologically pro-KMT) find themselves compelled, by electoral logic, to stress a more “local” Taiwanese identity in cross-strait discourse. In this climate, the “1992 Consensus”—the pragmatic formula where both sides of the Strait acknowledge that there is but one China—has been increasingly stigmatized, forcing politicians to skirt around it or render it deliberately ambiguous.

By claiming to restore pride in a shared Chinese identity among Taiwanese, Cheng Li-wun, who assumed the KMT chair last October, has staked her tenure on a refusal to be politically kidnapped by the DPP and sought to put an end to a decade of cross-strait stalemate.

In her meeting with Xi Jinping, she stated publicly that both the KMT and CPC should strengthen their shared political foundation, built on the “1992 Consensus” and opposition to Taiwan independence. She also invited Su Chi to accompany her on the mainland trip. It was Su who, during the KMT’s previous stint in power in 2008, played a pivotal role in enshrining the “1992 Consensus” into official policy.

In Cheng’s pilgrimage to Sun Yat-sen’s Mausoleum in Nanjing, she paid tribute to the figure revered by both the KMT and CPC as a pioneer of China’s revolution. In the speech she emphasized was “written entirely by myself,” Cheng drew a thought-provoking historical parallel: When Sun died in 1925, mourning him on the Chinese mainland could be done “openly and with dignity,” whereas in Japanese-occupied Taiwan at the time, such expressions had to be done “carefully and concealed.” The contrast she suggested appears to mirror today’s politically charged environment in Taiwan, where what the DPP frames as political correctness has come to stigmatize and marginalize identification with China—much as Sun himself.

The genesis of this modern-day identity struggle lies in over a century of unresolved political and military history. Once ceded to Japan in 1895, Taiwan was restored to China in 1945 with the blessing of the Cairo Declaration and Potsdam Proclamation. The Chinese civil war, which began in 1946, culminated three years later in the CPC’s victory on the mainland and the KMT’s retreat to Taiwan, leaving a divided political order in its wake.

To this day, what is widely regarded as the world’s longest-running civil war has never formally been brought to a legal conclusion. Both sides, in their respective constitutions, still claim that the territory of the other side falls within their rightful jurisdiction. A meeting between the two parties in 1992 produced a tacit understanding that both sides adhere to the “one China” principle, even though they might interpret “China” differently in their own political discourses.

A China-centred narrative that preserves shared cross-strait memory has, over the past decade, come under sustained pressure from Taiwan’s DPP authorities. Lai Ching-te, now in office, has pursued what is described as a more explicit form of “de facto Taiwan independence.” The rogue move has eroded mutual trust across the Strait, shattered crisis-management guardrails, and pushed the island further towards military confrontation. Cheng’s visit amounts to a pointed response to such attempts to upend the status quo.

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Beijing’s Strategic Patience

Despite a decade of button-pushing by the pro-independence forces in Taipei, Beijing has maintained a posture of strategic patience. The approach was reflected in Xi’s remarks during his talks with Cheng: “We welcome any proposals conducive to the peaceful development of cross-Strait relations and will spare no effort to advance any endeavors that promote such development.”

If Beijing were determined to set the stage for a military resolution—as many in the West have predicted—such conciliatory overtures would be entirely superfluous. Clearly, Beijing still views a peaceful settlement as its primary objective.

Such patience is all the more remarkable given a profound shift in the balance of power between the mainland and Taiwan. The People’s Liberation Army (PLA), whose name remains a literal reminder of the unfinished “liberation” of Taiwan, has over recent decades moved from relative technological backwardness to overwhelming superiority. Had the mainland’s political culture been captured by the same populist sentiment now evident in Taiwan, a military showdown might already have become unavoidable.

A more palpable shift has been economic. When Cheng accompanied Lien Chan on his mainland visit 21 years ago, China’s economy still trailed behind Japan and Germany. Today, it is considered even by the United States as a “near-peer.” Taiwan, whose GDP once amounted to roughly half that of the mainland, has since been overtaken even by the closest mainland province.

Therefore, unlike previous KMT leaders’ visits, which were steeped in culture and history, Cheng’s itinerary was packed with tours of tech frontiers: experiencing a drone-based delivery system, visiting an EV factory, touring an advanced chip foundry, and stepping inside the cabin of a domestically developed large passenger aircraft. The mainland’s global leadership in innovation and integrated industrial chains has now exerted a gravitational pull on the island, challenging the very sectors in which the island once claimed an unassailable comparative advantage 20 years earlier.

As Cheng’s visit drew to a close, Beijing unveiled a fresh package of preferential economic policies. The last such broad package of goodwill measures dates back to the period when the KMT was in power between 2008 and 2016, which was marked by the opening of direct flights and the signing of the ECFA trade agreement. The latest round of concessions, however, is all the more notable, given that earlier rounds fell short of fostering mutual trust amid pushback from the DPP.

However, history has shown that even the greatest measure of strategic patience has its limits. The last time a mainland power resorted to force to unify Taiwan was in 1683. A film commemorating that episode, The Battle of Penghu, is due for release this year—an implicit reminder that the final campaign was the culmination of two decades of delay, evasion, and reversal by the regime that then held Taiwan, in its fitful negotiations with the Qing court. Nearly half a century into Beijing’s proposal of “peaceful unification” after it ceased the bombardment of Kinmen in 1979, the mainland has consistently maintained that it will not renounce the use of force.

Cheng Li-wun repeatedly returned to the theme of “peace” throughout her trip. During a visit to Shanghai’s Yangshan Port, she remarked: “If peace is given enough time, anything is possible.” The question is what that time of peace, long or short, will be used for. If the mainland must continue to contend with a Taiwan drifting ever further from the “one China” principle and more closely aligning with America’s strategy to contain Beijing, the window for peace opened by this visit may prove fleeting.

Beyond a Pawn

One striking aspect of Cheng Li-wun’s visit is its timing: she arrived in Beijing a month before Donald Trump, whose own trip was reportedly delayed by a crisis in another strait. Cheng’s decision to engage the mainland before heading to the United States sets her apart from many in Taiwan who have outsourced their strategic thinking to Washington. She advocates a more measured and rational approach: “Taiwan should not be a passive object of geopolitical pressure, valued only for what others project onto it.”

The past decade’s intensification of great-power competition between the United States and China has coincided with the DPP’s second spell in office in Taiwan. During this period, Washington has become more explicit in treating the island as a pawn in its effort to constrain Beijing.

Since 2018, the US has begun to promote what is sometimes described as a “denial strategy,” steadily normalizing the sale of more advanced weaponry to Taiwan in a blatant disregard of the 1982 U.S.-China Joint Communique. The goal has been to fashion Taiwan into a heavily armed “porcupine” or “hedgehog,” designed to maximize the costs of any mainland military action, even at the risk to the island itself. Last December’s record-breaking $11.1bn arms package represented the latest peak of this approach.

Under Donald Trump, the United States appears less a guarantor of stability in the Taiwan Strait than a predatory spoiler. From pressing TSMC to accelerate technology transfer and expand capacity in the United States, to imposing higher tariffs on Taiwan than on regional partners such as Japan and South Korea, it has become increasingly clear that, however substantial the concessions Taipei is willing to make to accommodate Washington’s demands, Taiwan may still be treated in America’s strategic calculus as an expendable piece on the chessboard.

In an essay published in Foreign Affairs a month before her departure, Cheng challenged the conventional wisdom that Taiwan must choose between Washington and Beijing. This “one way or the other” mindset, she wrote, is fundamentally flawed and misleading. She argued that “for Taiwan, the achievement of peace cannot be separated from cooperation with Beijing.” This call for a more nuanced strategic autonomy is grounded in prevailing public sentiment within the island. A recent poll suggests that the majority of Taiwanese favor the authorities to maintain stable cross-Strait relations over splurging on weapons.

Before leaving for the mainland, Cheng stated that she bore responsibility not only for the security of 23 million people on the island, but also a broader duty to safeguard regional peace, so that neither the Taiwan Strait nor the wider world would be embroiled in conflict. After meeting with Xi Jinping, she expressed a desire to see the “institutionalization” of cross-Strait peace, an admirable ambition that may well exceed the remit of an opposition party leader, and one that would ultimately require a reshaping of political consensus in Taiwan and a more coherent cross-Strait policy from successive Taiwan authorities.

Ultimately, this visit was still a modest attempt to restore a degree of reason and pragmatism—a small but notable step at a time when both sides remain trapped in a downward spiral of deteriorating ties, and when there is an urgent need to alter the trajectory of developments in the Taiwan Strait. As Cheng Li-wun put it: “Whether it is war or peace, the path is made by those who walk it.”

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Boao should not have mattered as much as it does. It is not a financial hub. It is not even a city.

And yet, the just-concluded Boao Forum for Asia (BFA) is once again pushing this small coastal town in China’s Hainan province to the central stage, drawing leaders, executives, and scholars to discuss Asia’s role in an increasingly protectionist, conflict-ridden world.

This year’s gathering coincides with a fresh bout of global economic strain, as surging energy prices—driven by tensions in the Gulf—ripple through markets and weigh on growth. It is, in many ways, a familiar moment, for the forum is now convening, for the third time, in the shadow of an external shock.

The recurrence of “new dynamics” in both its first and 25th themes is a quiet reminder: Boao was not born in fair weather, but out of crisis.

The Shock That Shaped Boao

In the summer of 1997, a currency shock that began in Bangkok tore through Asia with a speed that left policymakers stunned. The Thai baht collapsed, losing more than half its value. The Indonesian rupiah lost over 80% of its value within months. South Korea, one of the so-called Asian miracle economies, was forced into an IMF bailout package that came laced with austerity conditions written largely in Washington. The lesson was searing: Asia had grown wealthy inside a global system it did not shape, and when that system convulsed, it had almost no institutional infrastructure of its own to fall back on.

The response, though in the form of a China-based non-governmental gathering for Asia, did not originate in Beijing.

In 1998, in the aftermath of the Asian financial crisis, former Filipino President Fidel Ramos, former Australian Prime Minister Bob Hawke, and former Japanese Prime Minister Morihiro Hosokawa jointly proposed a vision: a high-level platform where Asian voices could set their own agenda.

Its formal establishment in 2001 was in line with another milestone—China’s accession to the World Trade Organization (WTO), a moment that represented Asia’s most consequential bet on the rules-based trading order.

The timing was no coincidence. Long Yongtu, China’s chief negotiator for WTO accession, became the BFA’s first Secretary General, bridging China’s global integration with Asia’s emerging platform for coordination. Boao and Beijing’s WTO entry were, in a sense, two sides of the same wager: deep integration into globalization was the surest path to prosperity.

The name itself is telling. The Boao Forum for Asia is not just a forum in Asia, but one designed for the region while engaging the wider world.

Why Here：Location as Leverage

With a resident population of just over 30,000 today, Boao is no longer obscure. But in the 1990s, it was little more than a fishing village of around 15,000 people, with little to distinguish it even within Hainan, let alone China. Its selection as the BFA’s permanent site was, at first glance, counterintuitive—and, on reflection, deliberate.

In some ways, it is reminiscent of the model of the World Economic Forum in Davos: a small, quiet town hosting conversations of global consequence. As a non-governmental international platform, the BFA benefits from similar neutrality. Its distance from political and financial centers creates space for more candid and less formal exchanges that involve an array of incumbent and retired national leaders.

This kind of semi-official informality is crucial. BFA has, since its earliest years, been scheduled immediately after the close of the national “two sessions,” China’s biggest annual political event, thus serving as an early window into the country’s policy direction for the year and five-year span. Compared with official statements, the interpretation of policy signals here is more flexible and sometimes even bolder, which is welcomed by audiences from the political and business circles.

Geography adds another dimension. Hainan sits at the intersection of some of Asia’s most dynamic economic corridors—facing Southeast Asia, adjacent to major shipping lanes, and within reach of both Northeast and South Asia. It’s all about connectivity.

More importantly, Hainan, in many ways, encapsulates China’s own trajectory of opening up.

As early as 1983—when Hainan was still administratively part of Guangdong Province—a special document was issued to determine the policy of promoting the development of the island through opening up to the outside world, granting more autonomy in foreign economic activities.

In 1988, the newly minted province was designated the country’s first province-wide special economic zone.

Decades later, on December 18th, 2025, China launched island-wide special customs operations in the Hainan Free Trade Port (FTP), the world’s largest FTP by area. The date echoes the Party’s landmark third plenum of 1978—the starting point of China’s reform and opening up.

As a vast free trade sandbox, Hainan is often compared with Hong Kong and Singapore, but with a much larger geographic and policy scope that enables freer flows of goods, capital, and people. With 74% zero-tariff products and a 15% corporate tax rate for encouraged industries, the FTP is already delivering: in its first 100 days, total import and export value exceeded 80 billion yuan (about 11.6 billion U.S. dollars), up 32.9% year on year; 737 foreign-funded enterprises were added, up 33.5%.

Boao and the FTP are not parallel stories. They are part of the same architecture for openness.

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From Dialogue to Direction

Over 25 years, the BFA’s themes have repeatedly circled crisis and change, reflecting its core mission: to shape direction in an uncertain world.

Themes from the first decade were anchored in regional cooperation and integration, with early conferences framing “Asia’s rise” as both an economic imperative and an opportunity for collective action. For example, the 2001 founding conference was framed around the idea of “The Dawn of Asia,” and subsequent years focused on economic development and cooperation as Asia sought a shared pathway within globalization.

The global financial crisis of 2008 marked a pivotal juncture for the forum.

After Lehman Brothers collapsed, the world plunged into recession. At the 2009 G20 London Summit, leaders agreed on a global crisis response. The BFA, convened shortly thereafter with the theme “Asia: Managing Beyond Crisis,” was widely seen as a “second critical dialogue”—providing an Asian perspective on implementing the summit’s consensus.

At the time, China rolled out its 4 trillion-yuan stimulus package, while other Asian economies adopted expansionary measures. Asia became the primary engine of the global economic recovery, contributing over 45% to global growth in 2010, which indicated the balance of economic influence began to tilt. Boao, in turn, began to move beyond responding to crises toward engaging more actively in setting the agenda.

An interesting detail is that the 2010 BFA’s keyword “recovery” did not refer to the general economic rebound, but rather a green recovery. The then BFA Secretary General Long Yongtu illustrated that low-carbon and energy-saving technologies have created an excellent opportunity for Asian countries and other developing countries to “overtake on the curve” over developed countries. “For instance, in the traditional automotive sector, it will take a long time for developing countries to surpass developed counterparts,” he noted. “But in electric and new energy vehicles, with enough political will and attention, a rapid leap forward is entirely within reach.” And this argument proves solid today.

Over the following decade, BFA’s agenda expanded—from regional integration to innovation, sustainability, and governance. Concepts such as the “community with a shared future” gained traction through repeated articulation at Boao, reflecting an effort to frame globalization in more inclusive and less zero-sum terms.

By 2022, discussions had broadened further into security. Against the backdrop of the pandemic and geopolitical strain, China introduced the Global Security Initiative at the forum—signaling Boao’s growing role as a venue where economic and strategic issues intersect.

Navigating Complexity: What Role for Boao?

At 25, the forum faces a very different world from the one it was born into.

Globalization is no longer expanding in a linear way. Protectionism is rising, geopolitical divisions are sharpening, and multilateral institutions are under strain. As BFA Secretary General Zhang Jun put it this week, uncertainty now outweighs certainty.

In that context, the BFA’s role is no longer just to convene dialogue, but to help anchor a degree of stability in an increasingly uncertain world.

Part of that stability comes from China’s own trajectory. When the BFA was founded in 2001, China’s GDP stood at roughly $1.3 trillion. It has since surpassed $19 trillion—a transformation that former Philippine President Gloria Macapagal Arroyo, one of the forum’s earliest voices, described as contributing to the platform’s relevance.

Today, what matters as much as economic scale is policy orientation: a shift toward higher-quality development, continued openness, and clearer long-term policy signals. For regional partners and global markets alike, this provides a degree of predictability that is in short supply.

That predictability is increasingly institutionalized. Former Chinese Vice Foreign Minister Zhang Yesuì identified four shifts that have quietly redefined Asia’s economic weight: the economic growth rate of Asia has consistently been higher than the world average, making it the engine of global growth; ASEAN overtook the EU and the United States to become China’s largest trading partner in 2020 and has held that position for six consecutive years; the Regional Comprehensive Economic Partnership (RCEP) entered into force across all fifteen member states beginning in 2022; and in 2025, the China-ASEAN Free Trade Area 3.0 upgrade protocol was formally signed. All these point to, as Zhang put it, a deliberate strategic choice by Asian economies to build regional integration as a buffer against systemic risk.

Boao’s role sits at the intersection of these dynamics. It is one of the few platforms where policy signals are clarified early, where regional initiatives are explained across different stakeholders, and where emerging issues—from digital governance to green transition—are discussed before they harden into divisions. In that sense, it functions less as a decision-making body and more as a space for pre-coordination.

That may sound modest, but in today’s environment it matters. When those entrusted with global order play fast and loose and political trust is thin, the ability to sustain dialogue, reduce misreading, and build incremental alignment becomes a form of stability in itself.

Boao will not resolve Asia’s—or the world’s—complexities. But by keeping channels open and expectations aligned, it helps ensure that those complexities remain manageable.

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Chinese Premier Li Qiang on March 5 delivered a government work report to nearly 3,000 deputies to the 14th National People’s Congress at the Great Hall of the People in Beijing, on the opening day of the country’s top legislature’s annual session.

The all-encompassing report carries unusual weight this year as it marks the start of China’s 15th Five-Year Plan—the penultimate policy cycle before Beijing seeks to basically achieve modernization by 2035.

The report briefly touches on the development goals for the 15th Five-Year Plan, but does not elaborate, as the specifics will be laid out in the forthcoming plan outline. Instead, we focus on several new wordings and notable details in the government work report per se across economy, technology, and environmental policy—offering clues to China’s priorities for 2026.

Here are the key takeaways.

1. GROWTH TARGET FOR 2026

The main targets for development this year are as follows:

· GDP growth of 4.5–5 percent, while striving for better in practice

· surveyed urban unemployment rate of around 5.5 percent

· over 12 million new urban jobs

· CPI increase of around 2 percent

· personal income growth in step with economic growth

· a basic equilibrium in the balance of payments

· grain output of around 700 million metric tons

· a reduction of around 3.8 percent in carbon dioxide emissions per unit of GDP

In proposing these targets, we have considered the need to leave some room for structural adjustments, risk prevention, and reform in the opening year of this five-year plan period, so as to lay a solid foundation for delivering better performance in the coming years. The GDP growth target is well aligned with our long-range objectives through the year 2035 and broadly in line with the long-term growth potential of China’s economy. As favorable conditions for achieving this target are in place, all local governments should, in light of local realities, make solid efforts to deliver good outcomes.

First of all, for the first time in decades—excluding the pandemic-hit year of 2020—China has set its GDP growth target below 5 percent in the worst-case scenario. For China’s economic sectors and local governments, however, a lower growth target may in fact provide greater policy space. It gives them more room to defuse local government debt risks, accelerate the shift to new growth drivers, and advance the green transition—all central to China’s push for “high-quality development.”

Second, external pressures continue to play a role. Beginning in April last year, additional tariffs imposed by the United States weighed on China’s economic performance. Premier Li Qiang noted in the report:

From the second quarter on, in response to new developments facing the economy, particularly the impact of U.S. tariff hikes, we fully leveraged policies already in place and introduced a range of more robust measures to maintain employment and economic stability.

With the ongoing tensions in the Middle East pushing up energy prices and adding to global geopolitical uncertainty, China’s growth prospects are also likely to face renewed pressure.

Third, the report once again emphasizes the need for “personal incomes rose in step with economic growth,” reflecting China’s continued commitment to make domestic demand the main engine of economic growth.

For a long time, the growth of household income lagged behind overall economic growth. Under the 12th Five-Year Plan, the country set out to align urban and rural residents’ income growth with economic growth. By the end of the plan in 2015, this goal had been achieved: between 2010 and 2015, national per capita disposable income rose at an average annual rate of 8.9 % in real terms, outpacing GDP growth over the same period.

Fourth, the phrase “striving for better in practice,” which immediately follows the GDP target, is particularly noteworthy, as it signals that China could still aim for a 5 percent growth target if external conditions prove favorable.

Sustained growth remains crucial for the long-range objectives through 2035 that Xi Jinping attaches great importance to. In his own words, the aim is to “substantially grow the per capita GDP to be on par with that of a mid-level developed country.” By international benchmarks, that would require per capita GDP to exceed 20,000 U.S. dollars—roughly double China’s 2020 level.

Back-calculating from the 2035 objectives, and considering a projected annual population decline of approximately 0.20 percent by 2035, China would require an average annual GDP growth of 4.17 percent over the periods of the 15th and 16th Five-Year Plans. Therefore, sustaining growth remains a critical indicator for the country over the coming decade.

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2. DOMESTIC DEMAND

Building a robust domestic market. Taking the expansion of domestic demand as our priority, we should make coordinated efforts to boost consumption and expand investment, tap into every potential for growth in domestic demand, and better leverage the strengths of our enormous market.

We will continue to advance special initiatives to boost consumption. We will adopt measures to stimulate the internal drive for household spending as well as polices to boost consumption, so as to propel further consumption growth. We will formulate and implement an income growth plan for urban and rural residents and roll out a range of practical measures to boost the earnings of low-income groups, increase property income, and refine the remuneration and social security systems.

In laying out its major tasks for 2026, the government work report places “building a robust domestic market” in the very first paragraph. This emphasis echoes the communique of the fourth plenum convened last October, which reaffirmed that expanding domestic demand remains a strategic priority. It also aligns with last year’s government work report, which positioned domestic demand as the main engine and stabilizing anchor of economic growth. It also signals China’s determination to move away from the state-led investment model that fueled China’s rapid growth in the early 21st century.

To this end, the 2026 report outlines a broad suite of demand-side policies. For the first time, it proposes “formulating and implementing an income growth plan for urban and rural residents,” marking a transition from abstract ideas toward specific policy behaviors designed to expand residents’ purchasing power. By coupling measures to increase household income with direct policies to stimulate consumption, Beijing is moving beyond investment and export, two of the three major economic drivers, in order to cultivate more resilient domestic demand.

To promote the expansion and upgrading of goods consumption, 250 billion yuan in ultra-long special treasury bonds will be earmarked for consumer goods trade-in programs, and refinements will be made to the implementation mechanisms for relevant policies. A special fiscal-financial coordination fund of 100 billion yuan will be created to facilitate domestic demand expansion through combined measures such as loan interest subsidies, financing guarantee, and risk compensation. We will broaden the coverage of loan interest subsidies for personal consumers and service entities, while also raising ceilings and extending terms.

The consumer goods trade-in programs last year helped propel retail sales of targeted categories to 2.61 trillion yuan ($373 billion); this year the government is allocating 250 billion yuan in ultra-long special treasury bonds to further support this initiative and expand its reach.

Crucially, financial policy is being marshaled more directly in the service of domestic demand. For the first time, the report said that a special fiscal-financial coordination fund of 100 billion yuan will be created to encourage consumption.

These measures align with broader trends in China’s consumption landscape, where policymakers have noted an increasing contribution from services and upgraded consumption, as residents allocate a larger share of their income to leisure, travel, and quality‑of‑life goods and services.

3. NEW GROWTH DRIVERS

We will nurture emerging industries and industries of the future.

We will launch industrial innovation projects, encourage central government enterprises and other SOEs to take the lead in making application scenarios more accessible, and foster emerging pillar industries such as integrated circuits, aviation and aerospace, biomedicine, and the low-altitude economy. To nurture industries of the future such as future energy, quantum technology, embodied AI, brain-computer interfaces, and 6G technology, mechanisms will be put in place to increase funding and share risks in these fields.

We will roll out mechanisms to help grow SMEs that use specialized and sophisticated technologies to produce novel and unique products, and also nurture unicorn companies. We will make full use of the National Venture Capital Guide Fund and redouble efforts to develop angel investment and venture capital investment. Government investment funds should play an exemplary role as patient capital and help more startups grow into leading technology enterprises more quickly.

The government has outlined a broad division of responsibilities between state-owned and private enterprises across emerging and future industries. SOEs are expected to take the lead in capital-intensive, cross-sector projects, while private companies are incentivized to engage in technology-driven, market-oriented industries through risk-sharing arrangements and preferential investment policies. Government investment funds are expected to function as patient capital, backing long-term investment in future industries.

We will create new forms of smart economy.

We will advance and expand the AI Plus Initiative. We will promote faster application of new-generation intelligent terminals and AI agents and encourage large-scale commercial application of AI in key sectors and fields, so as to foster new forms and models of AI-native business. We will support the development of open-source AI communities and build a vibrant open-source ecosystem.

We will launch new infrastructure projects on hyper-scale intelligent computing clusters and coordinated development of computing capacity and electricity supply. We will step up integrated monitoring and distribution of computing capacity across the country and support the development of public cloud services. The development of satellite internet will be expedited, and an upgraded 5G Plus Industrial Internet Initiative will be introduced. We will extensively develop and utilize data resources, refine the foundational systems for data as a production factor, and build high-quality datasets. Steps will be taken to improve AI governance.

Against the backdrop of a global AI arms race, this year’s government work report introduces the concept of a “smart economy” for the first time, aiming to establish a full-scale ecosystem for the AI industry, encompassing commercial applications, infrastructure building, R&D support, and regulatory oversight. The remarkable advances in AI and robotics showcased over the past two years on the Spring Festival Gala stages reflect the dynamics of this evolving environment, and the outlook for China’s AI sector is set to shift dramatically over the coming year.

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4. SCI-TECH SELF-RELIANCE

We will promote integrated development of education, science and technology, and talent. We will institute sound, integrated mechanisms on this front to boost coordination across development plans, policies, resources, and evaluations. We will improve mechanisms for ensuring that talent training programs are geared to economic and social development needs, advance reforms of higher education institutions on a categorized basis, and adjust academic disciplines and majors as needed. We will launch a new round of initiatives to develop world-class universities and academic disciplines, build national centers for interdisciplinary studies, and do more to cultivate top-tier homegrown innovators.

In the third plenum resolution, China's latest reform roadmap published in 2024, the segments of education, science and technology, and talent were presented in the same paragraph, allegedly for the first time in such a Party or policy document. The government work report clearly followed the same pattern, underscoring the importance of integrating the three aspects to advance sci-tech development.

Last year, when meeting with members of the China Democratic League and the China Association for Promoting Democracy from the education sector who attended the CPPCC National Committee session, Xi also emphasized the importance of advancing these three areas in a coordinated manner.

From the perspective of policy design, the core idea is to establish a more effective coordination mechanism, strengthening alignment in planning, policy coordination, resource allocation, and evaluation systems. The goal is to build a more integrated framework that links talent cultivation, scientific research, and industrial development. Through this approach, China is attempting to construct a more comprehensive national innovation system to support technological progress, industrial upgrading, and long-term economic development.

We will pursue full integration between technological and industrial innovation. We will develop Beijing (the Beijing-Tianjin-Hebei region), Shanghai (the Yangtze River Delta), and the Guangdong-Hong Kong-Macao Greater Bay Area into international centers for scientific and technological innovation and turn them into world-class innovation engines. The principal role of enterprises in innovation will be reinforced. We will back leading high-tech enterprises in spearheading the creation of innovation consortia and undertaking more major national science and technology projects.

The concept of building world-class innovation engines appears in the government work report for the first time. Such innovation hubs typically bring together leading universities, research institutions, and high-tech enterprises. Through high-level research and collaboration, they generate original scientific breakthroughs and act as key sources of technological innovation.

These hubs also benefit from strong clustering effects. When top talent, capital, research institutions, and companies are concentrated in a specific region, they can form a vibrant innovation ecosystem that significantly improves the efficiency of technological development.

For example, Beijing has strong advantages in basic research, with institutions such as Tsinghua University, Peking University, and numerous national research institutes. Shanghai benefits from a comprehensive industrial base and strong financial resources that support the commercialization of scientific achievements. The Guangdong-Hong Kong-Macao Greater Bay Area, meanwhile, combines international connectivity with a robust manufacturing base, creating favorable conditions for innovation and industrial application.

Amid the new round of technological revolution, China seeks to cultivate its own Silicon Valleys—plural.

5. GREEN TRANSITION

Guided by our goals of achieving peak carbon emissions and carbon neutrality, we will make coordinated efforts to cut carbon emissions, reduce pollution, pursue green development, and boost economic growth, while strengthening our green development drivers.

Although they are mentioned side by side in the report, carbon reduction and pollution control now carry different degrees of urgency in China’s current environmental governance. Carbon reduction and the broader green transformation of the economy have been elevated to a higher priority. In fact, Xi Jinping made a similar point during the formulation of the 14th Five-Year Plan: “During the 14th Five-Year Plan period, China’s ecological civilization development has entered a crucial stage in which carbon reduction becomes the key strategic priority.” During the 13th Five-Year Plan period, China’s environmental policy focused primarily on pollution control, while the 14th Five-Year Plan has shifted the strategic emphasis toward carbon reduction. The upcoming 15th Five-Year Plan will therefore continue to advance this major systemic undertaking.

We will boost the green and low-carbon economy. We will improve the policies for promoting green and low-carbon development, launch initiatives for upgrading quality, lowering costs, and reducing carbon emissions in key industries, and drive forward the development of zero-carbon industrial parks and factories. We will set up a national fund for low-carbon transition and foster new growth drivers such as hydrogen power and green fuels. We will exercise tight and effective regulation over energy-intensive and high-emission projects, accelerate efforts to phase out outdated production capacity, and support innovation and application of green and low-carbon technologies and equipment. The systems for total resource consumption control and comprehensive resource conservation will be improved, and recycling of recyclable materials will be stepped up.

We will actively yet prudently work toward peaking carbon emissions and achieving carbon neutrality. We will implement the system of controlling both the total amount and intensity of carbon emissions and refine the systems for carbon emissions statistics and accounting as well as carbon footprint management. The coverage of the China Carbon Emission Trade Exchange will be expanded. An outline of the plan for strengthening China’s energy sector will be formulated. We will build a new electric power system, accelerate the construction of smart grids, develop new types of energy storage, and promote more extensive use of green electricity. We will also promote clean and efficient use of fossil fuels.

The series of measures outlined in the report this year constitutes essential steps for China to achieve its carbon peaking target by 2030.

The proposal to establish a National Low-Carbon Transition Fund, introduced for the first time, reflects the government’s intention to support industrial transformation through financial instruments. Mobilizing long-term capital to support low-carbon technologies and green infrastructure represents a stronger form of policy intervention and could help address the financing challenges associated with large-scale energy transitions.

Meanwhile, the development of hydrogen energy and green fuels as new growth sectors indicates that China is seeking new economic growth opportunities through technological innovation and industrial upgrading within the green transition. China has already achieved notable success in the development of lithium batteries and electric vehicles, building a relatively complete industrial chain and gaining strong global competitiveness. By contrast, Japan moved earlier to explore hydrogen fuel cell vehicles as part of its clean energy strategy and has carried out extensive technological experimentation. However, due to the high cost of hydrogen transportation and the significant investment required for refueling infrastructure, hydrogen vehicles have not yet achieved widespread adoption.

Nevertheless, investing in hydrogen technologies remains hopeful. It could not only foster new industrial growth opportunities but also provide additional technological options for the future energy system.

Strict control over high-energy-consuming and high-emission projects will help accelerate the elimination of outdated production capacity and optimize industrial structure. At the same time, accelerating the construction of smart grids and developing new energy storage technologies will improve the utilization efficiency of renewable energy and address the integration challenges of wind and solar power, thereby facilitating the transition of China’s energy structure from traditional fossil fuels toward cleaner energy sources.

Overall, China is promoting the development of a green and low-carbon economy through institutional reforms, industrial upgrading, and energy system transformation. These efforts aim not only to advance the goals of carbon peaking and carbon neutrality, but also to support broader economic restructuring and high-quality development.

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Tan Yixiao is a Xinhua journalist. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn

Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

For our documentary on the 15th Five-Year Plan:

As Sir Keir Starmer strolled through the Forbidden City, the six-century-old monument of Chinese dynastic power, social media was abuzz with snarky comparisons to Donald Trump’s 2017 visit, when the U.S. president was personally escorted by Xi Jinping through the same halls and courtyards with the full pomp of a dignitary. Armchair critics eagerly piled on Starmer’s relatively low-key presence: no crowd roped off, no prominent leader at his side.

Right in front of the Hall of Supreme Harmony, where Starmer paused to take in the grandeur, Trump had once questioned China’s claim to antiquity: “I guess the older culture, they say, is Egypt with 8,000.” Xi replied: “Egypt is a bit more ancient. But the only civilization that continues uninterrupted is China.” Earlier that day, during formal talks ahead of Starmer’s visit to the Forbidden City, Xi struck a similar historical chord with the British prime minister, invoking what he called a “grand view of history.”

Contrary to what online ridicules imply, Beijing rolled out the full red-carpet treatment for the first British leader to visit China in eight years, who were successively received by the top three figures in Chinese politics: President Xi Jinping, Premier Li Qiang, and National People’s Congress Chairman Zhao Leji. The formal one-on-one with President Xi, originally scheduled for 40 minutes, extended to 80 minutes, yielding productive exchanges that officials on both sides described as “warm and constructive.” It was on this occasion that Xi said to Starmer:

“China stands ready to work with Britain in upholding a grand view of history, rising above differences, and promoting mutual respect, in order to translate the promising potential of cooperation into remarkable accomplishments, open up new vistas for China-Britain relations and cooperation to better benefit both the two peoples and the world at large.”

中方愿同英方秉持大历史观，超越分歧、相互尊重，把中英合作“大有可为”的潜力转化成“大有作为”的实绩，为中英关系与合作开新局，既造福两国人民，也惠及世界。

(Note: In Xinhua’s English readout, the phrase was rendered as “see history from a broader perspective.” While not inaccurate, the translation lacks the rhetorical weight of the original phrasing.)

The wording is particularly unorthodox in a diplomatic setting. Xi Jinping brought up the concept of the “grand view of history” in February 2021, when urging a room full of Party seniors to study history ahead of the upcoming centenary of the Communist Party of China. At the conference, he remarked:

“Efforts should be made to educate and guide the entire Party to take into account China’s pursuit of national rejuvenation strategy amid global changes of a scale unseen in a century, develop a grand view of history, examine the dynamics of change and identify historical patterns from the long course of history, the tide of the times, and the global landscape, formulate corresponding strategies and policies, and advance our work with a holistic, foresighted, and innovative approach.”

要教育引导全党胸怀中华民族伟大复兴战略全局和世界百年未有之大变局，树立大历史观，从历史长河、时代大潮、全球风云中分析演变机理、探究历史规律，提出因应的战略策略，增强工作的系统性、预见性、创造性。

As a distinctly Party terminology rooted in Marxist ideology, the “grand view of history” has since been rarely invoked in public, even when the top leader addressed Party cadres. To deploy such an ideological term during a meeting with a visiting foreign head of government was, therefore, a highly calculated move, coded with subtext.

On the flight to Beijing, Starmer cautioned that Sino-British relations must not veer from a “golden age” to an “ice age.” But the remarks about a “grand view of history” appeared to reflect Beijing’s perspective on that trajectory—namely, London’s abandonment of its commitment to the “golden age” made a decade ago.

When Xi paid his first state visit to Britain in 2015, it was just over a decade after the two countries had established a “comprehensive strategic partnership.” At the time, Britain was China’s second-largest trading partner and the top investment destination in Europe. London had positioned itself as a trailblazer in finance, becoming the first Western nation to issue sovereign RMB bonds and the earliest major Western power to join the Beijing-initiated Asian Infrastructure Investment Bank. Barbara Woodward, then British ambassador to China, announced that the visit would establish “a global partnership for the 21st century and ushering in a golden decade in China-UK relations.”

The ensuing “golden decade,” however, played out in precisely the opposite direction. Months after Trump’s 2017 Forbidden City tour, Washington launched the first round of the trade war on China. Britain, following Washington’s footsteps in containment strategy, adopted an increasingly adversarial posture toward Beijing on issues such as Hong Kong riots, Xinjiang cotton, “derisking” in supply chains, and technology blockade against China, effectively dismantling the shared vision for deepening bilateral ties.

Today, as the U.S. casts covetous eyes on Greenland, denigrates the memory of fallen British soldiers, and threatens a tariff onslaught against the transatlantic partnership under the so-called “Donroe Doctrine,” London’s move to mend ties with Beijing feels less like a strategic pivot than a desperate hedge against “Discordia Americana.”

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From Beijing’s standpoint, this sudden diplomatic warm-up appears woefully lacking in a genuine long-term historical vision. Britain’s overtures look like the latest policy oscillation driven by the fickle whims of Washington. It naturally raises a question: should a less idiosyncratic president enter the White House in 2029, would No. 10 once again find a return to an “ice age” with China acceptable?

This skepticism runs even deeper. A leading Chinese scholar on U.S. politics once likened the U.S.-Europe relationship to a marriage: they may “quarrel at the headboard but they reconcile at the foot of the bed.” This Chinese idiom captures the prevailing sentiment in Chinese strategic circles: for all the recent frictions, the West remains an exclusive, if temporarily dysfunctional, club.

While Western politicians such as Mark Carney fret over a “rupture” in the post–Cold War order, for much of the Global South, there is no sign of a break—only the continuation of a U.S.-led hegemony under which they have long lived. The “new world order” is simply a case of a new king starting to abuse nobles the same way he once abused commoners. The nobles now cry out against him as a tyrant, not because they find the hierarchy unjust, but because they have lost their prerogatives to act with impunity.

The “grand view of history” may well serve as a pointed reminder to European leaders not to succumb to amnesia in the wake of Trumpian shocks. Europe was never Washington’s equal, and Beijing has no intention of serving as leverage for Europe to buy its way back into a “liberal” past.

Starmer’s visit laid bare this unvarnished economic realism. Landing in Beijing with a retinue of business titans, he tweeted that he aimed to “deliver for the British people.” To be sure, Beijing welcomed the push to expand trade links, extending agreements on Scotch whisky, pharmaceuticals, and visa-free travel—deals that have understandably drawn Trump’s ire. However, China expects Britain to be more than trade-obsessed “strangers at the gate.”

What Beijing truly seeks is for Britain to act as a “major power” in global affairs, a term Xi repeatedly used during his 2015 state visit. He used it again last Thursday, albeit in guarded terms: “International law can only work when all countries obey it, and major powers must lead by example, or the world will return to the law of the jungle.”

China does not seek an ally in Britain; it instead asks for a partner with independent strategic thinking, one capable of injecting certainty into the increasingly volatile global system. Even that modest expectation, however, appears to overshoot Britain’s ambitions. During the decade once heralded as the “golden decade,” Britain seemed to have voluntarily surrendered the very “major power” identity Beijing invokes.

The self-demoting nature of Britain’s foreign policy diverges sharply from how most Chinese view the island country’s historical role—something that even eludes the British themselves. The Britain-launched Opium War of 1840 is widely regarded as the starting point of China’s “century of humiliation.” The overarching goal of the Party, the “great rejuvenation of the Chinese nation,” aims to restore China’s international standing to what it was before the arrival of British gunboats. Referred to in Chinese textbooks as “the empire on which the sun never sets,” Britain’s colonial legacy is not only reflected in Chinese artifacts looted and displayed in the British Museum, but also continues to manifest in China-India border disputes and unrest in Hong Kong.

Yet China sees Britain not merely as a once-formidable power that left an indelible mark on its modern history and geopolitical landscape, but also as an autonomous, pragmatic nation that has shown historical foresight in global engagement. Britain was the first Western power to recognize the People’s Republic of China, in the second year of its founding to be exact—three decades before the U.S. followed suit. That decision remains, in Chinese eyes, a rare demonstration of strategic independence and pragmatism for an empire in decline.

As Winston Churchill once put it, “the farther backward you can look, the farther forward you are likely to see.” This may now be a rare, and perhaps final, window for Britain and other European nations, which have now awakened to the grim reality that the American-led “liberal order” neither embraces genuine liberal values nor provides a predictable order. They have an opportunity to assert themselves as a truly autonomous “pole” in an emerging multipolar world, rather than simply dancing to America’s capricious whims with diplomatic flip-flops.

When Donald Trump was in the Forbidden City in 2017, he failed to grasp or chose to disregard the subtle historical metaphor conveyed by his Chinese host: the imperative to avoid a “clash of civilizations” through dialogue and mutual respect. Instead, within months, his administration dragged the whole world into an era of intensifying U.S.-China confrontation, though the way things went afterwards was a far cry from the Cold War in living memory. How Sir Keir Starmer makes out of the “grand view of history” during his own walk through those same imperial halls may yet prove to be a critical moment—one that future historians will cite with either admiration or commiseration when passing verdict on the fate of Britain and Europe.

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Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

Tian Zijun is a Xinhua journalist based in Guangxi Zhuang Autonomous Region. Email: jeremytzj@qq.com

It came out as a stark turn of events, as the United States just approved the largest arms sale to Taiwan in history less than a month ago, to which Beijing swiftly responded by conducting a Taiwan-encircling military drill that pushed the exercise areas closer to the island than ever before.

It is unclear whether Trump has realized that Taiwan no longer figures prominently in the strategic formula laid out under the “Donroe Doctrine,” or whether he was instead hoping to gain leverage in tariff negotiations with Taiwan (on January 12, The New York Times unexpectedly reported that the Trump administration is nearing a trade deal with Taiwan). In any case, his remarks have once again sparked speculation about a renewed “abandoning Taiwan” line in Washington.

Many assume that the United States and Taiwan have long been strategically and ideologically synchronized. Not true. Washington and Taipei have been through some rough patches ever since Generalissimo Chiang Kai-shek, soundly defeated in China’s civil war, dragged his demoralized Nationalist forces to the island in 1949. Within the U.S. government and the American strategic community, calls to “abandon Taiwan” have repeatedly surfaced.

First Wave: After the “Loss of China”

The first wave of “abandoning Taiwan” debates emerged between 1949 and the outbreak of the Korean War. Policy arguments over whether to deploy troops to Taiwan to “save the Nationalists” unfolded both within the U.S. administration and between the executive branch and Congress. In 1949, the U.S. government lost confidence in the Nationalist regime, which had suffered repeated defeats in the face of Communist forces. In a memorandum to the National Security Council dated August 4, 1949, Secretary of State Dean Acheson explicitly argued that the Nationalist authorities were corrupt and incompetent, that the “fall” of Taiwan was inevitable, and that the State Department had ruled out the possibility of using U.S. forces to “defend” the island.

On October 6, 1949, the U.S. State Department, in a report for consideration of the National Security Council, argued that if U.S. forces were used to “defend” Taiwan, this would only strengthen nationalist forces on the Chinese mainland and thereby endanger U.S. interests throughout Asia.

In late December 1949, the National Security Council formally adopted the State Department’s position and decided against taking military action to “assist” Taiwan. On January 5, 1950, President Truman issued a public statement saying that, in keeping with the Cairo Declaration and Potsdam Proclamation, Taiwan was surrendered to Chiang Kai-shek, and for the past four years the United States and other Allied Powers had accepted the exercise of Chinese authority over the island.

Truman further declared:

“The United States has no predatory designs on Formosa, or on any other Chinese territory. The United States has no desire to obtain special rights or privileges, or to establish military bases on Formosa at this time. Nor does it have any intention of utilizing its Armed Forces to interfere in the present situation. The United States Government will not pursue a course which will lead to involvement in the civil conflict in China.”

“Similarly, the United States Government will not provide military aid or advice to Chinese forces on Formosa. In the view of the United States Government, the resources on Formosa are adequate to enable them to obtain the items which they might consider necessary for the defense of the island.”

Subsequently in 1950, with the outbreak of the Korean War, where “Red China” and the United States confronted each other directly on the battlefield, and the rise of McCarthyism featured by massive anti-leftist political persecution, the U.S. government started to view Taiwan through a different lens. Taiwan came to be regarded as a Western bridgehead in the Asian theater of the Cold War to contain the “red fever,” and Washington advanced the so-called “undetermined status of Taiwan.” From that point on, calls to “defend” Taiwan became the dominant view both inside and outside the U.S. government.

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Second Wave: Nixon’s Grand Realignment

The second wave of “abandoning Taiwan” debates emerged in the mid- to late 1960s. As the U.S.-China-Soviet triangular relations began to shift, the strategic idea of aligning with China to balance the Soviet Union gained traction in Washington, and policymakers started to re-examine the containment policy toward China that had lasted more than a decade.

The 136 Sino-U.S. ambassadorial talks held between 1955 and 1970 made Washington keenly aware that the Taiwan question was a precondition for any attempt to ease relations with China. For instance, in the early 1960s, when Chiang Kai-shek was actively plotting to launch a counteroffensive against the mainland, the Chinese representative stated clearly during the Warsaw talks that the day Chiang attacked the mainland would be the day the Chinese people liberated Taiwan. In the end, the U.S. side explicitly indicated that if Chiang Kai-shek attempted to take action, Beijing and Washington would join together to stop him.

In 1966, James W. Fulbright, chairman of the Senate Foreign Relations Committee, held a hearing on China policy in which he sharply criticized the existing U.S. foreign policy as being seriously out of touch with international reality. When addressing the China question, he argued that in fact there were not “two Chinas,” but only one--the Chinese mainland.

In July 1971, during his talks with Chinese Premier Zhou Enlai, U.S. National Security Advisor Henry Kissinger stated that the United States did not support “two Chinas” or “one China, one Taiwan” as solutions for Taiwan’s political future, and that once the United States withdrew its forces, Taiwan would have no choice but to accept some form of unification.

Chiang Kai-shek himself had a clear understanding of this. In his diary in early 1970, he wrote:

“America’s sinister scheme toward China, the so-called ‘one China, one Taiwan’ policy--the ‘one Taiwan’ they speak of is meant to create a Taiwan of ‘Taiwanese,’ not a Taiwan of the Republic of China. This is clear proof that they will not be satisfied until our state is destroyed.”

In 1972, during President Nixon’s visit to China, the United States once again reaffirmed its position that it recognizes there is only one China and that Taiwan is part of China. Washington stated that it would no longer advance the notion that Taiwan’s status is undetermined and would not support “Taiwan independence.”

The Shanghai Communiqué, signed during Nixon’s 1972 visit to China, provided the framework of the U.S. “one China policy.” In the communiqué, the U.S. side declared:

“The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China. The United States Government does not challenge that position. It reaffirms its interest in a peaceful settlement of the Taiwan question by the Chinese themselves.”

This wording reflects a kind of diplomatic wisdom in which Beijing and Washington “seek common ground while reserving differences. However, the U.S. has later on sought to blur the one-China principle by placing emphasis on the particular meaning of the word “acknowledges.”

But it is worth noting that in 1980, the United States abolished the “Sino-American Mutual Defense Treaty” signed between Washington and Taipei in 1954. The treaty stipulated:

“Each Party recognizes that an armed attack in the West Pacific Area directed against the territories of either of the Parties would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional processes.”

Washington’s Taiwan Relations Act in 1979, enacted to replace the “mutual defense treaty”, says it is the policy of the U.S. “to consider any effort to determine the future of Taiwan by other than peaceful means, including by boycotts or embargoes, a threat to the peace and security of the Western Pacific area and of grave concern to the United States.”

In the legal sense, Washington had already abandoned a formal defense commitment to Taiwan, while carefully preserving a posture of strategic ambiguity. What it chose to keep was not a binding security guarantee, but a flexible instrument of leverage in its broader China policy.

In declassified White House documents at the Reagan Presidential Library, President Reagan instructed his cabinet members to strictly abide by the joint communiqués between China and the United States. When an envoy acting as intermediaries for then-Taiwan leader Chiang Ching-kuo repeatedly extended “olive branches,” Reagan and his staff were extremely cautious, turning down multiple requests for meetings. Even in correspondence with Chiang, messages were often delivered only orally, and Reagan ordered that no hard copies of those oral messages be left in Chiang’s possession.

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Third Wave: The Last China-U.S. Honeymoon

The third wave of “abandoning Taiwan” debates began in the early 21st century. China’s accession to the WTO, the outbreak of the Afghanistan War, and Washington’s unprecedented focus on the global war on terror led the United States to view China as more of a partner than a strategic rival for nearly a decade. As China-U.S. relations entered a “honeymoon period,” some figures in the American strategic community, working from the assumptions that China-U.S. cooperation would continue to deepen and that cross-Strait unification was an unstoppable trend, argued that the United States should “discard” Taiwan, which they saw as a burden hampering further improvement in relations with Beijing.

In November 2009, retired Admiral Bill Owens, former Vice Chairman of the Joint Chiefs of Staff, wrote that in dealing with China, the United States should abandon a posture of hedging, competition, and suspicion, and instead choose cooperation, openness, and trust. To that end, he argued, Washington needed to reassess the Taiwan Relations Act, a piece of outdated legislation that provides the legal basis for continued arms sales to Taiwan, and that ending such arms sales could open new space for the development of China-U.S. relations.

Charles Glaser, a professor at George Washington University, argued that abandoning its commitment to Taiwan would remove the most obvious and most contentious flashpoint in China-U.S. relations and pave the way for sustained improvement over the coming decades. Charles Freeman, a senior American diplomat who once served as Nixon’s translator during the 1972 visit to Beijing, similarly stated in multiple presentations that as cross-Strait relations gradually eased and cooperation deepened, the prospect of peaceful unification was becoming more likely, and that the United States, in pursuit of its long-term strategic interests, should view this trend rationally and begin to accept it.

Similar notions continued to circulate in Washington, repeatedly challenging the mainstream position that favored maintaining the status quo. This round of policy debate, triggered by the “abandoning Taiwan,” failed to dislodge the dominance of the status quo camp within the U.S. policy community on cross-Strait issues. Nonetheless, it contributed a degree of rational and pragmatic reflection that informed the Obama administration’s approach to the Taiwan Strait.

Toward the Fourth Wave?

In December 2016, then U.S. President-elect Donald Trump held a phone call with Taiwan leader Tsai Ing-wen, who extended his “congratulations.” Trump was thereby regarded as the first U.S. president or president-elect since 1979 to speak directly with a Taiwan leader, a move that immediately drew ire from Beijing.

In May 2020, as Tsai began her second term as the leader of the Taiwan authorities, U.S. Secretary of State Mike Pompeo bluntly issued a public statement congratulating her and explicitly referring to her as the “President of Taiwan,” setting a dangerous precedent again. In May 2024, under the Biden administration, Secretary of State Anthony Blinken released a similar statement.

This series of actions by the U.S. not only went against the commitments Washington made in the China-U.S. Joint Communiqués, but also, against the backdrop of the international community’s broad adherence to the one-China framework, repeatedly sent misleading political signals to pro-independence cliques in the Taiwan authorities.

These moves emboldened separatist forces on the island and heightened the risk of strategic miscalculation. Taking advantage of such signals, the Taiwan authorities controlled by the pro-independent DPP continued to push forward an incremental independence agenda and political provocations, leading to the rapid deterioration of cross-Strait relations. The tensions were then reversed and portrayed as evidence that the mainland was changing the status quo or strengthening military options, driving the Taiwan Strait into a classic spiral of external interference, escalating provocation, and growing security instability.

In 2021, Admiral Philip Scot Davidson, commander of the United States Indo-Pacific Command, said at the Congress that Taiwan is clearly one of China’s ambitions, and “the threat is manifest during this decade, in fact, in the next six years.” The “Davidson Window” that implies Beijing's becoming capable of developing sufficient capabilities to take control of Taiwan was heavily hyped. In 2022, Speaker of the House Nancy Pelosi’s opportunistic visit to Taiwan pushed “protecting Taiwan” sentiment in the United States to a new peak.

Despite the rising great-power tensions, the logic of “abandoning Taiwan” started to gain ground in light of the new developments of events.

Multiple war games conducted by American think tanks indicated that the United States would suffer heavy losses in the event of a Taiwan Strait conflict. This prompted senior American policymakers to become increasingly aware of the risks involved.

In January 2024, President Biden explicitly stated that “the United States does not support the independence of Taiwan.” Trump’s recent remarks are highly likely to reflect a pragmatic and transactional approach toward the Taiwan issue, and may also signal the emergence of a fourth wave of discourse in the U.S. advocating the abandonment of Taiwan.

A few scholars also began to warn against the risks of strategic miscalculation and a crisis spiral between China and the United States. They began to raise more sober questions, such as whether a “mainland attack on Taiwan” is really that imminent, and whether Taiwan genuinely involves U.S. core interests, and whether the American public is actually prepared for a war with China.

Senior fellow of the Quincy Institute, Michael Swaine, and RAND Corporation political scientist, Michael Mazarr, are the main representatives of this latest wave of such thinking. Their core proposal is gradual disengagement from Taiwan. They stress that Taiwan is not a core U.S. interest; American policy, as they argue, should shift its focus toward deterring independence.

In a September 2025 report titled “Taiwan: An Important but Non-Vital U.S. Interest”, Swaine offers a sober reassessment of Taiwan’s value to the United States from four perspectives: strategic value, economic value, credibility trap, and moral argument. He criticizes the rationales long used in the U.S. strategic community to justify playing the Taiwan card. Swaine asserts that Taiwan is an important but not vital U.S. interest. It is not an interest that justifies the United States going to war with China to defend.

Doug Bandow, a senior fellow at the Cato Institute, also contends that while occupying Taiwan would help advance the mainland’s military capabilities, it would not fundamentally alter America’s overall strategic position. The greatest danger facing the United States is war itself, not the mainland’s “takeover” of Taiwan.

From Truman’s era of no U.S. troops stationed in Taiwan, to the Cold War peak of “defending Taiwan,” and then to the cyclical waves of debate over “abandoning Taiwan,” U.S. policy toward Taiwan has never been rooted in a sincere commitment. There have always been good reasons for this approach, as policy has oscillated between realist calculation and ideological rhetoric. President Trump’s recent remarks merely brought into the open what previous administrations preferred to keep behind closed doors: the United States owes no security obligation to Taiwan.

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Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency.

The fact that this piece appeared in Qiushi is in itself a noteworthy policy signal. Far from a typical policy outlet, Qiushi serves as the Party’s premier theoretical journal publication and is directly overseen by the Communist Party of China Central Committee. Its predecessor, Red Flag (红旗), was launched by Mao Zedong in 1958 with a distinctly revolutionary style. It was renamed Qiushi (求是) in 1988 by Deng Xiaoping, who personally inscribed its title—a symbolic gesture underscoring the Party’s commitment to applying the principle of “seeking truth from facts (实事求是)” to update and revamp the traditional socialist framework in step with the Deng-initiated reform and opening-up drive.

Today, Qiushi often publishes exclusive excerpts of Xi Jinping’s remarks delivered at key political meetings. It also serves as a platform for policy commentary that blends official cues with academic analysis, offering insight into China’s governance approaches and broader policy priorities. Its choice of topics and framing of arguments typically reflect policy consensus forged through extensive deliberation between policymakers and the academic community. The prominence given to real estate in Qiushi’s first issue of the year is, therefore, highly symbolic. Beyond directly addressing market concerns, it signals that the top leadership remains committed to stabilizing expectations and ensuring the orderly functioning of the property market.

The article is authored by Zhong Tingjun, who is the deputy director of the Policy Research Center at the Ministry of Housing and Urban-Rural Development and also a PhD supervisor at the Chinese Academy of Social Sciences. This dual background in policy research and academia, in turn, shapes the role the article is intended to play: grounded in concrete housing issues—ranging from affordable housing programs that provide low-cost units to those in need, to urban renewal initiatives aimed at modernizing city districts, and to the renovation of aging residential communities—the piece is less a practical policy manual than an officially authorized effort to explain and clarify the structural changes taking place in China’s real estate sector.

China’s old real estate model has obviously reached its endpoint. But how will the government adjust a sector that once powered the country’s economic growth and now struggles to achieve a “soft landing” in the coming year? One could take cues from this piece of Qiushi article.

Signal One: Official Jettison of the Old Real Estate Model

The very title of the article—“Improving and Stabilizing Expectations in China’s Real Estate Market”—points to the core and most persistent challenge in China’s current property policy framework. Policy support has been steadily intensified since the central government explicitly called for efforts to “reverse the downturn of and stabilize the real estate market” in 2024. Nevertheless, at the national level, this goal is far from attained.

It is against this backdrop that the article delivers an unambiguous assessment of where China’s real estate sector now stands. It identifies three structural shifts that together define the current phase of the market.

First, overall housing shortages have given way to basic balance in total supply, accompanied by structural shortages—particularly in affordable housing—leaving new urban residents and young people facing relatively heavy housing burdens. Second, residents’ demand has broadly evolved from concerns about “having a roof over their heads” to “whether the quality of housing is good enough,” with a growing desire for better living standards. Third, the traditional model of “high debt, high leverage, and high turnover” championed by developers is no longer sustainable; the industry must now transition toward low-debt, low-leverage, and reasonable-return operations, upgrading from quasi-manufacturing to integrated “product-service-operation” models.

一是住房总量短缺转为总量基本平衡、结构性供给不足，特别是保障性住房相对不足，新市民、青年人住房负担较重。二是居民需求总体上从“有没有”向“好不好”转变，对提升居住品质愿望更为强烈。三是房地产企业的“高负债、高杠杆、高周转”模式难以为继，亟待向低负债、低杠杆、合理回报的模式转变，由“类制造业”升级为“产品—服务—运营”一体化。

Building on these observations, the article delivers a candid assessment：

In certain projects and cities, localized oversupply has emerged, triggering pronounced declines in property sales and prices. These corrections, in turn, have exerted significant spillover effects—weakening demand in the real economy, eroding asset values on balance sheets, and placing strain on the liability side of financial institutions.

部分项目、部分城市出现局部供过于求情形，导致房地产销售和价格出现较大幅度回落，对实体经济的需求端、资产负债表的资产端和金融机构的负债端产生了较大影响。

Recent official data help put this diagnosis in context. According to China’s National Bureau of Statistics, real estate development investment fell 15.9% in the first 11 months of 2025. Over the same period, new home sales by floor area declined 7.8%, while sales value dropped by a sharper 11.1%.

The broader demand backdrop remains subdued. China’s retail sales of consumer goods went up 4% year-on-year in the first 11 months of 2025, a modest increase from 3.5% in the same period of 2024, but still well below the 7.2% growth recorded in 2023. Analysts widely interpret the prolonged weakness in China’s property market as a factor weighing on household confidence and consumption, underscoring how developments in real estate continue to reverberate across the macroeconomic landscape.

Beyond documenting the trends, the article draws on a comprehensive set of core indicators to reach a firm and unequivocal conclusion:

Whether viewed through metrics such as household homeownership rates, price-to-income ratios, or price-to-rent ratios—or through facts like the share of real estate-related loans in total bank lending, the proportion of real estate revenues in local government fiscal income, and the weight of housing assets in household wealth—it is abundantly clear that the old real estate development model has reached its limits.

无论从家庭住房拥有率、房价/收入比、房价/租金比等指标看，还是结合房地产相关贷款占银行贷款比重、房地产业相关收入占地方财政收入比重、居民住房财富占家庭总财富比重等事实观察，传统房地产发展模式已经走到了尽头。

Adjusting for demolitions, urban per capita housing floor space reached about 41 square meters by the end of 2024, with average household ownership exceeding 1.1 units. This level of housing penetration indicates that the traditional model—where the sector drives economic growth primarily through large-scale new construction—is nearing its end, as the potential for further expansion in absolute housing demand is increasingly constrained.

While previous central policy documents and key political meetings have frequently referenced the need to “develop a new real estate model” and “promote high‑quality development,” these statements were typically cautious and measured.

For instance, the Resolution adopted at the Third Plenum of the 20th CPC Central Committee called for accelerating the establishment of a new real estate development model, while the communique of the Fourth Plenum emphasized promoting high-quality development across the sector. More recently, the Central Economic Work Conference stressed defusing risks in key areas, with a focus on stabilizing the real estate market. In contrast, the Qiushi article delivers a near‑unvarnished assessment of the old model, signaling that policymakers now have a clear consensus on the structural imbalances reflected in key indicators and that policy discussion is shifting decisively toward accelerating the transition to a new development model.

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Signal Two: Stronger Policy Delivery in One Go, No More Drip-Feeding Stimulus

In terms of expectations, policy strength must match market anticipation: deliver the full measure of support in one go, avoiding drip-feeding stimulus that would lock the market forces and government policies in a state of gamesmanship. In terms of policy coordination, the authorities should strengthen consistency assessments. Real estate is significantly influenced by overall expectations regarding the stage of economic development, macroeconomic conditions, and the growth rate of residents’ income. Policies should aim to better satisfy residents’ essential housing needs and diversified improvement demands by lifting relevant restrictive measures, ensuring smooth coordination between new and old policies, and maintaining consistency between real estate policies and the orientation of other macroeconomic policies.

政策预期上，政策力度要符合市场预期，政策要一次性给足，不能采取添油战术，导致市场与政策陷入博弈状态。政策协调上，强化政策一致性评估，房地产受经济发展阶段、宏观经济形势、居民收入增速等整体预期影响明显，要以更好满足居民刚性需求和多样化改善性住房需求为目标，取消相关限制性措施，确保新老政策相互配合，确保房地产政策与其他宏观政策取向一致。

The explicit rejection of “drip-feeding stimulus” is striking. Rare in official real estate rhetoric, it addresses the prolonged policy–market standoffs of recent years, during which incremental measures fell short of reviving market confidence.

In retrospect, China’s property stabilization strategy has largely followed an incremental, calibrated approach. Measures such as selectively loosening purchase restrictions, gradually trimming mortgage rates, and lowering down-payment ratios in specific cities were intended to stabilize the market while mitigating the risk of overheating. In practice, however, this stepwise intervention often prolonged market uncertainty, blunted the effectiveness of individual measures, and fostered a pronounced wait-and-see mindset among buyers and sellers. Market participants became increasingly “policy-desensitized,” delaying decisions in anticipation of the next round of easing, leaving expectations without a clear anchor.

By explicitly discarding this incrementalism, the Qiushi article signals a shift in policy thinking. In a phase of deep adjustment, stabilizing expectations has become a policy objective in its own right. Achieving this requires greater coherence in timing, scale, and coordination, rather than reliance on fragmented, trial-and-error measures.

In 2025, major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, and Hangzhou, rolled out successive rounds of easing—covering purchase eligibility, taxes and fees, and credit conditions. Just one week before the Qiushi article was published, Beijing unveiled its second round of 2025 housing policies. These measures, aimed particularly at non-local families and multi-child households, included allowing families with two or more children to purchase an additional home within the Fifth Ring Road (a major expressway separating central Beijing from suburban districts), reducing the required period of social insurance or income tax records for non-local buyers from three years to two for central districts and from two years to one for suburban areas. The frequency of these adjustments underscores the gap between past practice and the article’s call for more decisive, front-loaded action.

More importantly, a broader set of medium- and long-term reforms is now being rolled out in parallel. In late December 2025, the Ministry of Housing and Urban-Rural Development issued guidelines on improving housing quality, setting out a clear roadmap for “high-quality housing” through 2030. Around the same time, fiscal authorities confirmed that from 2026, VAT on housing transactions will be reduced and streamlined: the rate on homes sold within two years of purchase will be cut from 5% to 3%, while homes held for two years or more will be exempt. These measures directly lower the cost of upgrading and facilitate turnover in the existing housing stock.

Taken together, these policies point in a consistent direction: revitalizing the housing market through institutional adjustments rather than short-term stimulus, activating the secondary housing market, and strengthening linkages between new and existing homes.

Against this backdrop, the call to deliver the full measure of support in one go marks a clear break from the gradualist playbook of the past. It reflects a firmer top-level resolve to stabilize the market, and suggests that future property policies will be more systematic, coherent, and robust in both planning and implementation.

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Signal Three: Reaffirming Real Estate’s Role as a “Financial Asset” and “Foundational Industry”

While the article declares that China’s traditional real estate development model has reached its endpoint, it does not diminish the sector’s macroeconomic significance. On the contrary, the author emphasizes that real estate “has strong attributes as a financial asset.” Viewed in the context of the decade-old official principle that “housing is for living in, not for speculation,” the acknowledgment in the Qiushi article seems to reflect a subtle shift in emphasis. In fact, the author’s point is that precisely because of its financial attributes— its extensive interconnections, wide-ranging implications, and high public attention—strengthening expectation management is of paramount importance for stabilizing the market. Greater clarity on the sector’s financial attributes would help guide the market toward a more rational and stable investment environment.

In response to market narratives suggesting that real estate’s importance to the national economy is waning, the article firmly rejects such claims as “lopsided.” The rationale is straightforward:

The sector’s all-encompassing nature spans dozens of upstream and downstream industries—from steel and cement to household appliances and furniture—exerting significant influence on investment, consumption, employment, and other critical economic indicators. It remains the bedrock of the national economy. In 2024, the combined added value of real estate and construction accounted for 13% of GDP and directly created over 70 million jobs.

涉及钢铁、水泥、家电、家具等几十个上下游行业，对投资、消费、就业等关键经济指标均有显著影响，仍然是支撑国民经济的基础产业。2024年，我国房地产业和建筑业增加值占国内生产总值的比重合计达13%，直接带动就业人口超7000万人。

These figures suggest that, although investment in the real estate sector has declined in recent years, it continues to carry substantial economic weight. Areas such as housing services, secondary housing market transactions, and real estate asset management have maintained robust growth, revealing substantial untapped potential. Judging from China’s current stage of urbanization, the transformation of the real estate sector still leaves huge growth potential.

In 2024, China’s urbanization rate reached 67%, yet the urban household registration rate remained below 50%. This gap indicates that housing demand from “new urban residents”—including newly settled rural migrants and recent university graduates—has yet to be fully released; Nearly 40% of urban households have per capita floor space below 30 square meters, and about 7% fall short of 20 square meters. Urban areas alone hold roughly 35 billion square meters of housing stock. Assuming a 2% annual depreciation rate, this will translate into roughly 700 million square meters of annual replacement and renewal demand.

2024年中国常住人口城镇化率为67%，而户籍人口城镇化率不足50%，新落户农民工、新毕业大学生等“新市民”刚性住房需求有待持续释放；我国城镇人均住房建筑面积在30平方米以下的家庭户占比接近40%，约有7%的城镇家庭人均住宅建筑面积尚不足20平方米。目前中国城镇已积累约350亿平方米的住房存量，按照每年2%的折旧率估算，每年将产生约7亿平方米的更新替代需求。

These data also highlight two priorities for demand-side interventions: the rigid housing needs of “new urban residents” and the renewal and upgrading of existing housing stock. Both are closely linked to the “new-type urbanization” (新型城镇化) strategy launched under Xi Jinping’s leadership. This policy framework emphasizes:

1. A “people-centered” approach. Urbanization is defined primarily by addressing human needs—most notably access to housing, healthcare, and education—rather than by rapidly inflating urbanization rates through the large-scale relocation of rural populations. Within this framework, reform of China’s household registration (hukou) system, which determines access to public services based on place of registration, is envisioned as a gradual process, aligned with the expansion of public service capacity. This approach seeks to avoid urban ghettoization, as seen in cities such as Rio de Janeiro or Johannesburg.

2. Coordinated and balanced urban growth. The framework prioritizes moderating the expansion of megacities while fostering growth in smaller cities and county seats, thereby narrowing disparities between cities, across regions, and between urban and rural areas.

3. Enhancing cities’ quality and resilience. Policies promoting new-type urbanization should focus on modernizing urban housing, enhancing disaster resilience, and advancing the transition to green and smart cities.

The article further strengthens the argument for real estate’s continued macroeconomic importance through international comparisons. Data indicate that China’s real estate sector increasingly mirrors the role of property markets in mature economies:

International experience further reinforces this: in developed economies like the United States, United Kingdom, Germany, Japan, and Australia, real estate’s share of GDP still averages above 10%, serving as a vital ballast for economic stability and the primary form of societal wealth.

从国际经验看，美国、英国、德国、日本、澳大利亚等发达国家，目前房地产业增加值占国内生产总值的比重平均都在10%以上，依然是经济保持稳定的重要支撑和社会财富的主要形式。

From 2000 to 2024, Japan and the Republic of Korea built an annualized average of 7.74 and 10.39 new housing units per thousand people, respectively, reflecting sustained momentum in construction. Based on this research, China’s annual demand for new urban and rural housing should fall in the range of 10–14.9 million units, suggesting ample room for growth.

2000—2024年，日本、韩国每千人年均新建住宅分别为7.74套、10.39套，房地产建设强度仍然较高。有关研究机构以此推算，我国城乡每年新建住宅规模应在1000万—1490万套之间，房地产发展仍有不小的市场潜力。

Signal Four: Policy Priorities for Real Estate

While emphasizing that a healthy and stable real estate market is essential for the overall stability of China’s economy, the article offers a measured and pragmatic assessment of the sector’s current situation:

On one hand, high inventories in some cities need time for absorption and market clearance. On the other hand, the sector harbors great development potential, though converting that potential into drivers of growth and confidence also requires a process. Risk prevention and contingency plans must be prepared in advance, since debt levels among developers remain high, and the possibility of bankruptcy or restructuring for individual enterprises cannot be ruled out.

一些城市库存还比较高，消化库存、市场出清需要时间；另一方面，房地产发展潜力和空间巨大，但转化为当前发展动力和信心也需要一个过程。目前房地产企业债务仍然较高，不排除个别企业仍有破产重组的可能，要未雨绸缪，有效做好应对。

Based on this assessment, the article provides more operational guidance on policy priorities.

On the demand side, the focus is on stabilizing expectations and removing constraints:

Policies should aim to better satisfy residents’ essential housing needs and diversified improvement demands by lifting relevant restrictive measures, ensuring smooth coordination between new and old policies, and maintaining consistency between real estate policies and the orientation of other macroeconomic policies.

要以更好满足居民刚性需求和多样化改善性住房需求为目标，取消相关限制性措施，确保新老政策相互配合，确保房地产政策与其他宏观政策取向一致。

On the supply side, the policy orientation is toward structural adjustment rather than unchecked expansion:

On the supply side, strict control of new increments must work in tandem with revitalization of existing stock. Acquisitions of commercial inventory should be encouraged, primarily for uses such as affordable housing, while orderly advancing the construction of “good homes.” Radical reforms must be implemented in real estate development methods, aiding enterprises in accelerating shifts from reliance on new-home sales to greater emphasis on holding properties and providing high-quality, diversified residential services.

做好供给管理。供给端要严控增量、盘活存量，鼓励收购存量商品房主要用于保障性住房等合理用途，同时有序推动“好房子”建设。彻底改变房地产开发方式，支持房企加快从以新房销售为主向更多持有物业、提供高品质多样化居住服务转型。

On the institutional side, policy efforts should be put to “lay the groundwork” for the new development model:

The construction of the new model should serve as the guiding force for promoting high-quality development in real estate. This requires refinement of foundational institutions for commercial housing development, financing, and sales, careful timing of the rollout of these institutions, deepening reforms to the housing provident fund system, and facilitating a smooth transition between old and new models. The country should encourage continued expansion of the scope of real estate investment trusts (REITs), conduct pilot explorations of mechanisms for supplementary payment of land premiums on land with expired usage terms, and stabilize the investment expectations and confidence of social capital.

要完善商品房开发、融资、销售等基础制度，合理把握各项基础制度出台时机，深化住房公积金制度改革，推动新旧模式平稳转换。鼓励不动产投资信托基金继续扩大范围，对使用年限超期的土地试点探索建立土地出让金补缴机制，稳定社会资本的投资预期和投资信心。

The article further emphasizes that housing represents the largest and most significant asset for ordinary families, and housing prices directly affect public interests and attract widespread attention—a point that helps explain the widespread attention the piece has received.

A report from the China Index Academy indicates that China’s real estate market continued to “adjust” throughout 2025. In the first 11 months of 2025, the average price of second-hand residential properties across 100 major cities fell by a cumulative 7.46%. The secondary housing market remains characterized by a “volume-for-price” dynamic, meaning that sellers often lower prices to encourage transactions, while high inventory keeps overall prices under pressure. In terms of inventory clearance, as of the end of November, the 50 major cities in the sample had an average clearance period of 22.2 months.

These figures underscore that challenges persist in China’s property sector. Yet the article’s unusually candid language also signals that, as the traditional development model exits, the authorities are actively working to secure the breathing space needed for a smooth market transition. While obstacles remain, 2026 still offers policymakers leeway to act, and they are making concerted efforts to reinforce confidence and facilitate a return to stability in the real estate market.

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Tan Yixiao is a Xinhua journalist. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn

Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

For more stories on China’s recent adjustment to the property industry:

At the dawn of the 20th century, it was a familiar tableau: Venezuela in economic crisis, an unyielding strongman in Caracas, and a formidable U.S. naval force conveniently at hand. There was, however, a minor tweak in this historical parallel. President Theodore Roosevelt sought not to topple, but shield the bankrupt Venezuelan government from an ad hoc coalition of European powers poised to collect debts at gunpoint—even though Caracas was then, by Washington’s standards, an outright dictatorship. The successful deterrence backed by sheer military might lent credence to Uncle Sam’s longstanding claim to a sphere of influence in the Western Hemisphere, henceforth underwritten by direct intervention.

Curiously, the recent capture of Maduro triggered an outpouring of mourning over the unfortunate realignment toward that era of gunboat diplomacy, and the death of the “liberal world order.” Such sentiments are as baffling as they are ridiculous. The successful kidnapping of a national leader from his well-fortified nest was no doubt a living metaphor of power politics, but was it without precedent in the “good old days”?

In a way, Nicolas Maduro only joined the ranks of Manuel Noriega, Saddam Hussein, and Muammar Gaddafi—either captured or killed in the American military campaigns sans the UN Security Council’s sanction, despite UN being the cornerstone of the “liberal world order.” If anything, Trump, compared to his predecessors, has even exerted restraint so far by not destroying the regime altogether. This is not meant as a compliment, but a reminder of the staggering militarization of U.S. diplomacy under Pax Americana.

The “liberal world order” amounts to nothing but an illusory portrayal of the “benevolent” American hegemony. It is Washington’s choosing whether it should act leniently or stringently. The underlying logic has always been power and national interest.

As Maduro was paraded like a barbarian chieftain in a Roman triumph, Trump flirted with the idea of directly running Venezuela with Marco Rubio assuming the role of “viceroy.” Many were outraged by such old-fashioned imperialist moves. Again, they simply overreacted to a template practice inherited from the heyday of the “liberal world order.”

After the U.S. invasion of Iraq in 2003, Paul Bremer, who triumphantly announced “We got him” following Saddam Hussein’s capture, soon became the all-powerful administrator exercising all executive, legislative, and judicial powers in the country. Bremer was therefore jokingly addressed as “viceroy” by a Shi’ite politician (Mowaffak al-Rubaie, who later served as Iraq's National Security Advisor) in a meeting. Only Bremer, unlike Rubio, had the decency to take offense at the title. Later, it was this “Viceroy of Iraq” who hastily disbanded the old Iraqi military and disastrously plunged the country into a decade-long insurgency and sectarian fighting. Given Rubio’s record of being outspoken despite ignorance, there is every reason to doubt that he would heed the cautionary tale and outperform Bremer.

Therefore, Trump’s inroads in Venezuela do not mark a change in approach to power projection, let alone the end of an era of world order, but rather a recalibration of strategic priorities: from the Middle East to the Asia-Pacific, and now back to the Americas.

Around 2,500 years ago, Athens, the first known democracy in human history, sent an armada of trireme warships to the peaceful polis of Melos, demanding unconditional surrender. While the Melians argued that no state ought to attack another without provocation, the Athenians gave an irrefutable reply: “The strong do what they can and the weak suffer what they must.”

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Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

The PLA Eastern Theater Command lavished some of the most advanced models in its arsenal — fighter jets, bombers, drones, destroyers, along with long-range ground-based firepower — jointly ringing in the New Year for the swaggering Taiwan authorities.

Drill of Unprecedented Scale

This isn’t the first time the PLA has carried out exercises around Taiwan. So the more interesting question may be what, if anything, stands out about this round compared with earlier ones. On the very day the drill took place, several academics from PLA-affiliated research institutes gave high-profile on-camera interviews, sharing their views on what they saw as the key features of the exercise.

“Closer to the island of Taiwan than ever before”

Zhang Chi, a professor from the National Defense University of China, noted the exercise areas in this round were “positioned closer to Taiwan’s main island than in previous drills.” After the exercises began, PLA naval and air forces moved in rapidly from multiple directions, establishing what was described as an integrated air-sea control posture around the island.

Compared with previous drills, the configuration reflects a more comprehensive, close-in posture, underscoring comprehensive coverage and integrated blockade-and-strike capabilities.

[Note: Based on the Chinese-language maps released by the Chinese military for several rounds of exercises around Taiwan since 2022, we have produced an English version for your reference. The military exercises code-named “Strait Thunder–2025A,” conducted in April this year in the central and southern areas of the Taiwan Strait, are not included in the above illustration, as we were unable to find any officially released, comparable maps of the exercise areas.]

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“Combat operations from the outset”

Prof. Zhang noted that the most notable feature of Monday’s drill was “combat operations from the outset”:

This marked a clear departure from PLA’s previous drills in the Taiwan Strait, particularly the series of exercises conducted between 2022 and the first half of 2025. In previous drills, the PLA typically followed a phased escalation approach — first deploying forces and establishing operational postures, before gradually progressing to live-fire activities. This time, however, live-fire operations began almost immediately, with key combat vessels conducting naval gunfire drills.

Coincidentally, one day before PLA’s military exercise, the Taiwan leader Lai Ching-te appeared in an interview, proclaiming that it was “the lack of military capabilities” that deterred Beijing from resolving the Taiwan question by military means. He touted the so-called “porcupine strategy,” long hailed as a panacea for Taiwan’s security conundrum. PLA’s fresh drill posture inadvertently served as a real-time rebuttal.

“Most critical lifelines”

Meng Xiangqing, also a professor from the National Defense University, explained why the deployment of drill forces is basically positioned along Taiwan’s most critical lifelines. He first offered a concise and pointed assessment of Taiwan’s geography:

The island has a relatively small land area, with mountainous terrain, rivers, and rolling hills, and is long from north to south but narrow from east to west. As a result, Taiwan lacks strategic depth, is ill-suited for prolonged conflict, and is severely constrained by a shortage of strategic resources.

On this basis, he concluded that maritime transport routes — as well as energy and supply lines — are of critical importance to Taiwan. He then went on to explain why the five exercise areas were positioned to correspond precisely to what he described as Taiwan’s “most critical lifelines”:

The two northern zones were positioned close to the waters off the Keelung Port, effectively forming a blockade of the port. The two southern zones were positioned adjacent to the Kaohsiung–Zuoying maritime and airspace, severing Taiwan’s largest sea routes and placing vital military bases in a “shut-the-door-and-hit-the-dog” squeeze.

Deployed east of the island, another zone targeted the main eastern access route for external support, showcasing the PLA’s ability to block outside intervention. Overall, the exercises underscored an evolving approach centered on close-in containment and integrated blockade-and-strike operations, external access denial and coordinated sea–air interdiction across multiple ranges.

“Precision strikes”

Another feature of this round of military exercises listed by Prof. Zhang is “precision strikes.” Zhang noted that PLA units tracked and targeted mobile targets across the island, carrying out deterrent precision strikes that left offensive weapons purchased from external forces with nowhere to hide and under constant threat of destruction.

The Arms Deal That Flared

The rationale behind the exercise was made explicit from the outset. On Dec. 29, Xinhua published a commentator article that led by pointing to recent U.S. arms sales to Taiwan:

The U.S. Defense Security Cooperation Agency announced arms sales to Taiwan worth about $11 billion, and the Democratic Progressive Party (DPP) authorities were quick to express their gratitude. Lai Ching-te has presented what critics describe as a “pledge of allegiance” to Washington, committing to raising Taiwan’s defense budget to 5 percent of GDP by 2030 and planning to spend NT$1.25 trillion over the next eight years on arms purchases from the United States.

The commentary stressed that “bottom lines and red lines must not be crossed,” and described the exercise as a stern warning against “Taiwan Independence” separatist forces and external interference, and a legitimate and necessary action to safeguard China’s sovereignty and national unity.

According to Reuters, the arms package covers eight items, including HIMARS rocket systems, howitzers, Javelin anti-tank missiles, Altius loitering munition drones, as well as parts and support for other equipment. HIMARS, in particular, has at times been widely described as a potential game-changing weapon in the Russia–Ukraine conflict.

Fu Zhengnan, an expert with the PLA’s Academy of Military Science, believed the arms sale in question had been provocative and dangerous in three respects:

It is an escalation in procurement scope. The U.S. military sales package to Taiwan totals a staggering $11.1 billion, making it the largest arms sale to the island to date.

It is an escalation of strategic intent. Unlike previous sales that focused mainly on defensive systems, this package is largely offensive in nature, violating the three China-U.S. joint communiqués, especially the August 17 Communiqué of 1982.

It is an escalation toward systemic confrontation. Taiwan’s latest procurement covers not just offensive weapons, but also the Taiwan Tactical Network and Force Awareness Application Suite, effectively linking the island’s military operational systems with U.S. networks. These acquisitions heighten the risk of direct confrontation between U.S. and Chinese forces.

By the time China and the U.S. established formal diplomatic relations in 1979, the issue of Washington’s arms sales to the Taiwan regime had yet to be resolved. In 1982, following multiple rounds of negotiations, the two sides issued what later was known as the August 17 Communiqué of 1982.

China made clear that U.S. arms sales to Taiwan could not be justified by the Taiwan Relations Act (TRA), nor could the U.S. commitments on arms sales be made conditional on China’s policy of seeking a peaceful resolution of the Taiwan question. Against this backdrop, the two sides reached an agreement on the communiqué, in which the United States promised:

...that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan, leading over a period of time to a final resolution.

In the eyes of Beijing, the whopping $11.1 billion arms sale can only be deemed as a flagrant breach of the past commitments and unilateral alteration of the status quo across the Taiwan Strait.

Hours after the drill began, the official WeChat account of the Department of North American and Oceanian Affairs, China’s Ministry of Foreign Affairs, published a commentary in reference to the August 17 Communiqué of 1982. The account, named Kuanguang Taipingyang (literally translated as the “Wide Pacific Ocean”), sought to appeal to Washington’s reason:

Sino-U.S. confrontation over the Taiwan question does not serve America’s interests. Now that the two countries share broad common interests and vast potential for cooperation, they have every reason to be partners and friends, in order to secure mutual benefits and common prosperity. The United States, in addressing numerous domestic challenges and pressing international issues, cannot do without China’s support. But this is predicated on its respect for China’s core interests. Seeking cooperation with China on the one hand while incessantly undermining China’s core interests on the other simply does not work.

Wang Wenjuan, a researcher with the PLA’s Academy of Military Science, further justified the drill on the grounds of legal principles:

Principles such as respect for state sovereignty and non-interference in internal affairs are the basic norms of contemporary international law, enshrined and reaffirmed in the UN Charter. The 1970 Declaration on Principles of International Law explicitly prohibits acts of secession and forbids both direct and indirect interference. In 1965 and 1981, the international community adopted the Declaration on the Inadmissibility of Intervention in the Domestic Affairs of States and the Protection of Their Independence and Sovereignty, and the Declaration on the Inadmissibility of Intervention and Interference in the Internal Affairs of States, respectively. It is therefore clear that actions aimed at splitting a state or interfering in its domestic affairs constitute serious violations of international law.

It was also noted that Beijing has, in recent years, come to make Taiwan’s unification a legally binding commitment by establishing a framework of laws that include the Constitution, National Security Law, National Defense Law, and Anti-Secession Law. Safeguarding territorial integrity is therefore regarded as “a sacred responsibility of all Chinese, Taiwan compatriots included.”

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PLA’s Offensive on Media Front

Beyond conventional military measures, the PLA simultaneously rolled out an upgraded psychological warfare campaign, deploying a barrage of videos and visual content aimed at “Taiwan independence” separatist forces.

It develops a distinctive way of packaging exercise-related content — one that resonates strongly with the general public and, in some cases, draws directly on popular expressions circulating in the Chinese mainland.

One example is a short video released by the Eastern Theater Command on the day of the exercise, titled “So Close, So Beautiful — Anytime to Taipei” (《这么近那么美 随时到台北》). The video runs for less than a minute. For those familiar with Chinese internet memes, the wording is instantly recognizable as a variation on a tourism slogan launched in 2019 by north China’s Hebei Province: “So close, So Beautiful — A Weekend in Hebei.” (”这么近 那么美 周末到河北”)

Notably, the Eastern Theater Command replaced “weekend” with “anytime,” a subtle but deliberate change. This appears to echo what many military analysts have emphasized—that the exercises were intended to demonstrate the PLA’s ability to shift rapidly from training to combat readiness.

Although the slogan’s final line refers specifically to Taipei, the video’s visual design suggests a broader message. In the Chinese characters for “Taipei,” one stroke of the character bei (北) is highlighted in red and shaped like the island of Taiwan, implying that the PLA’s operational reach extends beyond Taipei to cover the entire island.

Another moment that drew attention comes at around the 41–42 second mark, when footage shows an aerial view over Taipei’s urban area. The same footage also appeared that evening on Xinwen Lianbo, China’s flagship nightly news program. According to China Central Television, the images were captured by a PLA drone. How close that drone came to Taipei, however, is a question best left to military experts.

The video’s soundtrack is also striking. Rather than a solemn or martial tone, it adopts a light, youthful, almost “cute” musical style — suggesting a carefully considered approach to audience engagement.

For viewers who prefer a more traditional and hard-edged military aesthetic, the Eastern Theater Command also released a separate exercise video titled “Intercept, Break Through, Strike at Distance” (《驱歼 破击 远袭》), which focuses on live-action training scenes and carries a much more serious combat tone.

In addition to videos, posters have been another visual highlight. One widely circulated poster, titled “Shield of Justice — Breaking Limits and Dispelling Delusions“ (《正义之盾 破限除妄》), features the slogan: “Any external interference that strikes the shield will be destroyed.” The image depicts a shield emblazoned with a Great Wall motif blocking incoming aircraft and warships, leaving little ambiguity about its intended message.

As with the video, visual symbolism is layered into the design: in the character for “shield” (盾) at the top right corner, a red stroke again takes the shape of Taiwan. Taken together, the posters and videos show a high degree of visual and thematic consistency in how the exercises are being framed.

This unusually expressive style highlights Beijing’s unequivocal stance on resolving the Taiwan question: “We will continue to strive for peaceful reunification with the greatest sincerity and the utmost effort, but we will never promise to renounce the use of force, reserving the option of taking all measures necessary.”

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Read our previous story for a historical cautionary tale of Beijing’s use of force on Taiwan:

Recently, the so-called “1644 historical view” is gaining traction online. It contends that the demise of the Ming dynasty at the hands of Manchus in 1644 and the subsequent establishment of the Qing dynasty (1644-1912) represented “a fatal rupture in Chinese civilization.” In this narrative, Qing is not regarded as a legitimate successor of Chinese dynasties but a “foreign colonial power,” and the entire Qing history is open to a complete rejection because Qing’s misrule led to China’s weakness and suffering during the century of humiliation.

近来，所谓的“1644史观”在网上持续引发热议。该论调的核心主张包括，将1644年明朝灭亡、清军入关视为“华夏文明的中断”，将清朝定位为“外来殖民政权”，并衍生出对清朝历史全盘否定的评价，将近代中国积贫积弱、遭受列强欺凌的根源归咎于清朝的统治。

The original piece was issued by the publicity arm of Zhejiang provincial authorities, whose WeChat account Zhejiang Xuanchuan has a reputation for its outspoken and progressive leanings. The account earned nationwide prominence by publishing an article titled “The People Are the Priority, Not Anti-Covid Measures” (“人民至上”，不是“防疫至上”) in November 2022, in a measured yet unmistakable rebuke of local authorities clamoring for further policy outreach during the height of the draconian Covid containment drive. That piece allegedly nudged policymakers in the direction of ending the “zero-Covid” policy.

The latest article argues that the sentiment-arousing narrative against Manchus is not merely historically simplistic but politically divisive, risking stirring ethnic divisions at home while echoing external narratives designed to cast doubt on the legitimacy of China’s modern multi-ethnic state.

The “1644 historical view,” a far cry from novel scholarly invention, is a “version” of the interpretation of history popularized through bite-sized videos and heated threads on the comment section. Its core claim lies in the idea that the Manchu’s entry into the Chinese capital interrupted an otherwise rolling wheel of Chinese advancement. Proponents hail it as an ingenious unmasking of truths absent from school textbooks, while critics dismiss it as emotional venting dressed up as insightful revelation.

Yet beyond our perceptual knowledge of history, we must also approach it with reason. The study of history bears directly on profound questions: where the Chinese nation has come from, and where it is headed. Passion for history is admirable; every individual’s enthusiasm for China’s past deserves affirmation. But when it comes to interpreting historical facts and drawing conclusions, we need clear-headed awareness and a basic understanding of the subject—rather than simply echoing popular opinion. Regrettably, certain social media accounts exploit historical snippets, peddle emotive takes, and engineer controversies purely to gain popularity, gravely misleading public understanding. They act either out of ignorance or deliberate distortion.

不过，我们在对历史有感性的认识之外，也需要对历史有理性的理解。对历史的研究，关系着中华民族从何处来、往何处去的重大问题。热爱历史是好事，每个人对中国历史的热忱都是值得肯定的。但如果涉及对历史事实、历史结论的解析，也需要保持清醒认知，具备基本的历史素养，而不能人云亦云。然而，有些自媒体通过截取碎片化史料、输出情绪化观点、制造争议性话题来收割流量，严重误导认知。他们要么是对历史无知，要么是在刻意歪曲历史。

The Zhejiang piece emphatically unpacks the appeal of this narrative. It acknowledges the genuine patriotic fervor from which it derives, as many adherents to the narrative recoil from memories of the late-Qing’s incompetence and the atrocities it committed against the Han majority, channeling frustration over China’s historical humiliations into anti-Qing sentiment.

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In today’s fiercely competitive society, where the pressures of life have intensified, some individuals project their real-world feelings of helplessness and frustration onto discussions of history. This serves as a psychological defense mechanism: by criticizing—or even vilifying—a dynasty long vanished, and by rejecting history in one sweeping gesture, they achieve a fleeting sense of emotional catharsis.

时至今日，该论调在互联网语境下获得关注，除了认知层面的因素外，还有着复杂且深刻的心理根源。比如，面临现实压力的情绪宣泄。在竞争激烈、生活压力倍增的当代社会，部分人将现实中的无力感与挫折感，代入到对历史的讨论中。这是一种心理防御机制——通过批判甚至辱骂早已不存在的王朝，通过对历史的单向度否定，获得短暂的情绪释放。

However, empathy has its limits. The piece warns that if this sentiment is allowed to go unchecked, it can veer into the realm of absurdity and, more dangerously, into a narrow ethnic populism that treats Manchus, Mongols, and other ethnic minorities as outsiders to the storyline that drives Chinese history forward. And such exclusion, the piece argues, plays into the hands of foreign narratives long deployed to undermine China’s territorial and historical integrity.

Consider, for instance, how this view flies in the face of historical context. The “1644 historical view” approaches the past with modern notions of the nation-state. In 17th century Chinese society, perceptual distinctions between “civilized” Hua and “barbarian” Yi certainly existed, but ordinary people’s political loyalties were far more tied to region, culture, and dynasty than to ethnicity. Once the Qing rulers established themselves in the Central Plains, they swiftly assumed the mantle of “lords of China,” with successive emperors explicitly positioning themselves as universal sovereigns over “All Under Heaven.” They respected the political and cultural traditions of the China’s heartland and never pursued an exclusionary regime centered on their own ethnicity. Overemphasizing Manchu-Han antagonism blurs the essential nature of dynastic succession as a transfer of power, and risks devolving into a parochial Han-centrism.

比如，违背历史语境。“1644史观”用现代的民族国家概念切割历史。在17世纪的中国社会，“夷夏之辨”虽然存在，但普通民众的政治认同更多是地域性、文化性和王朝性的。清朝统治者入主中原后，迅速采纳“中国之主”的政治身份，历任皇帝都明确将自己定位为“天下共主”，尊重中原的政治传统和文化传统，并未追求排外的“本民族政权”。过分强调满汉对立，模糊了王朝更替本质上还是政权更迭，可能会演化为狭隘的汉族中心主义。

The bashing of Han-centrism has a more profound political origin. China enshrined its latest edition of the ethnic policy in 2017 as “promoting the sense of community for the Chinese nation” (铸牢中华民族共同体意识), which downplays the core position of the Han ethnic, which accounts for over 90% of the Chinese population, and emphasizes the shared identities among all ethnic groups living on China’s soil. It later became an integral part of “Xi Jinping Thought on Culture,” formally established in 2023 as one of Xi’s six highest-level governance philosophies that are qualified to be referred to as “Thought” in official rhetoric. You are free to check out our article “Why China Adopts Culture as Political Doctrine” for a more detailed analysis on this subject.

Take its denial of the resilience of civilization for instance. The extraordinary inclusiveness and continuity of Chinese civilization have been proven time and again through history. From the Northern Wei to the Yuan, when northern nomadic peoples entered the Central Plains and founded their own dynasties, the outcome was never a rupture in civilization but rather ongoing cultural fusion and political integration. The Qing followed this very pattern: after entering the realm, it promptly adopted Ming’s political institutions and preserved core elements of Chinese civilization—Chinese characters, the civil-service examination system, Confucian thought—demonstrating unbroken continuity at both institutional and civilizational levels.

比如，否定文明韧性。中华文明强大的包容性和连续性在历史上多次得到验证。从北魏到元朝，北方民族进入中原建立政权的结果从未导致“文明中断”，而是不断促进新的文化融合与政治整合。清朝延续了这一历史模式，入关后迅速沿袭明朝政治制度，继承了汉字、科举制度、儒家思想等中华文明的核心元素，这些都体现了文明和制度层面的连续性。

The piece voices against the latest trend on the Internet that some content creators monetize anti-Qing sentiment by turning it into marketable internet traffic. Among them was Chigua Mengzhu (吃瓜蒙主), who had a significant presence on China’s YouTube-wannabe Bilibili. She rose to prominence in late 2025 with livestreams and video clips offering acerbic comments on the Qing dynasty’s legacy from a staunch Han-centric perspective. Her commentary centers on cultural revival and national confidence, often blending historical narratives and contemporary social issues.

Supporters praise her for amplifying grassroots voices and challenging orthodox views, while critics decry her for promoting unsubstantiated claims to fuel ethnic division. Her clips frequently attract hundreds of thousands of views, triggering contentious debates among audiences, though some content has been removed amid escalating controversy.

Some claims in this narrative have strayed so far from historical discussion that they have become mere noise-shaped, amusingly absurd gossip. For example: “The Manchu gave away the photolithography technology documented in the Yongle Encyclopedia (The world’s largest pre-modern compendium of knowledge commissioned by the emperor Yongle of Ming in the early 15th century) to the West—that’s why we are struggling with the West’s choke-hold on key technologies today.” Or: “When Lin Daiyu buries flowers, the ‘flowers’ she’s really burying stand for ‘China’ itself—the character for flower subtly evoking ‘Hua,’ the classical name for the Chinese realm.” (Lin Daiyu was the emotionally fragile heroine from Dream of the Red Chamber, the eighteenth-century masterpiece widely regarded as China’s greatest novel, and Lin’s famous flower-burying scene serves as a poignant meditation on transience and personal sorrow. However, fringe readings reinterpret it as coded mourning for the fallen Ming under Qing rule.)

And those who uphold this view alleged that Chen Xiaoxu, the actress who brought this character to life in a hit TV series in the 1980s, knew this truth forty years before the rest of us; she wasn’t acting on the silver screen—she was truly weeping for our vast and ancient civilization.”

They claimed in an equally absurd way that the word “invention”, or “Fa Ming” in Mandarin pronunciation, referred to the “Ming” dynasty, because all Chinese scientific advancements sprang from the Ming Era’s Yongle Encyclopedia, that boundless treasure house of Chinese knowledge.

还有些观点已经脱离讨论历史的范畴，变成了“吃瓜”言论，令人啼笑皆非。比如，“满清把《永乐大典》上的光刻机技术送给了西方，导致我们现在还在被卡脖子。”“黛玉葬花，葬的‘花’原来是‘华’。陈晓旭早我们40年知道真相，所以她在剧中不是演的，是真正在为我泱泱华夏而哭。”“发明，它不叫发东，不叫发西，不叫发秦，不叫发唐，不叫发宋，也不叫发元，唯独它叫发明，因为它都起源于《永乐大典》，中华文明的知识宝库。”

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The article also explicitly links this growing domestic trend to the Western scholarly movement known as “New Qing History,” which was given rise by a school of American historians. Since the 1990s, this cohort has highlighted the Qing’s distinctive Manchu identity, often portraying it as a conquering regime rather than a fully sinicized successor state while deliberately playing down their role in the continuity of Chinese civilization.

Some could argue that while these works have, to a certain extent, enriched global understanding of the Qing through Manchu-language sources and global comparisons, they have long provoked unease in China for seemingly eroding cultural continuity and political integration.

Even more alarming, this so-called “1644 historical view” unwittingly echoes certain overseas narratives designed to dismantle the continuity of Chinese history, lending ammunition to arguments that seek to undermine the historical legitimacy of China as a unified multi-ethnic nation. Take, for example, the school of “New Qing History” that emerged in the United States. Some of its arguments deliberately spotlight the Qing’s “Manchu characteristics,” depicting it as a non-Han conquest dynasty while downplaying its ties to Chinese historical traditions. The implicit logic is to sever the Qing dynasty from the broader Chinese narrative, thereby supplying grounds for separatist claims.

更需要引起警惕的是，所谓的“1644史观”与境外某些旨在解构中国历史连续性的叙事形成了呼应，为那些试图否定中国统一多民族国家历史合法性的论述提供口实。比如，兴起于美国的“新清史”研究，其部分论点刻意强调清朝的“满洲特性”，将其描绘为“非汉人的征服王朝”，淡化清朝与中国历史传统的连续性。这种论述的潜在逻辑是割裂清朝与中国历史的关系，为某些分裂论调提供依据。

This is no abstract and abstruse academic debate. In today’s China, the official historiography has placed great emphasis on forging a shared sense of belonging across the country’s 56 ethnic groups. The Qing’s incorporation of Taiwan, Xinjiang, Tibet, and Mongolia is routinely cited as the historical foundation for modern borders. Portraying Qing as a foreign occupier threatens to unravel that consensus.

Transcending binary oppositions and construct an inclusive narrative. What we need is a tolerant, integrative account of the Chinese nation’s history—one that decisively moves past simplistic dichotomies like “Sinicization” versus “barbarization,” or “conquest” versus “subjugation.” The vitality of Chinese civilization shines precisely in the dynamic process by which diverse peoples, through collision and difference, have blended and learned from one another across the centuries. The Qing’s place in history ought to be assessed within this broader story of multiple ethnic groups co-writing China’s past. Such a narrative fully acknowledges the contributions and cultural distinctiveness of each people while sharply illuminating the overarching integrity and unity of Chinese civilization—an indispensable cognitive foundation for forging a strong sense of community among the Chinese nation.

超越二元对立，构建包容叙事。我们需要构建一种包容、整合的中华民族历史叙事，彻底超越“汉化”与“胡化”、“征服”与“被征服”的简单二元框架。中华文明强大的生命力，正体现于历史上各民族在碰撞中交融、在差异中互鉴的动态过程。清朝的历史地位，应被置于多民族共同书写中国史的整体叙事中来评价。这种叙事既能充分承认各民族的历史贡献与文化特性，又能鲜明彰显中华文明的整体性与统一性，是铸牢中华民族共同体意识必不可少的历史认知基础。

The piece advocated for a more inclusive historical narrative, one that transcends the binary portrayal of “sinicization” versus “barbarization” and instead celebrates the dynamic interweaving of contributions from peoples of different origins as proof of the undying vitality of Chinese civilization. It demonstrates an interesting turn in rhetoric as the “sinicization” narrative was equally dismissed as a biased discourse, even if it was once the archrival academic genre vis-à-vis the “New Qing History.” The two sets of opposing arguments were brought into full view amid the famous polemic between Ho Ping-ti and Evelyn S. Rawski in the late 1990s, and the impact lasts till today. The rhetorical shift showcased the official inclination to elevate the “sense of community of the Chinese nation” as an overarching principle that rises above either perspective.

Bewaring the instrumentalization of history, we should uphold scholarly rigor. Historical inquiry can legitimately proceed from varied perspectives, but it must always rest on solid sources and meticulous methodology. We should be wary of history being co-opted by any political agenda or irrational sentiment. This means firmly opposing tendencies like those in “New Qing History” that deliberately sever the Qing dynasty from China’s historical continuity for academic-political ends, even as we consciously resist domestic online expressions that, under the guise of “restoring truth,” in fact erode shared consensus through emotional outbursts. Only by insisting on the scrupulous use of evidence and logic—returning history to its proper domain as a discipline—can we effectively counter attempts, domestic or foreign, to distort China’s historical narrative and safeguard the scientific integrity and seriousness of its study.

警惕历史工具化，坚守学术理性。历史研究可以有不同视角，但必须建立在扎实史料和严谨方法基础上，警惕历史被任何形式的政治意图或非理性情绪所工具化。我们既要坚决反对如“新清史”等刻意割裂中国历史连续性的学术政治化倾向，也要自觉抵制国内网络空间中以“还原真相”为名、行撕裂共识之实的历史情绪化表达。唯有坚持史料与逻辑的严谨性，让历史回归历史学的本来领域，才能有效抵御内外各种试图扭曲中国历史叙事的企图，守护历史研究的科学性与严肃性。

An episode like this reveals something much deeper. The Party is actively forging a modern national identity rooted in the “community of the Chinese nation.” This civilization-centered concept, epitomized in Xi Jinping’s vision of “Chinese modern civilization,” is intended to transcend narrow ethnic, regional, or sub-cultural divisions. Therefore, narratives that pit the Han majority against minorities, whether through Han-centrism or “New Qing history”, are increasingly treated by authorities as direct challenges.

Furthermore, amid growing social discontent from economic slowdown and tempered outlooks, outlets for catharsis via memes and satirical humor are sometimes tolerated. But content that threatens political stability or ethnic solidarity crosses a firm red line, and it will undoubtedly trigger a swift official response.

Amid a chorus of commentary, the Zhejiang piece stands out for its tone. Instead of outright denunciation, it elects for a measured yet unequivocal rebuttal steeped in scholarly rigor and historical evidence. It acknowledges public sentiment while methodically steering the narrative back toward official lines.

The piece’s widespread adoption and positive reception also signal a deeper societal consensus. Rejecting a populist backslide and divisive ethno-nationalism remains a core value in Chinese society, one that the country’s leadership is determined to promote and reinforce.

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Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

Tian Zijun is a Xinhua journalist based in Guangxi Zhuang Autonomous Region. Email: jeremytzj@qq.com

Read the following story for China’s rationale behind incorporating culture into political platforms:

Japanese Prime Minister Sanae Takaichi has made provocative remarks on Taiwan by flirting with the possibility of Japanese military intervention, and further claimed on November 26 that, according to the Treaty of San Francisco, Japan is “not in a position to recognize Taiwan’s legal status.” In response, some Chinese officials and media outlets appear to have revived the argument that the status of Okinawa, known historically as “Ryukyu,” remains undetermined.

In November, a spokesperson for China’s Ministry of Foreign Affairs posted on Twitter some contents related to the Potsdam Proclamation concerning the Allied definition of Japan’s postwar territorial scope, which was widely interpreted as hinting at this position. If that signal was not explicit enough, on November 28, China News Service, the country’s second-largest state news agency, published an article titled “It Is Time to Settle the Old Account of Ryukyu’s Sovereignty,” openly questioning the sovereignty of Okinawa. Unsurprisingly, this triggered widespread attention both inside and outside China regarding the future direction of Sino-Japanese relations.

Such countermeasures are not without precedent. In 2012, the Japanese government’s so-called “nationalization” of the Diaoyu Islands (or “Senkaku Islands” called by the Japanese) plunged Sino-Japanese relations to a low point. In May 2013, People’s Daily published an article arguing that, according to the postwar arrangements for Japan stipulated in the Cairo Declaration and the Potsdam Proclamation, not only Taiwan and its affiliated islands (including the Diaoyu Islands) and the Penghu Islands should be returned to China, but that the historically unresolved Ryukyu question had also reached a point where it could be revisited.

So, how did Ryukyu, once a vassal state of China, come under Japan’s subjugation and become Okinawa? What arrangements did the Allies make regarding Ryukyu’s future during WWII? How did the indigenous people of Ryukyu view Japan and China after the war?

The Ryukyus are a chain of volcanic islands that stretch southwest from Japan’s Kyushu to China’s Taiwan. Historically, their Chinese name was long identical to that used for Taiwan. Once a tributary state of China, the Ryukyu Kingdom’s status changed after the 1609 invasion by Shimazu Tadatsune, a Japanese daimyo based in southern Kyushu. The islands started paying additional tribute to the Shimazu clan. The Shimazu domain profited substantially by leveraging Ryukyu’s tributary trade with China, extracting significant economic benefits from this intermediary position. These revenues strengthened the Shimazu clan considerably and later contributed to its key role in the overthrow of the Tokugawa shogunate and Japan’s drive toward Westernization in the late 1860s.

From 1609 until the 1870s, the Ryukyu Kingdom existed simultaneously as a tributary state of both China and Japan. Its official documents continued to be written in Chinese, its court attire followed Chinese styles, and even the 1854 Treaty of Amity between the United States and Ryukyu was signed solely in English and Chinese. However, this subtle balance, which had lasted for more than two centuries, was disrupted by Japan’s rapid rise following the Meiji Restoration. In 1874, Japan transferred administrative authority over Ryukyu from the Ministry of Foreign Affairs to the Ministry of Home Affairs; by 1879, Japan formally annexed the kingdom and reorganized it as Okinawa Prefecture.

Seized with panic, China reached out to the former U.S. President Ulysses S. Grant, who was on a tour around the world, wishing to resolve the question through his arbitration. Having visited Beijing and Tokyo, Grant quickly devised a proposal to China, with the northern part ceded to Japan, the southern part to China, and the rest restored to the previous kingdom. On April 17, 1880, the Japanese government raised the proposal to divide the Ryukyus in two, with the Miyako-jima (宫古岛) and Yaeyama Islands (八重山群岛) put under the rule of China. On October 28, 1880, the Chinese government accepted the proposal, and agreed to grant Japan most-favored nation status in reciprocity. However, China and Japan never implemented this agreement, and the issue of the Ryukyu Islands remained unresolved, with Japan continuing to control the islands until the end of World War II.

Despite rarely mentioning this question since the Japanese annexation of the Ryukyus, successive Chinese administrations have never officially recognized Japanese sovereignty over these islands, nor have they relinquished their proper rights to the Ryukyus.

Chiang Kai-shek, China’s supreme leader from the late 1920s to 1949, despite carrying much historical controversy, did not recognize Japan’s control over the Ryukyu Islands either and attempted to address this question. On September 13, 1932, close to the one-year anniversary of the Mukden Incident in which Japan launched a surprise attack on northeast China under the excuse of a “survival crisis” (sounds familiar?), Chiang wrote in his diary, expectantly, by the Moon’s Festival in 1942, “China should be able to recover Manchuria, liberate Korea, and take back Taiwan and the Ryukyus.”

On a night in late September 1940, Chiang coincidentally reviewed the diary entry written down eight years before. Still, he believed that China had a chance “to recover the Ryukyus.” During a press conference held in early November 1942 in America, T. V. Soong, China’s Foreign Affairs Minister and Chiang’s brother-in-law, indicated that China should take back northeast China, Taiwan, and the Ryukyus, and that Korea had to become independent.

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In late November that year, Madame Chiang Soong May-ling left for America. Before her departure, Chiang Kai-shek meticulously prepared her for talks with Roosevelt. The very first point was that Manchuria (aka northeast China), Taiwan, and the Ryukyus should be returned to China, and China would approve of America using naval and air bases at these locations. Having met with FDR, Soong May-ling, on March 1, 1943, informed Chiang in her telegram of Roosevelt’s agreement that “the Ryukyu Islands and Taiwan should be reverted to China in the future.”

Preparing for the Cairo Conference that took place from November 23 to 26, 1943, the Advisory Office of the Military Commission envisioned a comprehensive plan that the Generalissimo would raise during the meeting. According to the draft, Japan should retreat from all the territories that it had occupied since September 18, 1931, and restore to China Taiwan and the Pescadores Islands (aka Penghu Islands), as well as the Ryukyus. The draft even included a flexible back-up plan that Okinawa could either be put under international trusteeship or designated as a demilitarized zone.

However, by November 15, 1943, Chiang apparently had changed his mind. In the entry on that day, Chiang argued that the status in history of the Ryukyus and Taiwan was different: “The Ryukyus as a kingdom resembles Korea in this position,” and, therefore, Chiang decided not to raise the question regarding these islands during the conference.

To Chiang’s surprise, on November 23, Roosevelt took the initiative to bring up the Ryukyu question during his meeting with Chiang. According to the Foreign Relations of the United States (FRUS):

“The president then referred to the question of the Ryukyu Islands and enquired more than once whether China would want the Ryukyus. The Generalissimo replied that China would be agreeable to joint occupation of the Ryukyus by China and the United States and eventually, joint administration by the two countries under the trusteeship of an international organization.”

Based on Chiang’s diaries, he might have softened on the Ryukyu question for three reasons. First, other lost territories of China, such as Manchuria and Taiwan, weighed more heavily on his heart. Therefore, he chose to focus on what was important to him.

Second, Chiang was concerned about America’s sincerity. Roosevelt’s offer to allow China to take over these islands of such great strategic importance might have sounded too good to be true to Chiang. In addition, Chiang, being diplomatically inexperienced, was suspicious as to whether Roosevelt was testing China’s ambitions on expansionism.

Third, the Ryukyus were a tributary state of China rather than an inherent part of the territory of China, similar to the status of Korea historically. The close historical relations between China and the Ryukyus remained suzerainty ties, while China had never exercised direct control there. Chiang, as one of “the Big Four Leaders” of the Allies, grandly proclaimed that he coveted “no gain” and entertained “no territorial expansion.” Consequently, attempts to incorporate the Ryukyus into Chinese territory seemed inconsistent with Chiang’s moral claims.

On December 1, 1943, the “Three Great Allies” jointly issued the Cairo Declaration that stipulated:

“It is their purpose that Japan shall be stripped of all the islands in the Pacific which she has seized or occupied since the beginning of the First World War in 1914, and that all the territories Japan has stolen from the Chinese, such as Manchuria, Formosa, and the Pescadores, shall be restored to the Republic of China. Japan will also be expelled from all other territories which she has taken by violence and greed.”

The future of the Ryukyus was not mentioned in this document, though the statement that “Japan will also be expelled from all other territories which she has taken by violence and greed” implied it did not belong to Japan in the view of the Allies.

At the Tehran Conference of 1943, Stalin told Roosevelt that the Ryukyus, which Japan forcibly annexed in 1879, should be returned to China.

Two years later, at the Potsdam Conference, the four great Allies reached a final decision over the unresolved Japanese territorial issue. With reference to the Cairo document, the Potsdam Declaration defined the limits of the post-war “to the islands of Honshu, Hokkaido, Kyushu, Shikoku and such minor islands as we determine.” However, the Potsdam Declaration that Truman, Churchill, and Stalin issued jointly with the absent Chiang on July 26, 1945, like the Cairo document, made no mention of the islands. But clearly, the future of Okinawa is up to the discretion of the Allies.

As one of the principal victorious powers in the Pacific theater of WWII, China naturally has a legitimate voice on this question.

In October 2025, China’s Deputy Permanent Representative to the United Nations, Sun Lei, publicly urged Japan to “end its discrimination and prejudice against the indigenous people of Okinawa.” Many assumed this was just routine diplomatic language. But in fact, it carries deep, painful historical roots.

After Japan annexed the Ryukyus, for a long while, it never truly treated the Ryukyuan people as part of its “Yamato” nation. In 1904, Japanese anthropologists published “Studies on Human Races,” openly stating that:

“The racial status of the Ryukyuan people is even lower than that of the Taiwan aboriginal.” The justification? Their supposedly “ugly appearance” and “weak physique.”

Even today, reading these words is shocking. It is difficult to see any trace that Ryukyuans were ever regarded as “fellow Japanese.”

By the end of the 1945 Battle of Okinawa, the Japanese military even forced large numbers of Ryukyuans to commit mass suicide. Scholars still debate the exact number, and some estimates go above 100,000. Having spoken with several American veterans who witnessed the battlefield ten years ago, I believe this much is clear: Tens of thousands certainly lost their innocent lives.

As early as 1879, right after Japan forcibly annexed the Ryukyu Kingdom, Ryukyuans traveled to Beijing to plead for China’s help. And after WWII, with Okinawa reduced to ruins, one cannot avoid asking: How would the people of a devastated Ryukyu view Japan after all of this?

The answer lies buried in the archives.

Following Japan’s surrender in 1945, Ryukyu gradually emerged on the agenda and was repeatedly mentioned by China’s senior officials. Chiang Kai-shek, probably overwhelmed with his civil war against the communists, did not discuss the islands in his diaries over the course until 1948. While his approach to Okinawa seemed to have stalemated, the visit to Nanjing during the summer of 1948 by Kiyuna Tsugumasa (he also had a Chinese name: Cai Zhang/蔡璋), head of Okinawa’s “Revolutionary Society (琉球革命同志会),” brought Chiang a new chance to move forward with the question.

Established in the early 1940s, the Ryukyu Revolutionary Society was committed to anti-Japanese activity and clearly demonstrated its pro-China stance. As early as 1946, the Society wrote to Chiang and voiced its loyalty, vowing to subordinate Okinawa to the rule of China. However, Chiang only asked his Foreign Affairs Ministry to “study the matter and report back,” and nothing further happened.

In the autumn of 1947, Kiyuna submitted another petition to Chiang, urging China to direct its diplomats at the upcoming peace conference with Japan to demand that the Ryukyus be incorporated into China’s territory. He wrote that “China and the Ryukyus have maintained relations for over a thousand years; in politics, economics, culture, customs—there is nothing that does not trace back to China.” He warned that “Japan has resorted to base and shameless tactics, currying favor with foreign powers, conserving its strength, and hoping for a future resurgence,” and expressed concern that China, “out of excessive leniency,” might allow Japan’s ambitions to take shape. Kiyuna emphasized that although the Ryukyus were small, they were crucial to China’s national defense.

This petition was forwarded by the head of the KMT’s Organization Department to Chiang, after which it again vanished without a trace. On March 31, 1948, China’s Ministry of National Defense presented Chiang with an impression of the “Seal of the King of Ryukyu,” provided by the Ryukyu Revolutionary Society as historical evidence of Ryukyu’s ties to China. The ministry also warned that “both Japan and the United States intend to seize this territory after victory,” and recommended that the matter be referred to the relevant departments for further study.

This time, the Ryukyuan petitions finally caught Chiang’s attention. The next day, on April 1, he drafted an order, and on April 2 instructed Foreign Minister Wang Shijie to consider the question carefully.

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On July 25, Kiyuna and 16 other members of the Ryukyu Revolutionary Society filed a petition once again to Chiang Kai-shek, who had assumed the presidency on May 20. The 17 “representatives of the Okinawan people” stated that everything in the Ryukyus originated from China and analogized the close relations between China and the Ryukyus to those between a father and a son.

On August 2, Kiyuna arrived in Nanjing. Chiang received Kiyuna on August 9 and, on the following day, the Central Committee of the KMT telegraphed the Foreign Affairs Ministry five proposals that included alleviating restraints on the Ryukyu compatriots in Taiwan and dispatching elementary school teachers from Taiwan to impact the second generation there.

On August 14, Chiang instructed the Foreign Ministry to “study in strict confidence” the Ryukyu Revolutionary Society’s request for China to reclaim the islands. In its top-secret report submitted on August 26, the ministry argued that the Cairo Declaration had not explicitly mentioned the Ryukyus; that the United States, having suffered heavy casualties in the Battle of Okinawa and having built significant bases there, would “never agree to relinquish” the islands; and that the Ryukyus, “poor in resources and impoverished in population,” could not sustain themselves, especially after “seventy years of Japanese indoctrination.” Therefore, neither restoration to China nor immediate independence was feasible.

Despite the Foreign Ministry’s cautious stance, China’s delegation in Japan proved strikingly farsighted. In confidential communications to Nanjing, the delegation argued that the key boundary question concerned whether the Yaeyama (八重山) and Miyako island (宫古岛) should be included within the Ryukyu domain, recommending that China invoke the 1880 agreement to claim both groups. If these two island chains could not be secured, the report noted, “the matter of the ‘Senkaku Islands (钓鱼岛)’ and Chiwei Island (赤尾屿) is likewise worthy of attention.” The same archival file even contains an English-language draft of a proposed “Sino-American Joint Trusteeship Agreement for the Ryukyu Islands.”

Shortly after WWII, the Ryukyuan people repeatedly sought assistance from China, yet their appeals never received open or sustained attention from the international community. Within the Cold War framework, the United States effectively fixed Okinawa’s status as a complex of military bases, rather than allowing the Ryukyuan people to determine their own future.

Under Article 77 of the United Nations Charter, the international trusteeship system applies to: territories now held under mandate, territories which may be detached from enemy states as a result of the Second World War, and territories voluntarily placed under the system by states responsible for their administration.

Furthermore, under the Potsdam Proclamation, the final status of Okinawa should have been determined collectively by the Allied Powers. The 1951 San Francisco Peace Treaty, concluded with China entirely excluded, with “any proposal of the United States to the United Nations to place under its trusteeship system.” However, the United States never carried out this step. Instead, it maintained long-term unilateral military control and ultimately, in 1972, transferred Okinawa directly to Japan under the label of “reversion,” without any UN trusteeship process and without a formal consensus among the Allied nations.

This trajectory makes one point clear: Ryukyu sovereignty was never conclusively resolved. Rather, it was deferred-submerged beneath Cold War arrangements and political expediency.

This year marks the 80th anniversary of Taiwan’s restoration to China. Ironically, despite Taiwan’s status having been affirmed by the Cairo Declaration, the Potsdam Proclamation, and Japan’s instrument of surrender, some Japanese politicians continue to promote the so-called theory of Taiwan’s “undetermined status.” Against this backdrop, if Tokyo persistently probes red lines on the Taiwan question while simultaneously advancing military deployments in Okinawa, it is hardly surprising that Beijing’s reexamination of the already contested Ryukyu question will draw increasing attention.

The Ryukyu question was quietly placed in a “drawer” of history and geopolitics. When certain conditions emerge, it returns to the center of the table. Today, that drawer has once again been opened slightly. Whether it will be fully opened in the future is not for scholars alone to determine.

What can be stated with certainty, however, is this: Any claim that the question of Ryukyu sovereignty was “long ago conclusively settled” is inconsistent with the historical record, international norms, and the documented negotiations among the Allied powers.

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Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency.

Three flagship financial outlets have seized the sentiment with remarkable enthusiasm and unanimity. The Financial Times declared that “China is making trade impossible,” Bloomberg warned that Beijing is “pulling the ladder up” on the Global South, and the Wall Street Journal pronounced that “China’s Growth Is Coming at the Rest of the World’s Expense.”

Taken together, these reports have formed a broader narrative: China’s swelling trade surplus, which was projected by Goldman to reach 1 percent of global GDP by the end of the decade, is not merely a garden-variety trade imbalance but a deliberate, zero-sum attack to undermine everyone else.

The prognosis is not entirely baseless. Trade frictions are real, and they have become a flashpoint for policy adjustments around the world. Yet the current prescription—more tariffs, mandated re-balancing, containment—rests on a selective reading of the evidence and a notable disregard for the economic choices made elsewhere in the world.

In this piece, we look at four recurring claims behind the “beggar-thy-neighbor” narrative and examine how well they hold up against the available evidence.

1. The myth of “overcapacity”

There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to. For now, to be sure, China is still a customer for semiconductors, software, commercial aircraft and the most sophisticated kinds of production machinery. But it is a customer like a resident doctor is a student. China is developing all of these goods. Soon it will make them, and export them, itself. -- FT

The loudest alarm concerns China’s alleged refusal to import. The Goldman Sachs research note, echoed by the Financial Times, paints China as an export-obsessed hermit, intent on self-sufficiency at all costs.

In the past five years, its export volumes have soared while imports have flatlined. China is swallowing up a growing share of the world’s market for manufactured goods. This reveals an uncomfortable truth: Beijing is pursuing a “beggar thy neighbor” growth model at everyone else’s expense. -- WSJ

The Wall Street Journal adds that China’s imports have stagnated amid soaring exports, embodying a “beggar thy neighbor” model that undercuts growth elsewhere.

Yet the broader “overcapacity” narrative itself overlooks a deeper structural issue: China’s excess notwithstanding, the root of the malaise lies in global investment shortage. As Chinese political economist Lu Di argued in an interview with Beijing Cultural Review (文化纵横) — an increasingly visible magazine focused on Chinese intellectual debates — published on its WeChat blog on Oct. 30, well before much of the recent Western coverage, the world is suffering from chronic under-investment outside China, not Chinese over-investment:

The insufficiency of development space worldwide is due to slow income growth; and one important reason for slow income growth is insufficient investment. The problem we face today is worldwide insufficient investment, not excessive investment. Whether China has excessive investment or occupies too large a share of worldwide demand is debatable. But worldwide insufficient demand is mainly caused by factors outside China — the entire capitalist world has experienced investment stagnation or even decline.

世界范围内的发展空间不足，是因为收入增长缓慢；而收入增长缓慢的一个重要原因，就是投资不足。我们如今面对的问题是世界范围的投资不足，而不是投资过度。中国是否存在投资过度、是否占有过多世界范围的需求份额，这是可以争论的。但是，世界范围的需求不足主要是中国之外的原因导致的——整个资本主义世界出现了投资停滞，乃至下降。

The World Bank’s own analysis reached the same conclusion in 2023, warning that in advanced economies the investment-to-GDP ratio has fallen from around 23 percent before the global financial crisis to roughly 20 percent in 2022, a collapse that has directly weakened aggregate demand and subdued income growth across the OECD.

Between 2000 and 2022, gross capital formation in the OECD dropped from about 25 percent of GDP to 22 percent, while China’s rose to 43 percent. The asymmetry could hardly be starker, and the culpability of the world’s demand shortfall could hardly lie somewhere else.

In 2025, an Oxford study in the Quarterly Journal of Economics models the fallout from these “barriers to international investment frictions,” estimating that they slash the world’s output by about 7 percent while widening the cross-country scatter of capital per worker.

It constitutes a proof that the investment chokehold at the core of the capitalist world is the true global drag, not Beijing’s export engine.

Professor Lu then homes in on the selective outrage of American technocrats like former Treasury Secretary Janet Yellen, who rails against Chinese “overcapacity” in green tech and products while keeping conspicuously silent about surplus capacity in labor-intensive sectors that the West long ago abandoned.

What Yellen targeted was not overcapacity in China’s labour-intensive industries—even if Chinese products conquered the entire world in those fields, they would applaud rather than condemn, according to Lu.

U.S. financial officials accordingly changed their attitude and tone, beginning to harshly accuse China of causing the so-called “global imbalances.” There were even cases where the same person made a 180-degree turn in attitude: when Janet Yellen was Fed Chair (2014–2018), she still praised the “China produces, America consumes” relationship; but when she became Treasury Secretary in the Biden administration (2021–2024), faced with the same reality, she turned to harsh criticism, believing that China had taken too large a share of demand in the global economy, causing various economic difficulties for deficit countries, especially the United States.

美国的财经官员随之转换态度和口风，开始严厉指责中国导致了所谓的“全球经济失衡”。甚至出现了同一个人前后态度180度大扭转的情况：当珍妮特·耶伦担任美联储主席的时候（2014~2018），她还在赞赏“中国生产、美国消费”的经贸关系；但到了她担任拜登政府财政部长的时候（2021~2024），面对同样的现实，她却转换为严厉的批判，认为中国在全球经济中占有了过多的需求份额，导致逆差国家，特别是美国出现各种各样的经济困难。

And according to EMBER, a non-profit energy think tank, and the World Economic Forum (WEF), China’s lead in solar and batteries, evident in its 2024 deployment of 360 gigawatts of wind and solar capacity, over half the world’s total, acts as a dis-inflationary gift, lowering costs for importers and aiding the energy transition, can hardly be dismissed as purely predatory practice:

EMBER: China Energy Transition Review 2025

These investments in the clean energy future are driving dramatic cost reductions across the world in key technologies such as wind turbines, solar panels, storage batteries and electric vehicles... Accelerating deployment of renewables, grids and storage in China... are rapidly bringing China itself towards a peak in energy-related fossil fuel use, while also reducing costs and accelerating uptake of clean electro-technologies in other countries.

World Economic Forum (WEF): China’s renewable energy boom has its own challenges. Here’s what we can learn

The central challenge is ensuring that renewable energy’s low generation costs lowers total system costs and consumer prices rather than increasing them... In 2024 alone, China installed 360 gigawatts (GW) of wind and solar capacity. That’s more than half of global additions that year... This transformation has also driven the rise of new technologies and business models, from battery storage... to electric vehicles.

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2. Who is really pulling up the ladder?

Subramanian says one way China has accomplished this is through shrinking profit margins. Another, he explained in a discussion this month with Taimur Baig, chief global economist at Singapore’s DBS Group, is by substituting robots for higher-cost workers. But China also has failed to “vacate” market share by maintaining policy “distortions,” ranging from an undervalued exchange rate to pure dumping, he said.

“Deliberate policy choices that prevent poorer countries from climbing the development ladder” lie behind China’s dominance, Chatterjee and Subramanian concluded. -- Bloomberg

Bloomberg accuses China of hogging low-end manufacturing, “pulling the ladder up” on poorer nations, per the economists Shoumitro Chatterjee and Arvind Subramanian. The Journal concurs, claiming Beijing deviates from the paths of Germany, Japan or South Korea, which vacated basic industries for those at the lower rung of the development ladder.

This ladder metaphor, however, is fundamentally flawed. China has in fact actively enabled the rise of many in the Global South. Professor Lu counters that China has run trade deficits with developing countries since the early 2010s, only recently flipping to surpluses, while offshoring labor-intensive production to Vietnam, Bangladesh, and Ethiopia.

“Before 2012, China did indeed have a fully comprehensive industrial structure... But at the same time, China began to undergo a transformation in trade structure... our labor-intensive export-oriented industries began to migrate on a large scale and systematically to Vietnam, Cambodia, Bangladesh, Ethiopia... Therefore, in this sense, China has not squeezed other countries’ development space.”

“2012年之前，中国确实是产业结构全覆盖……大量研究表明，其他发展中国家的纺织、服装、玩具……确实曾经受到中国的竞争压力。但与此同时，中国开始发生贸易结构的转型，我们开始出口资本和技术密集型产品，并且比重不断上升，我们的劳动密集型出口导向的产业则开始大规模、系统性地迁往越南、柬埔寨、孟加拉、埃塞俄比亚等发展中国家。因此，在这个意义上也没有发生中国以自身全覆盖的产业链挤压其他国家发展空间的事。”

An East Asia Forum August 2024 analysis seconds this, noting that “China’s large markets and proximity offer ASEAN substantial benefits as a source of investment and an export market, from reductions in production costs through supply chain integration.”

The New York Times, in a September 2025 report on China’s Africa exports, highlights a $60 billion surplus but also surging infrastructure deals that boost local growth, which is indicative of something far from ladder-pulling.

The real hurdle, Lu argues, lies in Western investment atrophy, not Chinese dominance. In a 2024 Project Syndicate column, Harvard economist Dani Rodrik argues that China’s massive subsidies for green tech are not the “beggar-thy-neighbor” strategy the West claims. Rather, they are “enrich-thy-neighbor” policies that help slash clean energy prices, hasten the shift away from fossil fuels, and fill the void left by inadequate carbon pricing. China’s edge, Professor Rodrik believes, stems largely from productivity gains and innovation spillovers, instead of deliberately harming trading partners.

3. The “insecurity” mis-argument

China is developing all of these goods. Soon it will make them, and export them, itself. “Well, how can you blame us,” the conversation usually continued, after agreeing on China’s desire for self-sufficiency, “when you see how the US uses export controls as a weapon to contain us and keep us down? You need to understand the deep sense of insecurity that China feels.”

That is reasonable enough and blame does not come into it. But it leads to the following point, which I put to my interlocutors and put to you now: if China does not want to buy anything from us in trade, then how can we trade with China? This is not a threat but a simple statement of fact. -- FT

The Financial Times attributes China’s self-sufficiency drive to a “deep sense of insecurity” post-sanctions, dismissing it as paranoia.

But as part of the democratic West, they didn’t fear economic interdependence nor seek to eliminate imports. And as they moved up the value chain, they allowed lower-end manufacturing to migrate to poorer countries.

Those countries “were driven by a desire for prosperity,” said Rush Doshi, a China expert who served on President Joe Biden’s National Security Council. “China is driven by a fortress mentality and sees industrial dominance as key to wealth and power. These are longstanding goals deeply rooted in nationalism and the Communist Party.” -- WSJ

The Journal, citing Rush Doshi, frames it as a “fortress mentality” rooted in nationalism, contrasting it with prosperity-driven Western models.

“A very simple example: the profits of American high-tech companies such as Apple, Microsoft, Amazon, Google, and Meta mainly flow into various kinds of financial speculation, especially used to buy back their own shares... rather than being used for reinvestment to promote industrial upgrading. China is different; the most striking example is Huawei... In Keynesian terms, capital in developed countries is simply ‘on strike’.”

“很简单的例子，苹果、微软、亚马逊、谷歌、Meta这些美国高科技公司，它们的利润主要进入了各种各样的金融投机活动，特别是用来回购自己公司的股票……而不是用来投资再生产，推动产业升级。中国则不同，最鲜明的例子是华为。华为将主要的利润用来再投资，所以才能逐步动摇、侵蚀美国公司的垄断租金。按照凯恩斯理论的说法，发达国家的资本在‘怠工’。”

Lu reverses the logic of this argument: in his view, it is the West that exhibits a deeper sense of insecurity, reflecting the erosion of long-standing monopoly rents and a diminished capacity to extract rents amid their inability to re-invest productively in the world.

A 2025 Al Jazeera commentary makes a similar point, arguing that Western criticism of China has intensified because its corporate profits are being squeezed as China’s economic development has brought up the price of its labor while its technological development is breaking longstanding monopolies and may give other developing countries alternative suppliers for necessary goods at more affordable prices.

Within Western academia, there is broad acknowledgment that U.S. export controls have been a major driver of China’s push for technological self-reliance—an adaptation shaped more by necessity than by any intent to disrupt.

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4. The coming world of two camps

China’s next five-year plan should temper any hope of change. Consumption is on the priority list, at number three. Items one and two are manufacturing and technology. That leaves one difficult solution and one bad solution for Europe. The difficult solution is to become more competitive and find new sources of value, as the US does with its technology industry. -- FT

Both the Financial Times and Bloomberg pieces deliver the same grim verdict: since Beijing shows no intention of re-balancing toward consumption, letting its currency appreciate uninterrupted, or abandoning industrial subsidies, the rest of the world has no choice but large-scale protectionism.

Usually, if one major global economy grows faster, it lifts all — or at least many — boats. But that’s not the case with what’s going on in China, Goldman’s Joseph Briggs, Megan Peters and Sarah Dong wrote in a recent note titled “Beggar Thy Neighbor.”

While there should be some positives, such as downward pressure on global prices that allows central banks to cut interest rates further, net-net, China’s “spillovers to other countries are more likely to be negative,” the team wrote. They added that China’s supply “may crowd out” production in other nations. -- Bloomberg

Europe, in particular, is told it faces a binary: protect or perish. Goldman calls China’s “spillovers to other countries are more likely to be negative,” and it “may crowd out” production in other nations.

It is, in effect, akin to saying out loud that China’s surplus is a deliberate act of keeping everyone else down, leaving tariffs and subsidies wars as the only rational response left.

Lu rejects this prognosis root and branch:

In such a situation, if developed countries wish to maintain their existing mode of capital accumulation, they must cut ties with China. Because they already know that China cannot be their ‘little partner,’ content to remain relatively underdeveloped and voluntarily contribute its production fruits to developed countries. Moreover, if China continues its current development trajectory, it will continuously erode the monopoly rents on which developed countries survive. Even in monetary and financial terms, their monopoly position is being shaken, albeit to a lesser degree. Politically, global capitalism cannot accommodate China as a member, especially not allowing it to become a developed country—according to the Western establishment’s judgment, the Earth’s resources cannot bear it.

“在这样的情况下，如果发达国家希望继续维持已有的资本积累模式的话，它们就必须跟中国切割。因为它们已经知道，中国是不可能作为它们的‘小伙伴’，甘于停留在相对而言不发达的状况、自愿把生产成果贡献给发达国家的。不止如此，如果中国按这样的发展势头继续发展的话，会不断削弱发达国家赖以生存的垄断租金。其实，哪怕是货币金融意义上，发达国家的垄断地位也正在被动摇，虽然程度没有那么高。在政治上，世界资本主义也容纳不了中国作为它的一个成员，特别是不可能让中国成为一个发达国家——按照西方建制的判断，地球的资源也承受不起。”

The eventual bifurcation of the world economy into “two camps” is probable, Lu acknowledges, but not because China is unwilling to engage within existing rules. Rather, he suggests, it reflects a growing reluctance — and in some cases an institutional incapacity — within the West to accommodate the consequences of genuinely competitive catch-up by a latecomer that does not accept a permanently subordinate role.

The West can only choose to decouple from China and try to suppress China as much as possible… However, this will be a long process of evolution, because the West is now also highly dependent on productive activities related to China and can only gradually ‘decouple’… Therefore, for some time to come, a fundamental transformation of the world political order is unlikely… What is more likely to happen is that the world will split into two camps: one camp dominated by developed countries, and one camp dominated by China… The vast Global South countries, including some European countries, may maintain relationships of varying degrees with both cores in trade, production, finance, currency, and other fields. The camp with China as the core should form more equal relationships, while the camp with the United States as the core will still maintain hierarchical relationships.

西方只能选择跟中国切割，尽量打压中国。但是，这将是一个漫长的演变过程，因为现在西方也高度依赖与中国相关的生产性活动，只能逐步与中国‘脱钩’。……未来一段时间，可能不会发生世界政治秩序的根本性改造……更有可能出现的情况是，世界将变成两个阵营，一个是发达国家主导的阵营，一个是中国主导的阵营……广大的全球南方国家，包括一部分欧洲国家，在贸易、生产、金融、货币等领域，可能会同时与两个核心保持不同程度的关系。以中国为核心的阵营应该会形成更平等的关系，以美国为核心的阵营则仍然会保持等级性的关系。”

According to Lu, much of the Western policy establishment operates as if China cannot be permitted to reach the status of a fully developed economy, given that their own model of accumulation relies on preserving certain monopoly rents that China’s rise is now eroding. In this reading, distancing from China becomes a strategic response, even as the process will be long and painful as they remain deeply dependent on China’s productive apparatus. The political decision behind this momentum, Lu suggests, has already been made.

The intensity of Western reactions to China’s trade surplus reveals more about the vulnerabilities of their own growth model than about China’s intentions. After decades of championing open markets, established powers now find that genuine competition from a latecomer unwilling to remain subordinate can feel destabilizing. Tariffs are no longer corrections, but a bastion to protect an accumulation model that has struggled to invest productively. This panic arrives precisely when China is leading the charge of a clean-energy revolution and opening a genuine second gateway for the Global South. The rules-based order is being jettisoned the moment it threatens to work for someone else.

Two camps are indeed coming into being, but not because Beijing refuses to consume more. They are forming because they behave as if the planet is unable to support another billion population at high-income levels, and that the exclusivity of technological rents must remain in the hands of a few. China’s growth is making both propositions moot. The coming decade will reveal who still believes prosperity can expand, and who prefers isolation.

About the Sources:

Lu Di (卢荻) (or Dic Lo) is Professor of Political Economy at Lingnan College, Sun Yat-sen University, and the director of the Political Economy Research Institute at the university. He has been with the School of Oriental and African Studies (SOAS) University of London since 1994, serving as a lecturer in the Department of Economics.

A scholar in development economics, the Chinese economy, and the political economy of globalization, he has published extensively in high-impact English-language journals including the Cambridge Journal of Economics, China Quarterly, and Journal of Post Keynesian Economics. He has also received grants from National Social Science Foundation of China to explore the political economy of Socialist China in the perspectives of global-comparative studies.

Beijing Cultural Review (文化纵横) is a bimonthly Chinese magazine founded in 2008. The magazine publishes long-form essays that integrate economics, international relations, history, and philosophy. It regularly features extended interviews with prominent scholars and in-depth analyses of global and strategic issues. An English selection has also circulated online for international readers, though its official status is unclear. The journal is widely cited in Chinese academia and policy circles.

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Once the roaring driver of China’s meteoric economic rise, the property sector now stands at a defining turning point. In China’s recently released proposals for the 15th Five-Year Plan (2026-2030), the real estate industry, previously placed within chapters on consumption, services, and urbanization in the country’s medium-term blueprints, has been repositioned under the section of “public well-being” for the first time in decades.

For many Chinese, the move evokes the bygone era of “welfare housing allocation,” when urban dwellings were doled out through a rigid command system. Yet the latest pivot is far from a nostalgic return to the cradle-to-grave welfare. After years of breakneck growth fueled by rampant high-leverage practices and nationwide speculation mania, the sector now faces its most protracted and challenging adjustment. Chinese policymakers seem to be steering the housing industry back to its “original aspiration”: providing homes that are available, affordable, and ameliorated.

The shifts came after a cascade of crises that punctured the once-towering myth of China’s property boom. Evergrande Group, once the country’s largest property developer by sales, collapsed into liquidation this August, leaving liabilities exceeding 2 trillion yuan (about 280 billion U.S. dollars). Country Garden, long the biggest private home seller in China, is grappling with slumping sales and offshore defaults, sinking into a painful restructuring. Several retail complex giants have resorted to offloading assets at steep discounts, a stark reversal for companies that once expanded aggressively across Chinese cities.

The fallout has rippled outward. Local governments, heavily reliant on land sales to finance their expansionary budgets, are confronting a painful debt reckoning despite sweeping policies last year to ease the pressure. Ordinary Chinese households, who for decades funneled their savings into property, are now approaching the market with caution, even trepidation.

China’s roaring twenty years of real estate are officially over. While the country’s GDP grew 5.2% year-on-year in the first three quarters of 2025, property investment fell 13.9% and new-home sales slid 7.9%. Bracing for a bleak outlook, the new five-year plan—framed around fresh expressions such as “high-quality development,” “quality homes” and “city-specific policies”—appears poised to herald a new epoch in China’s real estate market.

“The More the Merrier“ No More

In the new five-year blueprint, housing policy is framed less as an economic driver and more through a social lens. Wu Jing, director of the center for real estate at Tsinghua University, sees the shift as a return to first principles: “China’s housing system must be crystal clear about its foundational purpose—serving basic needs. Only then can we discuss its broader economic contribution.”

China’s early housing system, rooted in a planned economy, embodied that logic. Urban residents were largely employees of state-owned enterprises and lived in state-owned units. Housing was allocated at minimal cost, and rents were nominal, yet scarcity was acute. By the end of 1977, the average living space per person measured only 3.6 square meters, roughly the footprint of an escalator in a shopping mall.

The market-oriented reform launched in the late 1970s set the stage for change, yet state provision remained the norm until Shanghai piloted a housing provident fund in 1991. The real turning point came in 1998, when China formally ended the housing allocation system that had lasted for half a century. For millions of families, the familiar sense of security based on state-provided housing evaporated overnight: homes had become a commodity.

The sector then entered a frenetic two-decade boom. Annual housing starts ballooned from tens of millions of square meters in the 1990s to over one billion by 2010, peaking at 1.7 billion in 2017. Much of this surge was driven by one of the largest population shifts in human history: China’s urban population surged from 190 million in 1980 to 944 million in 2024, creating a scale of housing demand unmatched anywhere else.

Housing was no longer just a roof over one’s head. It had become a tradable and investable asset. Home-ownership became a key vehicle for lifestyle upgrading, with practical and speculative motives converging in a wave of market activity.

Guided by the principle that “housing consumption could drive domestic demand,” developers scrambled to expand, leveraging high turnover and heavy debt, fueled by presale deposits and bank loans. Investment in property development soared, averaging 19.5% growth annually. A pivotal 2003 government policy, which enshrined commercial ambitions in the housing industry, ushered in an era of extravaganza driven by policy incentives, surging market demand, and aggressive development models.

Hidden risks started to surface after rapid, euphoric growth. Soaring prices, rampant speculative buying, and local governments’ growing reliance on land sales left the market overly exposed to policy swings. At the same time, demographic aging, slowing urbanization, and a glut of new stock began to reshape supply-demand dynamics. In 2016, China’s top leader Xi Jinping famously uttered the phrase “housing is for living in, not for speculation,” signaling stricter regulations to cool speculative activity. It appeared to be a yellow flag for the long-entrenched role of real estate as a short-term engine for economic growth. By September 2024, China’s top decision-making body, the Politburo, for the first time called for measures to “stabilize the real estate market and halt the decline in prices,” demonstrating a continued commitment to a soft landing.

Nonetheless, real estate is likely to remain a pillar of China’s economy. Over the next quarter-century, nationwide demand is projected at 1–1.2 billion square meters of new housing each year, representing a market worth roughly 10 trillion yuan (about 1.4 trillion U.S. dollars). As Prof. Wu observes, the sector’s true value now lies less in spurring new construction and more in managing its vast existing stock to deliver steady economic support. A stock-focused approach is increasingly central to the industry’s contribution to the economy.

Beyond market dynamics, China’s housing system has been subtly shaped by a growing government-subsidized housing system—a measured policy swing distinct from the welfare allocations of earlier decades. In the latest “15th Five-Year Plan” proposals, the language around affordable housing signals a nuanced shift: where the previous plan spoke of “effectively increasing the supply of government-subsidized housing,” the new one emphasizes “improving” supply. Of the roughly 1.2 billion square meters in annual new housing demand, some 200 million comes from the safety-net segment. Though not profit-driven, it is vital in stabilizing expectations and anchoring social welfare.

China’s government-subsidized housing system, launched in 1994, initially focused on providing economically priced homes for low- and middle-income families, complemented by commercial housing for higher-income groups. Over time, more than 80 million units have been completed nationwide, benefiting over 200 million people—roughly the population of Brazil.

In May 2024, a new policy mechanism began rolling out. He Lifeng, the vice premier responsible for finances and housing, proposed that in cities burdened by high inventories of commercial housing, the government could “purchase in place of building”—acquiring existing unsold units at reasonable prices and converting them into affordable housing.

Once the central government set the direction, local authorities were quick off the mark. Within six months, more than 30 cities rolled out detailed guidelines for purchasing and repurposing existing housing stock. In Hebei Province, roughly 8,400 affordable rental units were secured in the first quarter of 2025, nearly half from existing commercial housing. Meanwhile, Liaoning Province plans to expand allocation-based housing by 120,000 units by 2027. State-owned enterprises are acting as intermediaries between market forces and government objectives.

These measures not only gently absorb excess inventory, but also reinforce and broaden China’s affordable housing system. Concurrently, the new proposals emphasize “quality homes” that are safe, comfortable, eco-friendly, and smart. While not a novel concept, it assumes renewed significance over the next five years, guiding both new developments and upgrades to China’s existing housing stock.

The vision of “quality homes” was concretized in the government-sponsored “residential project standards” implemented since May 2025. Key requirements include ceiling heights of at least three meters and mandatory elevators in buildings of four floors or more—a significant lowering from the previous seven-floor threshold. Standards for soundproofing and daylighting have been substantially upgraded, while mobile phone coverage in elevator cabins addresses a long-standing frustration. Nuanced as they might be, these upgrades elevate daily life while bringing Chinese housing closer to international benchmarks of quality and livability.

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Toward a Soft Landing

Back in the frenzy of rapid construction and compressed schedules, building quality quickly surfaced as the most visible fault line. Across multiple regions, structures derided as “brittle towers” and “crooked blocks” laid bare the engineering compromises made in the rush to build. Excessive leverage and idle capital deepened financial fragility, while vast stretches of newly built districts remained eerily vacant. Viewed this way, today’s slowdown is less a rupture than a necessary recalibration—painful, yes, but hardly unexpected.

The 15th Five-Year Plan proposals call for “further improving foundational systems for the development, financing, and sales of commodity housing.” Notably, it places real estate risks at the very top of the national risk-prevention agenda, before local government debt and risks in small- and medium-sized financial institutions. The placement speaks for itself.

Policymakers are also closing institutional gaps left by years of rapid expansion. Developers are being required to insulate presale funds through stricter rules; A lead-bank mechanism ties lenders and builders jointly responsible for project execution, tightening accountability across the chain. And a gradual shift toward delivering completed homes, rather than selling off-plan, aims to eliminate the chronic risk of unfinished projects. Together, these measures seek to return China’s property sector to a sustainable, predictable, and deliverable footing.

Since the 2016 call that “housing is for living in, not for speculation,” China’s policy focus has evolved from suppressing speculative excess to managing downside risks and safeguarding systemic stability. The 2024 guidance to “stabilize the real estate market and halt the decline in prices” extends that approach while taking it a step further.

At the start of 2024, Zhu Ning, a leading expert on China’s economy and financial system at Shanghai Jiao Tong University, offered a blunt diagnosis: the real estate market may need another three to five years before truly finding its bottom. In a recent interview, Zhu said that while price declines have started to taper off in certain third- and fourth-tier cities, transactions and liquidity are rapidly drying up. Put simply, prices may stop falling, but fresh demand is virtually non-existent. “This is not a healthy market,” he said.

Recent statistics seemed to validate Zhu’s warning. Official data from China’s National Bureau of Statistics showed that in October, second-hand home prices in first-tier cities fell 0.9% month-on-month, marking a sixth consecutive month of declines. Second- and third-tier cities saw prices drop 0.6% and 0.7% respectively. Across 70 major cities, the traditional September–October peak season for home sales in China offered no relief: all recorded month-on-month declines for a second consecutive month.

The slowdown reflects decades of latent pressures finally surfacing. Over the past few decades, China has undergone one of the fastest and largest urban transformations in human history. The urbanization rate has climbed from 11% in 1949 to 67% today, and the country’s urban population now tops 940 million—twice the combined population of the European Union’s 27 member states.

That demographic tidal wave unleashed prodigious housing demand. Coupled with local governments’ reliance on land-sale revenues, it created a self-reinforcing loop of “high land prices, high home prices, and high expectations.” When the market turned, the same mechanisms ran in reverse: falling home prices eroded household wealth, shrinking transactions squeezed land finance, and mounting leverage surfaced as a systemic risk.

Population flows are shifting. The historic “rural-to-city” migration is giving way to movements from smaller towns toward major urban hubs. While megacities continue to exert an irresistible pull, many third- and fourth-tier cities face population loss, faltering demand, and dwindling economic vitality.

These dynamics do more than tilt the market cycle. They deepen it, turning a routine correction into a structural recalibration. Feng Changchun, deputy director of the Beijing Development Institute at Peking University, warns that China’s “second-stage” urbanization is still some distance from high-quality: newcomers often lack full access to public services, while smaller cities lack governance capacity to absorb or retain new residents.

Hegang, a third-tier industrial city in northeast China, illustrates the extremes: in some cases, two iPhones could buy an entire apartment. While rare, such valuations lay bare structural strains-supply-demand mismatches, slow absorption of existing stock, and mounting fiscal pressures-forces that entwine local finance and debt.

Across the country, tiered divergence is stark. First-tier cities retain resilience through concentrated jobs, industries, and educational resources. Many third- and fourth-tier cities, by contrast, are trapped in a downward spiral: falling home prices shrink fiscal revenues, tighter budgets curb public investment, and weakened services further depress demand.

The new five-year plan proposals therefore call for “city-specific policies” to align housing supply with genuine demand. The idea is to link the key elements of housing—people, land, capital, and supply—into a coordinated system. Decisions on where to expand or curb housing should no longer be dictated by developers’ timelines or fiscal pressures, but grounded in demographic trends, economic potential, and urban capacity. As Prof. Wu puts it, housing must follow people, not the reverse.

The wider challenge is to restore the fundamental social purpose of housing: providing stable homes and enabling healthier urban growth. China’s property market is feeling its way toward a slower, steadier, more resilient trajectory—and that cautious search may be the hardest, yet most consequential, part of a soft landing.

Smart, Managed, Investable

The proposals of the 15th Five-Year plan also signal a strategic shift in housing governance. China is moving beyond a build-at-all-costs mentality toward full life-cycle management: conducting regular structural check-ups to flag risks early, creating a dual-track maintenance fund financed by homeowners and supplemented by public resources, and promoting market-based housing quality and safety insurance.

As Prof. Wu noted, China’s housing stock is enormous, “quality home” construction, old-neighbourhood upgrades, smart-community development, and green retrofitting still offer substantial economic potential. “Rather than cutting capacity, we should transform it,” he said. That logic is already taking shape in major cities, where urban regeneration, smart-community solutions, and environmentally conscious upgrades are rapidly becoming core business lines for developers.

In a district of Shenzhen, a city often dubbed China’s Silicon Valley, leading developer China Resources Land has evolved beyond a builder, orchestrating neighborhoods as integrated urban ecosystems—with housing, offices, retail, and sports facilities-becoming a city operator. In a smart community in Beijing, a system provides 24/7 monitoring service for residents: elevators can detect when a senior living alone falls and trigger instant alerts, while water and electricity systems can automatically shut off in emergencies. Hangzhou offers a similar vision, with sensor-equipped mattresses tracking elderly residents’ health and notifying doctors as needed.

Prof. Wu likens this shift to the leap from a feature phone to a smartphone, suggesting China has a chance to “overtake on a curve” in residential intelligence, much as it has in the electric vehicle sector through innovation and competitive ingenuity.

For policymakers and developers alike, the stakes extend well beyond individual buildings. Real estate now spans smart infrastructure, city-wide operations, energy-efficient design, and enhanced lifestyle services, redrawing the sector’s boundaries.

In the meantime, the proposals call for accelerating new real estate models, with financial innovation playing a key role in structural transformation. As Prof. Feng noted, reconfiguring the flow of capital could unlock long-standing bottlenecks and create a more diversified and resilient financing system.

“Compared with developed economies, China’s range of housing finance tools remains limited. Emerging instruments such as REITs, however, offer a promising path forward,” said Prof. Feng.

REITs, or Real Estate Investment Trusts, are publicly traded vehicles that own or finance income-generating real estate, enabling individual investors to participate in property markets without directly purchasing buildings themselves. In China, their gradual introduction could broaden investment channels, improve capital efficiency, and support new models of sustainable real estate development.

China launched its public REITs pilot in 2020. By August 2025, over 70 infrastructure REITs were listed, raising 198.6 billion yuan in total, with a combined market value of 218.8 billion yuan. The portfolio has broadened beyond traditional transport and energy assets to include heating networks, environmental projects, logistics hubs, industrial parks, data centers, rental housing, water infrastructure, and even consumer-facing facilities—laying the foundation for a more diversified, market-driven real estate finance ecosystem.

“China’s built assets are worth an estimated 400 trillion yuan,” said Prof. Wu. “The economic returns from managing and optimizing this vast stock are far from exhausted. Even amid adjustments, the sector’s fundamental strengths—its scale, adaptability, and capacity for innovation—remain firmly intact, anchoring the future of China’s cities and economy.”

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Tan Yixiao is a Xinhua journalist. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn

Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

For more stories on China’s five-year plans:

On Nov. 18, at the UN General Assembly’s plenary meeting on Security Council reform, China’s Permanent Representative Fu Cong came out swinging against Japan:

“Is Japan going to repeat its past mistakes of militarism?... How can the international community trust Japan’s professed commitment to peaceful development? How can we trust Japan to uphold fairness and justice? How can we trust Japan to shoulder the responsibility of maintaining international peace and security?” He asked, concluding Japan is “totally unqualified to seek a permanent seat on the Security Council.”

Stripped of sugarcoating and diplomatic cushioning, this may well be Beijing’s sharpest statement in the past decade against Japan’s bid for a permanent seat on the UN Security Council. Fu’s remarks at the UN were not an isolated signal of China’s mounting frustration over Japan recently.

On Nov. 13, Chinese Vice Foreign Minister summoned, reportedly “upon instruction,” the Japanese Ambassador to China to lodge solemn representations over Prime Minister Sanae Takaichi’s erroneous remarks concerning China.

This move was highly unusual. The last time Beijing summoned the Japanese ambassador was still more than two years ago, in August 2023, over Japan’s decision to release Fukushima wastewater into the ocean. What makes this episode even more noteworthy is the rare use of the phrase “summoned upon instruction” in the Foreign Ministry’s statement. This indicates that the demarche was not a routine diplomatic protest, but reportedly, an action directly authorized by China’s top leadership, showing that the issue has escalated into a major diplomatic concern in Beijing.

The spark that ignited the latest controversy came from Takaichi’s remarks during a Diet meeting on Nov. 7. A Taiwan emergency involving the use of military force could constitute a “survival-threatening situation” for Japan under the country’s security legislation, she said.

A law pushed through the Diet ten years ago, amid massive public protests, stipulates that once such a “survival-threatening situation” is determined to exist, Japan may exercise the right of collective self-defense even if it is not directly attacked. Takaichi’s comments were therefore quickly and widely interpreted as hinting at Japan’s military intervention in a Taiwan conflict scenario, triggering strong questioning and opposition.

This was not the first time in recent weeks that the veteran lawmaker, a 30-year Diet member who has been prime minister for less than a month and is known for her hawkish stance toward the Chinese mainland, has crossed Beijing’s red lines on Taiwan. On October 31, while attending the APEC meetings, she posted a photo on X saying: “Before the APEC summit, I greeted and spoke with Lin Hsin-yi, ‘Senior Adviser to Taiwan’s Office of the President’.”

Earlier that same day, during her meeting with the Chinese President, she had reaffirmed that “Japan will adhere to the position stated in the 1972 Japan-China Joint Communique regarding the Taiwan question.” The contrast between her two sets of remarks was striking.

Takaichi’s tweet immediately prompted a stern protest from China’s Ministry of Foreign Affairs, slamming her for seriously violating the one-China principle and sending a gravely wrong signal to “Taiwan independence” separatist forces. Yet no one expected that just a week later, she would once again make a startling statement on Taiwan, unleashing one of the most intense waves of Chinese official and public criticism toward Japan seen in recent years.

Let us take a look at what has been said:

Wu Jianghao, Chinese Ambassador to Japan (Nov. 14):

“Prime Minister Sanae Takaichi made an openly provocative statement on Taiwan during her Diet meeting, flagrantly violating basic common sense, crossing China’s red line, issuing military threats, and even making warlike remarks. She has refused to acknowledge her mistake, refused to retract her comments, and refused to undo their harmful impact. This reflects a complete misreading of the situation and an utter overestimation of herself.

“…By clamoring for military intervention in Taiwan-related affairs, the Japanese authorities are blatantly challenging China’s core interests. They are voluntarily tying themselves to the chariot of Taiwan separatism and steering themselves onto a path of no return.

“…We sternly warn the Japanese side: today’s China is no longer the China of the past. Should Japan dare to intervene militarily in the Taiwan Strait, such action would constitute aggression, and China will surely deliver a head-on blow. China strongly urges Japan to seriously reflect on its history, retract its egregious remarks, and stop its provocations and red-line crossing. Otherwise, all consequences will be borne by the Japanese side.”

Jiang Bin, Chinese Defense Ministry Spokesperson (Nov. 14)

“The erroneous remarks on Taiwan made by the Japanese leader constitute a gross interference in China’s internal affairs, and a serious violation of the one-China principle, the spirit of the four political documents between China and Japan, and the basic norms governing international relations. The remarks have challenged the post-war international order, and sent very wrong signals to the “Taiwan independence” separatist forces. Such words are egregious in nature and have caused very negative impact. They are extremely irresponsible and dangerous.

“…Should the Japanese side fail to draw lessons from history and dare to take a risk, or even use force to interfere in the Taiwan question, it will only suffer a complete failure before the steel-willed PLA and pay a heavy price.”

Chen Binhua, the State Council Taiwan Affairs Office Spokesperson (Nov. 14)

“As for the means to be employed, that is entirely a matter for the Chinese people themselves and brooks no interference from any external forces. Japan and its current leaders have absolutely no standing to make irresponsible remarks, let alone issue veiled threats or attempt to obstruct China’s reunification.

“…On the 80th anniversary of the victory of the War of Resistance against Japanese Aggression and the restoration of Taiwan, instead of reflecting on its criminal history and drawing painful lessons, the Japanese side, through Prime Minister Sanae Takaichi, has made blatant and malicious statements on Taiwan, seeking to meddle in the Taiwan Strait, negate the outcomes of the victory over fascism, and challenge the postwar international order. The Chinese government and the Chinese people will absolutely not accept, tolerate, or condone this. Should Japan dare to intervene militarily in the Taiwan question, we will deliver a head-on blow and resolutely crush any such attempt.”

Sun Weidong, Vice Foreign Minister (Nov. 13)

“80 years ago, the courageous Chinese people fought a bloody struggle for fourteen years and defeated Japanese aggression. 80 years later, anyone who dares to interfere in China’s cause of reunification in any form will be met with a head-on blow from China.”

Lin Jian, Foreign Ministry Spokesperson (Nov. 13)

“What is the true intention behind Japanese Prime Minister Sanae Takaichi once again raising the so-called ‘survival-threatening situation’ today? Is Japan seeking to repeat the mistakes of militarism? To once again set itself against the Chinese and other Asian peoples? To attempt to overturn the postwar international order?

“…If the Japanese side dares to intervene militarily in the Taiwan Strait, such an act would constitute aggression, and China will surely deliver a head-on blow. We will firmly exercise the right of self-defense granted by the UN Charter and international law, and resolutely safeguard our national sovereignty and territorial integrity.

“…Do not play with fire on the Taiwan question. Those who play with fire will inevitably get burned.”

Lin Jian, Foreign Ministry Spokesperson (Nov. 10)

“The attempt by the Japanese authorities to interfere in Taiwan-related affairs is a trampling on international justice, a provocation against the postwar international order, and a grave undermining of China-Japan relations.

“…The Chinese people possess firm will, full confidence, and sufficient capability to resolutely crush any attempt to meddle in or obstruct China’s cause of national reunification.”

It is notable that in the responses issued by various Chinese government departments on November 13-14, all but the Ministry of National Defense used the phrase “a head-on blow (迎头痛击)”. This expression is rare in China’s official discourse too, especially in the context of China-Japan relations, and thus carries significant weight. The wording not only characterizes Takaichi’s remarks as an aggressive provocation, but also conveys clearly that should Japan resort to military interference in China’s internal affairs, Beijing would not hesitate to take all necessary measures in resolute counteraction. It is both a stern political warning and an explicit security and military signal.

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China has not only responded forcefully at the official level, but has also mobilized its entire publicity apparatus. Takaichi, widely called out by name by Chinese media outlets, has surely enjoyed treatment that even some American politicians may not have received at the height of the China-U.S. trade war. This underscores the level of Beijing’s outrage over her remarks.

For instance:

Xinhua: “Takaichi’s backward turn in history is a path destined for failure”

“Takachi’s actions are not incidents of individual behavior. Rather, they reflect a broader right-wing undercurrent within Japan that seeks to revive militarism and completely break free from the constraints of the post-war system.”

CCTV’s “Yuyuan Tantian”: “China is ready to unleash countermeasures against Japan”

“The egregious nature of Takaichi’s remarks lies not only in their blatant challenge to the political foundation of China-Japan relations but also in her lack of remorse afterward and her outright refusal to retract the erroneous statements.”

PLA Daily: “Saber-rattling about intervening militarily in the Taiwan Strait will only steer Japan onto a path of no return”

“After all, once you start playing with fire, the way in which the flames spread is no longer something the fire-starter can control.”

Taiwan was seized and colonized by Japan for half a century after Japan launched a war of aggression against China in 1894-1895. During WWII, China fought side by side with the Allied powers, including the United States, the United Kingdom, and the Soviet Union, making tremendous sacrifices to halt the expansion of fascist forces, Japan among them, and ultimately securing victory. The postwar international order, which was established with the participation of China as a major Allied nation, was clearly articulated in the Cairo Declaration and the Potsdam Proclamation: the territories Japan had stolen from China, including Taiwan, had to be restored to China.

After Taiwan’s restoration to China in 1945, the cross-Strait situation entered a prolonged and atypical state of political standoff, due to the continuation of China’s civil war and interference from external powers. But China’s sovereignty and territorial integrity have never been divided, nor will China ever permit the division.

For these reasons, the Taiwan question carries deep emotional weight among the Chinese public. When Japan, a country that once committed aggression, war crimes, and colonial rule in China, makes statements on Taiwan that trigger historical memories, the impact extends well beyond present-day sovereignty or strategic concerns. It touches a particularly sensitive dimension of China’s collective historical memory, underscored by the country’s recent commemoration of the 80th anniversary of Taiwan’s restoration just this October. Beijing’s reaction reflects this sensitivity.

In addition, although figures such as Deputy Prime Minister Taro Aso and former Prime Minister Shinzo Abe have made similarly explicit remarks in the past, Takaichi’s remarks carry fundamentally different significance. Since Japan’s defeat in 1945, this is the first time that a sitting Japanese head of government has, in an official setting, promoted the notion that “a Taiwan contingency is a Japanese contingency,” explicitly linking it to the exercise of collective self-defense. It is also the first time that a Japanese leader has expressed an ambition to intervene militarily in the Taiwan question, and the first time Japan has issued a direct threat of force toward China since 1945.

Historically, Japan has repeatedly invoked its own “security” and “national survival” as justifications for launching preemptive wars abroad. Before its 1931 invasion of northeast China, the opening skirmish of the prelude to WWII, Tokyo spread narratives of existential crisis. Prior to its 1941 attack on Pearl Harbor, Japan likewise circulated rhetoric of “imminent national peril.”

Given Takaichi’s longstanding identity as a right-wing politician seeking to break free from the postwar system, it is not difficult for informed observers to draw connections, or feel alarmed, about the intentions behind her latest remarks.

For years, she has championed the idea of Japan’s so-called “normalization” as a member of the Diet. Her latest improper remarks on Taiwan may contain an element of off-the-cuff bluntness, but they nonetheless reflect her consistent core belief: overturning the pacifist constitution as part of her vision for transforming Japan into a country capable of waging wars.

Japan’s postwar constitution explicitly renounces war as a sovereign right. Yet in 2015, under then Prime Minister Abe, Japan breached this constraint through the new security legislation, which lifted the ban on collective self-defense and introduced the category of “survival-threatening situation.”

A close protégé of Abe, and widely seen as the inheritor of his political legacy, Takaichi is now deliberately stretching the scope of what constitutes a “survival-threatening situation,” attempting to fold China’s internal affairs, the Taiwan question, which bears no direct relevance to Japan’s own security, into that category. This is clearly an abuse of the innately controversial concept, aimed at inflaming tensions in the Taiwan Strait as a means to break free from the historical constraints imposed on Japan as a defeated nation.

What is equally dangerous is that her rhetoric directly implicates the United States, seeking to bind Washington to Tokyo’s strategic assertions. For the U.S., this would not only mean being dragged into a potential conflict that does not align with its core interests, but would also heighten the chances of serious miscalculation in East Asia.

In other words, such statements were intended to sell the United States an uninvited, uncontrollable, and entirely unnecessary high-risk strategic gamble.

To understand the implications more clearly, it is useful to look at how Takaichi framed her argument on the 7th. She stated:

“An attack on U.S. warships sent to break any Chinese blockade on Taiwan could require Tokyo to intervene militarily to defend itself and its ally.”

The United States, for its part, appears not to have taken the bait. From AP and the New York Times to the Wall Street Journal, CNN, and the Washington Post, coverage over the past week has largely focused on the historical tensions between China and Japan, Takaichi’s remarks, and Beijing’s reactions, while signaling a notably cautious distance. These outlets offered almost virtually no endorsement of Takaichi’s comments, nor did they frame the China-Japan dispute as a security issue that the U.S. must follow Japan into.

Only NBC News, in discussing China’s reaction, offered a keen observation:

“None of this may matter all that much to Takaichi, who was expected to clash with Beijing on Taiwan and other issues.”

This restrained media posture is broadly consistent with the tone adopted by official Washington.

On the 12th, the spokesperson for the U.S. State Department commented:

“We emphasized the importance of maintaining peace and stability across the Taiwan Strait, and opposed any unilateral attempts to change the status quo, particularly by force or coercion. We encouraged the peaceful resolution of cross-Strait issues through constructive dialogue.”

On Nov. 10, during an interview with Fox News host Laura Ingraham, Trump was asked about Takaichi’s remarks regarding a “survival-threatening situation” and the response from a Chinese diplomat. Ingraham pressed him with the question: “These are not our friends, sir, are they, in China?”

To this, Trump replied:

“Well, a lot of our allies aren’t our friends, either, Laura. Our allies took advantage of us on trade more than China did, and China took a big advantage.”

As Takaichi chooses to amplify a “crisis” narrative, Washington’s caution and deliberate downplaying of the issue reveal an increasingly visible divergence in tempo between the U.S. and Japan. When it comes to security issues in the West Pacific, the United States prefers to manage risks at its own pace rather than be swayed by the domestic political fluctuations of an ally. Taking the cue from Trump, a treaty alliance is no guarantee of true camaraderie.

In fact, Takaichi’s calculations have not escaped the attention of American think-tank analysts either.

Mike Mochizuki, a non-resident fellow at the Quincy Institute, said if Takaichi were to enhance Tokyo’s security engagement with Taiwan, as well as encourage Washington to buttress military deterrence and bolster its defense ties with Taiwan, “Beijing is likely to escalate its coercive actions around Taiwan as well as accelerate its military buildup.” He added:

“This negative action-reaction spiral could eventually drive the Chinese leadership into a corner and lead them to conclude that the possibility of peaceful unification has disappeared and that the use of military force is the only viable option. The conflict could rapidly escalate and endanger the lives and livelihood of Japanese civilians.”

Even without its chief ally’s unequivocal backing, Japan seemed to shrug off China’s initial response. According to NHK, when asked on Nov. 14 about Beijing summoning Japan’s ambassador to China, Japan’s Foreign Minister Toshimitsu Motegi said that the ambassador had again explained to the Chinese side the meaning of Takaichi’s remarks and had clearly objected to China’s protest. Motegi also stated that the comments did not violate international law and therefore did not need to be withdrawn.

Japan’s Vice Foreign Minister also summoned the Chinese ambassador to Japan on the same day to lodge a strong protest. Japan’s response undeniably pushed the situation in a more negative direction.

On Nov. 14, China’s Ministry of Foreign Affairs and Chinese embassies and consulates in Japan issued a reminder, advising Chinese citizens to avoid traveling to Japan in the near future, citing “the continued deterioration of the security environment for Chinese nationals there.”

On Nov. 15, Air China, China Southern Airlines, China Eastern Airlines, and other carriers released notices stating that, in accordance with the Ministry’s travel advisory, tickets for flights involving routes to and from Japan, issued before December 31, may be changed or refunded free of charge. As of Nov. 19, over 543,000 tickets have been canceled. Nearly 7.5 million Chinese tourists visited Japan from January to September this year, making Japan the most visited country or region for Chinese tourists during that period.

Tourism accounts for about 7.5% of Japan’s GDP, and Chinese visitors make up nearly one-fifth of all foreign tourists to the country. Moreover, Chinese travelers, who spend almost half of their total travel expenditures on shopping in Japan, constitute a high-value segment for the industry. A downturn in Chinese travelers’ interest in visiting Japan is therefore expected to have a tangible negative impact on Japan’s economy.

On Nov. 17, a spokesperson for China’s Ministry of Foreign Affairs announced that Chinese premier had no plans to meet with the Japanese leader during the upcoming G20 Summit.

That same day, Chinese media reported that several Japanese films would postpone their release in China.

On Nov. 19, China informed Japan that it would halt imports of Japanese seafood. China had previously imposed a full ban on Japanese seafood imports in 2023, citing the release of wastewater from the Fukushima nuclear plant. In June 2025, it had only reinstated imports from 37 prefectures, with Fukushima and nine other affected regions remaining excluded.

In addition to concerns over the safety of its own citizens, China sees little justification for allowing Japan to continue profiting from the Chinese market while freely commenting on China’s core interests or even hinting at the use of force.

Yet for a brief moment, the situation seemed to be shifting in a more constructive direction. LDP Acting Policy Research Council Chair said on Nov. 16 that Takaichi had reflected on her failure to fully explain the context of her comments and would likely refrain from making similar statements in the future.

On Nov. 17, the Director-General of the Asian and Oceanian Affairs Bureau of the Japanese Ministry of Foreign Affairs arrived in Beijing to consult with the Chinese side regarding Takaichi’s remarks on a potential Taiwan contingency, though he refused to retract them. The issue is likely to keep China–Japan relations in a protracted stalemate, potentially for years.

The latest controversy reveals a strengthening political trend in Japan to break away from the postwar framework and challenge the existing international order. It also underscores once again the extreme sensitivity and strategic weight of the Taiwan question in China–Japan relations. Whether the bilateral relationship can return to a relatively stable state will largely depend on whether Japan can genuinely return to the political consensus outlined in documents such as the China–Japan Joint Statement.

It is worth noting that China responded swiftly and in a clearly tiered manner: from the foreign ministry’s formal representations, to the issuance of travel advisories, to a series of coordinated responses from other government bodies and media. Together, these formed a comprehensive multidimensional countermeasure covering diplomacy, security, and public opinion. The message China intends to send is unambiguous: it will not create exceptions for Japan, or any other country, on the Taiwan question, nor will it allow certain political forces in Japan to link the Taiwan question to Japan’s security, create room for future policy loosening, or externalize the risks of their own strategic adventurism onto the United States, thereby pushing Washington into a high-stakes confrontation.

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Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Wang Xiaopeng is an observer with academic training in the United States and frontline reporting in Japan and across Africa.

Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency.

For more background stories:

After decades of eventful engagement, Chinese are hardly surprised by the showmanship and fickleness long embedded in Western politics. In addition to the latest round of mixed signals sent toward Beijing by U.S. President Donald Trump and his high commissioner on trade war Scott Bessent, Japan is also staging its own version of political flip-flops.

On October 31, on the sidelines of the APEC South Korea summit, Chinese President Xi Jinping met, at Japan’s request, with Japan’s newly elected prime minister Sanae Takaichi. The first-ever meeting between the two leaders was supposed to kick off a good start for the bilateral high-level exchange and stabilize relations in East Asia. However, that same evening, Takaichi tweeted on X: “Before the APEC summit, I greeted and spoke with Lin Hsin-yi, ‘Senior Adviser to Taiwan’s Office of the President.’”

Her use of that title, unsurprisingly, drew ire from China, whose foreign ministry protested that Takaichi had gone against the “four political documents” that were deemed as the foundation of China-Japan relations. Beijing has long adhered to a stance on the Taiwan question reminiscent of the Hallstein Doctrine, viewing the island as a province and declining diplomatic ties with any country that recognizes Taiwan’s self-claimed sovereignty. By applying the word “president” in Lin’s title, Japan’s first female prime minister, who appeared eager to push charm offenses across the APEC venue, seemed to have engaged in a political provocation in the eyes of Beijing, which just commemorated the 80th anniversary of Taiwan’s restoration a week earlier.

In response to China’s protest, on November 4, Japan’s Minister for Foreign Affairs Toshimitsu Motegi stated:

“APEC consists of 21 economies, and on such multilateral occasions, meetings between the Japanese Prime Minister and representatives from the Taiwan side have taken place many times in the past. I believe this meeting was consistent with past practice. This conversation between Prime Minister Takaichi and Lin Hsin-yi was conducted on the basis of the 1972 Japan-China Joint Communique and in the form of non-governmental and pragmatic exchanges to maintain relations with Taiwan. The Japanese government does not believe this act violated its longstanding position. As I just mentioned, during past APEC leaders’ meetings, Japan has met with Taiwan representatives multiple times. After this meeting, China lodged a representation with Japan, but Japan reiterated its own position and issued a rebuttal. In any case, Japan’s basic policy on the Taiwan question has not changed in any way.”

It was surely not Japan’s unofficial exchanges with the Taiwan region that incurred Beijing’s wrath. However, referring to the Taiwan representative with terms implying a sovereign status clearly crosses the line of non-governmental interaction and ventures into political symbolism.

Adding fuel to the fire, on November 7, Takaichi asserted that a military emergency in Taiwan could constitute a “survival-threatening situation” for Japan under the country’s security laws. This caused an even greater response from Beijing, which criticized her move that “grossly interfered in China’s internal affairs.”

During the meeting with Takaichi on October 31, Xi Jinping explicitly emphasized that both sides should uphold the political foundation of bilateral relations in accordance with the principles and direction established in the “four political documents.” Takaichi responded on the spot: “On the Taiwan question, Japan will adhere to the position stated in the 1972 Japan-China Joint Communique.” Yet, her follow-up acts reduced that pledge to mere words.

Many readers may not be familiar with the concept of the “four political documents” between China and Japan. They constitute the core framework that defines the political basis and principles of China–Japan relations: 1972 Joint Communique, 1978 Treaty of Peace and Friendship, 1998 Joint Declaration, and 2008 Joint Statement.

It is worth noting that honoring the “four political documents” has never been a unilateral demand from China. It is a commitment repeatedly affirmed by successive Japanese leaders in public.

On November 15, 2024, during President Xi’s meeting with Prime Minister Shigeru Ishiba in Lima, Ishiba stated that “Japan adheres to the principles and consensus established in the ‘four political documents’ between Japan and China.”

On November 16, 2023, when Xi Jinping met Prime Minister Fumio Kishida in San Francisco, the two leaders reaffirmed their commitment to the principles and consensus of the “four political documents.”

Even Shinzo Abe, regarded by Takaichi as her political mentor, stated in Beijing on October 26, 2018, that “guided by the spirit of mutual benefit and non-threat, the two sides should advance bilateral relations based on the consensus confirmed in the ‘four political documents.’”

So, how do these “four political documents,” repeatedly mentioned and affirmed by leaders of both countries, address the roles of the two countries regarding the Taiwan question?

1. Joint Communique of the Government of Japan and the Government of the People’s Republic of China (1972)

“The Government of the pepole’s Republic of China reiterates that Taiwan is an inalienable part of the territory of the PRC. The Government of Japan fully understands and respects this position held by the Government of China, and reaffirms its commitment to observe the position stated in Article 8 of the Potsdam Proclamation.”

In the statement, the Japanese government declares its adherence to Article 8 of the Potsdam Declaration, which states that “the terms of the Cairo Declaration shall be carried out.”

The Cairo Declaration of 1943, jointly issued by the major Allied leaders, explicitly stipulated:

“All the territories Japan has stolen from the Chinese, such as Manchuria, Formosa, and the Pescadores, shall be restored to the Republic of China.”

Under international law, states, not governments, are the subjects of sovereignty. Governments merely represent the state. After 1949, the People’s Republic of China (PRC) replaced the Republic of China (ROC) and succeeded to its corresponding rights and obligations. This was also unequivocally affirmed by United Nations General Assembly Resolution 2758:

“Recognizing that the representatives of the Government of the People’s Republic of China are the only lawful representatives of China to the United Nations and that the People’s Republic of China is one of the five permanent members of the Security Council.”

Therefore, Japan’s statement that it adheres to Article 8 of the Potsdam Declaration is, in effect, confirmation that Taiwan belongs to China, and indirectly confirms that Taiwan falls within the sovereignty of the PRC.

Backgrounder: In February 1972, U.S. President Richard Nixon visited China on an ice-breaking surprise tour, achieving an unlikely detente that reversed the Cold War’s great game and astonished the world. This development sent shock waves through Japanese politics, which at the time followed a “pro-U.S., pro-Taiwan” policy line. With the United States shifting its diplomatic priorities, calls grew rapidly inside Japan to reassess its China policy. Prime Minister Eisaku Sato was forced to step down, and Kakuei Tanaka, who pledged to normalize diplomatic relations with the PRC, became the new prime minister. In September of the same year, Tanaka visited Beijing, where the leaders and foreign policy officials of both countries signed this Joint Communique.

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2. Treaty of Peace and Friendship between the PRC and Japan (1978)

“The PRC and Japan express their satisfaction that, since the Joint Communique of the Government of the PRC and the Government of Japan was issued in Beijing on September 29, 1972…They confirm that the above-mentioned Joint Communique constitutes the foundation of the relations of peace and friendship between the two countries, and that all the principles set forth in the Joint Communique shall be strictly observed.”

“The contracting parties shall develop lasting relations of peace and friendship between the two countries on the basis of the principles of mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence.”

In this context, Japan had already confirmed in the 1972 Joint Communique that Taiwan is part of China. In the Treaty of Peace and Friendship, Japan further committed to respecting China’s sovereignty and territorial integrity. These two documents therefore form a logically consistent and legally coherent framework, within which Japan effectively affirms that Taiwan is part of China’s territory.

Backgrounder: Based on the 1972 China–Japan Joint Communique, the two countries held multiple rounds of negotiations and eventually signed the Treaty of Peace and Friendship in Beijing in August 1978. The Standing Committee of the National People’s Congress of China, as well as both the House of Representatives and the House of Councillors of Japan, ratified the treaty respectively. On October 22, 1978, Deng Xiaoping, then Vice Premier of the State Council, paid an official goodwill visit to Japan, marking the first visit to Japan by a Chinese state leader since the founding of the PRC. The following day, the instruments of ratification were exchanged at the Prime Minister’s Office in Tokyo, with Deng and Prime Minister Takeo Fukuda attending the ceremony. After the exchange of ratification documents by the foreign affairs ministers of both countries, the treaty officially entered into force.

3. Joint Declaration Between China and Japan on Building a Friendly Partnership of Peace and Development (1998)

“Japan will continue to adhere to the position on the Taiwan question as stated in the China–Japan Joint Communique, reaffirming that there is only one China. Japan will maintain only non-official and regional-level relations with Taiwan.”

This declaration, in essence, reconfirmed the political commitment made in the 1972 Joint Communique. Japan voluntarily reaffirmed that commitment and pledged not to develop any form of official relations with Taiwan, nor indirectly recognize it as a “country.”

However, by referring to Taiwan representatives as holding titles such as the “Senior Adviser to Taiwan’s Office of the President” in multilateral settings, Takaichi undoubtedly crossed the boundary of “non-official interactions,” in direct contradiction to Japan’s stated political commitment.

Backgrounder: At the invitation of the Japanese government, then Chinese President Jiang Zemin paid a state visit to Japan in November 1998, the first state visit to Japan by a Chinese head of state since the founding of the PRC, coinciding with the 20th anniversary of the signing of the peace treaty. Jiang and Prime Minister Keizo Obuchi, guided by the principle of “taking history as a mirror and facing the future,” reviewed both the positive and negative experiences and lessons in the development of China–Japan relations and ultimately issued this Joint Declaration.

4. Joint Statement between China and Japan on Comprehensive Promotion of a Strategic Relationship of Mutual Benefit (2008)

“Both sides reaffirm that the Joint Communique of September 29, 1972, the Treaty of Peace and Friendship of August 12, 1978, and the Joint Declaration of November 26, 1998 constitute the political foundation for the stable development of China–Japan relations and for opening up the future. The two sides confirm that they will continue to abide by the principles of the three documents.”

“The Japanese side reiterates that it will continue to adhere to the position on the Taiwan question as stated in the 1972 Joint Communique.”

The phrase “constitute the political foundation” is highly significant.

It implies that if Japan violates the principles set out in these documents, such as the position that Taiwan is part of China and Japan does not maintain official relations with Taiwan, it is essentially undermining the very foundation of China-Japan relations.

Backgrounder: In the early 2000s, China-Japan relations deteriorated due to issues including visits by Japanese leaders to the Yasukuni Shrine. After Japanese leaders began seeking to repair bilateral ties, then Chinese President Hu Jintao visited Japan in May 2008. This “spring thaw” visit marked a transition from ice-breaking to strategic mutual benefit. During the visit, Hu and Fukuda signed this Joint Statement in Tokyo.

Since the late 19th century, when China was forced to cede Taiwan, Japan subjected the island to colonial rule for half a century, which in many ways added to the enduring complexity of today’s Taiwan question. While China has never expected Japanese politicians to demonstrate the same kind of dignity and courage as West German Chancellor Willy Brandt’s “Kniefall von Warschau,” the repeated disregard or lack of deep comprehension of the “four political documents,” repeatedly confirmed by the leaders of both countries, continues to create practical obstacles to the steady development of China-Japan relations.

Failing to honor international documents does little to bolster Japan’s self-vaulted image of the upholder of “rules-based international order.” Moreover, attempting to use its former colony as a geopolitical pawn against a neighboring Asian country neither advances Japan’s long-sought “normal state status” nor serves Takaichi’s ambition to see Japanese diplomacy “blossoming on the world stage.”

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Zhai Xiang works as a research fellow with the Xinhua Institute on China-U.S. relations.

Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency.

The following is a full transcript of the podcast, recorded Oct. 31 and broadcast Nov.3.

Host:

Welcome to Sinical China. On Oct. 30th, Chinese President Xi Jinping and U.S. President Donald Trump met in South Korea—their first face-to-face encounter in six years. The meeting came amid a stop-and-go pattern in trade talks and strategic tensions between the world’s two largest economies.

President Xi said at the meeting that economic and trade interactions should remain ballast and driver of ties, not obstacles or sources of conflict. He also said the two sides should think big and recognize the long-term benefit of cooperation, and must not fall into a vicious cycle of mutual retaliation. President Trump, for his part, said the two sides had reached an agreement on many things. He described the meeting as a twelve out of ten. The meeting, lasted about one hour and 40 minutes, has captured worldwide attention, not just for the handshake itself, but for what it might signal about the future trajectory of China-U.S. relations.

What messages does it send—for China, the U.S., Asia, and the wider world? And what might it mean for the next phase of high-level communication between Beijing and Washington? To help unpack these questions, I’m honored to be joined by Professor Wang Dong from the School of International Studies at Peking University, who is also directing the Institute for Global Cooperation and Understanding at Peking University. Prof. Wang, thanks for joining us today.

Wang Dong:

Thank you.

Host:

Let’s start with the big picture. How would you describe the overall tone of this Xi-Trump meeting? Do you think both sides achieved what they came for? And what key takeaways or signals from the meeting should the world be watching most closely?

Wang Dong:

Well, I think since the beginning of this year, President Xi Jinping and U.S. President Donald Trump have maintained close communication. Over the past months or so, both sides have worked towards facilitating this high-level meeting. It can be said that the Busan summit meeting was a natural culmination of all these efforts. The bilateral meeting commenced immediately upon President Xi’s arrival in Busan, reflecting the high significance and positive expectations both sides attach to this encounter.

The meeting proved highly productive, with both sides agreeing to strengthen cooperation across more fields and deepen exchanges and interactions. This has consolidated the sound relationship between the two leaders and opened a new chapter of stability in bilateral relations.

A healthy and stable China-U.S. relationship serves the common interests of both countries. The talks charted the course for the next phase of bilateral relations and will facilitate greater consensus in the future. The Busan summit has fostered a favorable environment for the respective development of both countries, prompting their respective teams to build upon the leaders’ consensus to consolidate the outcomes of previous economic and trade consultations, effectively resolve economic and trade conflicts, and thereby continue to propel the development of bilateral relations.

The talks also laid a solid foundation for future regular exchanges between the two heads of state. The China-U.S. relationship stands as one of the most significant bilateral relationships in the contemporary world. During this meeting, both leaders recognized that China and the United States can join hands to accomplish numerous significant, practical, and beneficial endeavors for both nations and the world.

In recent years, the world has faced numerous complex challenges. The stability of China-U.S. relations also facilitates both countries in shouldering their responsibilities as major powers, working together to resolve regional hot-spot issues, promoting global economic development, addressing challenges in global governance, and continuing to advance the building of a community with a shared future for mankind.

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Host:

Turning to the economic side, how do you see this meeting shaping China–U.S. trade relations in the short term and the long term? Would you call it a temporary truce, or do you think we’re actually entering a phase of broader easing in the trade tensions?

Wang Dong:

Well, China has consistently maintained that the essence of China-U.S. economic and trade relations lies in mutual benefits and win-win outcomes. The Busan summit has undoubtedly further consolidated the consensus and achievements reached through dialogue to resolve issues, once again, charting the course for bilateral economic and trade relations going forward.

President Xi emphasized that economic and trade cooperation should continue to serve as both the ballast and the engine for bilateral relations. While structural and long-term contradictions exist in the economic relationship, the leaders’ consensus has established a sound overall atmosphere for future interactions between the two countries. It has also set the principles of equality, respect, and mutual benefit, pointing the way to long-term cooperation rather than mutual retaliation.

So I think this will definitely help steer the bilateral relations toward a new phase characterized by overall stability, mutual understanding, and mutual benefit. The outcomes of previous high-level meetings demonstrate China’s sincere commitment to resolving economic and trade issues through consultation. China keeps its word and delivers on its commitments, consistently implementing the consensus and tangible outcomes of these talks.

Yet, China’s principles in safeguarding its interests remain equally firm. In other words, China’s stance on mutual benefit and win-win cooperation is stable and consistent. We hope the U.S.side will also actively fulfill its commitment, implement the consensus reached during this meeting, and continue advancing the overall easing of bilateral economic and trade relations, as well as long-term cooperation.

Host:

Now let’s talk about the U.S. side. For the Trump administration, do you see the recent concessions—like lifting some tariffs—as part of Trump’s personal style, or more of a political calculation at home?

Given his push for “Made in America” and framing trade as a national security issue, do you think China and the U.S. can still find new areas of cooperation?

Wang Dong:

Well, I think Trump’s China policy continues to adhere to his so-called “America First” policy platform, while his distinctly business-oriented mindset views China as a competitor for economic interests, rather than an ideological rival.

Since the beginning of this year, the U.S. has abused its tariff policies, leading to rising domestic prices in the United States, a blow to commodity trade, declining market confidence, increased recession risks, and growing domestic opposition. These factors intertwine to form the complex backdrop of America’s competitive strategy toward China. Therefore, Trump’s recent softening of stance toward China aligned with his pragmatic style, while also reflecting the tangible damage the trade war has inflicted on the U.S. economy and interests.

As the world’s two largest economies, China and the United States possess vast potential for economic and trade cooperation across multiple emerging sectors. During the Busan summit, President Xi Jinping called for enhanced communication and collaboration across all fields and channels, with both sides agreeing to strengthen cooperation in areas including trade, energy, and more.

So both nations currently face challenges such as advancing industrial transformation and upgrading, while countering economic downturn pressures. Cooperation in emerging sectors will not only benefit their respective economic development, but also inject vitality into global economic growth as well.

So I think the Busan summit undoubtedly lays a solid foundation for deepening bilateral collaboration, as long as both sides continue to prioritize long-term interests and strengthen exchanges and mutually beneficial cooperation based on principles of equality, respect, and reciprocity. I think they will surely expand their cooperation agenda going forward.

Host:

Thank you, Prof. Wang, for your elaboration. I’m also curious that in your view, how the United States’ allies—especially those in the region—will perceive this meeting between the Chinese and U.S. heads of state? What’s the broader significance of this meeting for the Asia–Pacific region and for the global economy as a whole? And how might it affect regional supply chains and market confidence?

Wang Dong:

Well, as one of the most important bilateral relationships in the world today, the China-U.S. leaders’ summit meeting has, of course, drawn global attention. A stable and sound China-U.S. relationship is not only the shared aspiration of the peoples of both countries, but also the common expectation of the international community.

The two countries should jointly take up the responsibilities of major countries, which will help resolve regional hotspot issues and global governance challenges of concern to the international community, and contribute to the steady and healthy development of the world economy and trade.

Certainly, key U.S. allies in the Asia-Pacific region maintain close economic and trade ties with China, and friction between China and the United States in economic and trade matters similarly hinders the economic development of U.S. allies.

For some time, geopolitical frictions have existed between China and the United States, as well as its regional allies. We are confident that countries in the region would also welcome the stabilization of China-U.S. relations, because it will then help ease political tensions with China, bring economic and trade exchanges back on track for mutually beneficial cooperation, reduce regional tensions, and continue to promote regional integration.

As the world’s two largest economies, improvement in China-U.S. relations often coincides with noticeable easing of global market tensions, significant gains in stock markets across multiple countries, and corresponding currency appreciation.

The Busan summit further provides stable expectations and brighter prospects for bilateral economic and trade relations. Therefore, it sends a very strong signal for resolving trade conflict going forward, instills long-term confidence in sustained economic growth among markets and investors, brings favorable development prospects to all industries, and creates a stable environment for the development of both nations. Undoubtedly, the world economy will gain stronger momentum after the Busan summit.

Host:

Let’s turn to an issue that was not on the table this time—Taiwan. The Taiwan question was notably absent from the agenda, whereas it had been raised in almost all major meetings or phone calls between the two leaders. From your perspective, what might explain this omission? What does this deliberate avoidance signify in the context of current China-U.S. relations?

Wang Dong:

I think the Busan summit, the two leaders focused on a discussion about the trade and economic issues between the two countries, and therefore that’s the reason why the Taiwan issue was not brought up during the summit.

We all understand the Taiwan issue remains one of the most sensitive and most important issues in China-U.S. relations, and if we look at it, I think the core of the Trump administration’s policy, of course, is America First, which also means that Taiwan is no longer a strategic priority for the United States.

So, given that the Taiwan issue does not fall within the core interest of his “America First” agenda, apparently, I think U.S. President Trump has adopted a strategic ambiguity approach, treating it more as a bargaining chip to achieve trade balance objectives while leaving room for dialogue to resolve regional issues.

So I think the Busan summit has set a positive tone for the steady development of overall bilateral relations. Previous rounds of economic and trade negotiations have also advanced tangible solutions to trade issues of mutual concern. Consequently, Trump may continue to maintain the strategic ambiguity when it comes to Taiwan, refraining from breaching the bottom line principles China has consistently emphasized during consultations.

In fact, the Taiwan issue is purely China’s internal affair. China’s resolve to pursue reunification remains unchanged. As a businessman, Trump has a very typical transactional personality, and he views everything as part of a deal he wants to strike with his partner.

Therefore, I think he is more likely to make a commitment to China on the Taiwan issue and even publicly support peaceful reunification between the Mainland and Taiwan.

In fact, on May 12th this year, right after the Geneva trade negotiations were concluded, Trump stated in a press conference that the outcome of the China-U.S. trade talks actually was very good. It was good for the United States, good for China, good for the world, and good for “unification and peace.”

And of course the U.S. State Department immediately came out denying any change in U.S. policy toward Taiwan, but we all understand that Trump actually referred to the peaceful reunification between the mainland and Taiwan, and in the context of China and the United States were trying to strike a deal.

So for the Chinese people and the Chinese government, of course, sovereignty is non-negotiable. China will demonstrate its resolve for reunification to the international community with a persistent struggle against voices advocating for the division of China, thereby securing, I think, Trump’s possible commitment to the peaceful reunification between the mainland and Taiwan. So I think, in principle, Trump might become the first U.S. sitting president who is willing to publicly support a peaceful reunification between the mainland and Taiwan.

And again, China is firmly opposed to any separatist actions seeking the so-called “Taiwan independence,” and firmly opposed to any foreign interference. And China has worked and will consistently work to solidify the international consensus on the one-China principle and urge the U.S. side to truly fulfill its commitment to opposing Taiwan independence.

Host:

Here comes my last question. President Trump has said he plans to visit China next year, probably in April, and next year’s G20 will be hosted by the United States. With more opportunities for high-level meetings between China and the U.S., do you think there is a significant chance the two countries could enter a period of more stable bilateral relations?

Wang Dong:

Looking ahead, the two leaders are expected to maintain regular communication in the coming months beyond potential reciprocal visits. Upcoming summits, such as the G20 Summit and the APEC Economic Leaders’ Meeting, could provide the first opportunities for the two leaders to meet again.

And as I just noted, fundamental and structural contradictions between China and the United States of course will inevitably persist over the long term, leading to frictions in the development of the bilateral relations.

In addition, there are also divergences between the two countries on many issues due to differing political and cultural conditions. However, the two countries cannot afford to fight against each other, nor can they win such a fight.

So this meeting undoubtedly charts the right course for stabilizing bilateral relations, consolidating the outcomes of previous consultations, and guiding sustained positive interactions between the two countries.

It also charts a path forward for both countries to avoid the so-called “Thucydides Trap” and promote a steady, sound, and sustainable development of the China-U.S. relationship. China has consistently maintained a high degree of continuity and stability in its U.S. policy following each summit meeting, promoting the healthy development of bilateral relations based on the consensus reached by the two leaders.

As President Xi stated during the Busan summit, China’s development and revitalization go hand in hand with President Trump’s vision to make America great again. As long as both sides actively implement the consensus reached at the meeting and jointly shoulder the responsibilities of major countries, I think China and the United States will surely achieve mutual success, boost each country’s development, write a new chapter of shared prosperity, work together to resolve regional hot-spot issues and global governance challenges, and advance bilateral relations to a new stage of stability and progress.

Host:

Thank you, Prof. Wang, for sharing your insights. Wang Dong is a professor at the School of International Studies at Peking University, who is also directing the Institute for Global Cooperation and Understanding at Peking University. I am Tan with Xinhua News Agency. That is all for this episode of Sinical China. Thanks for listening.

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Tan Yixiao, host of this podcast, is a journalist with Xinhua News Agency. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn

China’s proposals for the 15th Five-Year Plan (2026–2030) have just been unveiled at a key Party plenum. The medium-term national development blueprint, spanning policy initiatives on technology, finance, and opening-up, has naturally drawn global attention amid the country’s mounting pressure to secure an economic soft landing and its volatile trade tensions with the United States. Yet its implications run deeper: five-year plans have formed an integral pillar of Xi Jinping’s overarching national strategy.

In Xi’s own words, it would take “three consecutive five-year plans” to basically achieve what he hails as China’s model of modernization by 2035, a milestone target that bears his unmistakable personal imprint. The upcoming 15th iteration of the plan marks the second stage of this grand endeavor. Xi’s vision echoes Mao Zedong’s nation-building project in the early 1950s, when the first of such five-year plans kicked off: “How long will it take to build a great socialist country? I won’t set a fixed time, but roughly three five-year plans, or about fifteen years.”

Xi’s China is a far cry from Mao’s command-and-control system, yet the Five-Year Plans, a legacy of that era, remain very much alive. Defying János Kornai’s bleak verdict on socialist regimes in transition, this policy instrument not only survived the collapse of its birthplace Soviet Union and China’s own political and economic storms that followed, but it also helped propel China to become the only country with geopolitical clout rivaling America.

Why has China retained its own version of the Five-Year Plans? Or, put differently, how did this planning system evolve to survive its existential crisis? And in a global economic powerhouse that is committed to further market-oriented reforms, what role do the remnants of a planned economy still play?

Tug-of-War between Planning and Market

In many ways, the evolution of China’s Five-Year Plans reflects the government’s gradual ceding of its resource-allocation powers to the market. The year 2005 marked the most symbolic moment: the Chinese term for the plan changed from jìhuà, emphasizing exhaustive, prescriptive directives, to guīhuà, highlighting strategic visions that induce changes.

This semantic shift signaled a more profound change, as the 11th Five-Year Plan (2006-2010) introduced at that time had dropped all the output targets for major industrial and agricultural products, targets that had been the plan’s inborn function for half a century, and pivoted to value-based indicators such as urbanization rate, growth in household income, and the share of R&D spending in GDP. By that year, more than 95% of commodity prices in the country were determined by the market, whereas that figure stood at 3% in Mao’s era. This market-oriented trajectory was later confirmed by Xi Jinping shortly after he took office in 2012, who went so far as to elevate the market’s role in the country’s resource allocation to a “decisive” one.

However, it was the state that played that decisive role in the genesis of China’s five-year plan, which was largely modeled on the fountainhead of the modern planning system, Soviet Union. China’s First Five-Year Plan (1953-1957) was set in motion in 1953, when the devastating Korean War finally drew to a close. In return for China’s punishing efforts to contain the U.S. expansion in the Far East, the Soviet Union, following the death of its tight-fisted leader Joseph Stalin, spared no expense in supporting China’s post-war reconstruction centered on its First Five-Year Plan.

At the heart of the plan were 156 projects in heavy industry and infrastructure, almost all designed and built under Soviet supervision. The Soviet transfusion of capital and technology was so massive that it was estimated to account for a staggering 7% of the Soviet Union’s national income in 1959. Within just five years, China rolled out its first domestically produced truck, airplane, and steam locomotive, and built its first oil refinery, machine-tool plant, and vacuum-tube factory—alongside the first bridge spanning the country’s longest river and a modern highway reaching the Tibetan Plateau. Through rigid planning and execution, the nation transformed from an agricultural backwater into one with a fledgling industrial base almost overnight.

Li Fuchun, then head of the State Planning Commission in charge of drafting and implementing the First Five-Year Plan, remarked in a report that China had “caught up in just five years with what had taken decades in old China,” adding that reaching the industrial level of the advanced capitalist nations “would not take a century, but only a few decades”—a prophecy that has largely been fulfilled today.

Contrary to the prevailing myth, China’s five-year plans began neither as a wholesale copy of the Soviet template nor in outright opposition to market mechanisms. In 1953, the year Xi Jinping was born, his father Xi Zhongxun joined the eight-member task force responsible for drafting the First-Five Year Plan. Chen Yun, leader of the group and the Party’s economy czar, famously articulated the principle of “three mainstays, three supplements,” encouraging market forces alongside the guiding role of the planned economy. Even the all-powerful Mao Zedong compared China under the First Five-Year Plan with Soviet Russia prior to the introduction of its own five-year plans, lamenting the premature end of the New Economic Policy, which had tolerated a degree of market freedom. “The state-owned sector and private businesses should coexist,” he said.

Therefore, despite the massive “socialist transformations” that accompanied the First Five-Year Plan, China refrained from replicating the Soviet approach of direct agricultural planning, instead relying on indirect methods. In other sectors, China’s planning tales were also far less detailed than their Soviet counterparts. While reviewing a report on the First Five-Year Plan in 1956, Mao stressed the need to break away from the path dependency on the Soviet precedents.

At the crossroads of policy orientation, however, China opted to lean further toward a central planning system, even as planning became increasingly shaped by the leader’s personal impulses. In 1957, the final year of China’s First Five-Year Plan, Mao visited Moscow for the second time—a trip that triggered the China-Soviet contest over the leadership of the socialist bloc. It was followed by a fantastical slogan of “running toward communism” in an effort to reach the “ultimate state of social forms” before the Soviets. The incremental “socialist transformations” soon gave way to a sweeping annihilation of market elements and the private sector.

Consequently, the relatively cautious Second Five-Year Plan (1958-1962) was superseded by a directive issued by the National Planning Commission that mandated absurdly ambitious targets. The steel production target, in particular, soared from the original 12 million tonnes to an impossible 100 million. Simultaneously, the forced roll-out of the People’s Commune Movement reshaped rural China along fully planned lines, characterized by communal dining halls that drained farmers’ incentives and the “Great Steel Smelting Campaign,” which relentlessly pursued output figures. These policies directly led to the economic hardships from 1959 to 1961.

The subsequent Third (1966-1970) and Fourth Five-Year Plans (1971-1975) either pivoted toward the so-called “Third Front” construction, aimed at preparing for a potential Soviet invasion, or were hampered by the paralysis of the state apparatus during the Cultural Revolution. Notably, most of the economic difficulties that arose under Mao did not stem from planning itself, but from the fact that five-year plans were not formulated through rational deliberation.

As Deng Xiaoping assumed de facto top leadership in 1978, the formulation of five-year plans was freed from the whims of the charismatic leader. On the flip side of the coin, as Deng launched the market-oriented “reform and opening-up,” inaugurating the delegation of resource allocation power to the market, the five-year plans started to face a growing existential crisis.

A clear indication was the diminishing role of the five-year plans in determining annual allocations of personnel, finances, and goods. From the Sixth to Eighth Five-Year Plan (1981-1995), the number of production targets for physical goods dropped from 65 to 29. In 1984, China began allowing state-owned enterprises (all legally recognized enterprises were state-owned at the time, as private firms were not legalized until 1988) to sell surplus industrial output on the market after meeting their five-year plan quotas. This gave rise to a dual pricing system, where products were significantly cheaper within the planning cycle than on the open market. Widespread rent-seeking through speculative arbitrage soon rendered the coexistence of planned and market systems unsustainable.

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The final showdown came in 1992, a year pivotal to the very survival of China’s five-year plans. Amid domestic inflation fueling social unrest and a hostile international environment following the upheavals in the Soviet bloc, the semi-retired yet still powerful Deng Xiaoping demonstrated his unwavering resolve to further market-oriented reform during an unannounced southern tour. He made a bold proclamation: “The planned economy does not equal socialism, as capitalist nations also have plans. The market economy does not equal capitalism, as socialist states can also have a market.”

At the Party’s national congress that year, heeding Deng’s warning that “those who refuse to reform will be removed from office,” then General Secretary Jiang Zemin opted for “socialist market economy,” the most radical phrasing defining China’s new economic system, over milder alternatives such as “a socialist commodity economy combining plan and market” or “a planned socialist market economy.” The word “plan” was dropped altogether. It was also at this congress that the market’s role in resource allocation was, for the first time, defined as “foundational”—a linguistic shift that captured China’s historic turn toward market logic within a socialist framework.

Since 1992, the country saw its private sector expand at a hectic pace. Though China’s reform and opening-up nominally began in 1978, the non-state economy’s share of total industrial output inched up only from a negligible 0.49% in 1980 to 13.41% by 1992. With the market economy formally enshrined that year, the change was transformative: by 2000, the private sector accounted for over 64% of industrial output. Post-1992 reforms steered state-owned enterprises toward sectors deemed vital to the national economy such as defense, telecommunications, transport, and conventional energy, while ceding ordinary competitive industries to the private sector. This meant the share of economic activity directly guided by the five-year plans steadily receded with the market taking the driver’s seat.

The dramatic shift raised serious doubts about the relevance of the State Planning Commission, long tasked with directing the allocation of resources across the economy. Some deputies of the top legislature even proposed abolishing the agency along with its core mission of making five-year plans, leaving its staff confused and anxious about their uncertain prospects.

Yet, amid heated debate, the State Planning Commission survived another round of institutional reform in 1993. The reason was twofold. On one hand, the state sector still accounted for a sizable share of the economy, roughly a 40-60 split with the private sector even today, underscoring the continued need for planning. On the other, both the commission and the five-year plans were beginning to undergo a profound functional shift.

The State Planning Commission, according to the 1993 reform blueprint, “should adjust its functions in line with the objectives and requirements of a socialist market economy so as to better play its role in national macroeconomic management.” It indicated the days when five-year plans prescribed detailed industrial and agricultural output targets were numbered, though those quantitative benchmarks were not fully abolished until the 10th Five-Year Plan (2001–2005), around the time China joined the World Trade Organization.

The State Planning Commission itself went through two rounds of renaming, adopting its current title—the National Development and Reform Commission (NDRC)—in 2003. And the five-year plans switched from jìhuà to guīhuà in 2005. Both changes reflected the market-oriented course charted in 1992, transforming the five-year plan from a tool for quantifying outputs of steel or apparel into a broader framework for strategic development. That evolution is precisely what has ensured its survival.

Not Just the Economy, Stupid

In fact, Chinese leaders began to recalibrate the role of the five-year plans as early as the late 1970s. After Mao’s death in 1976, senior officials fanned out across the Western world to see how modern economies actually worked. The State Planning Commission, too, looked abroad to France and Japan—two capitalist powers that had successfully married planning with market efficiency. Both countries centered their plans on social development, an area where market forces alone can sometimes become part of the problem rather than the solution.

Therefore, beginning with the Sixth Five-Year Plan (1981–1985), the plan’s official title was changed from the “Five-Year Plan for Economic Development” to “Five-Year Plan for Economic and Social Development”—a formulation that endures to this day. The change marked a decisive shift in purpose: from micro-management to macroeconomics, and from a narrow focus on production targets to a broader agenda of public service delivery.

In the early post-Mao years, five-year plans remained largely anchored in production quotas, yet their priorities shifted from heavy industry to food, textiles, and other consumer goods. By the Sixth Five-Year Plan, the guiding principle of the planning became “first feed the people, then pursue the construction,” a striking turnaround from the first plan’s “prioritize heavy industry, yet attend to the people” and the third plan’s wartime motto: “prepare for war, guard against famine.”

As market reforms progressed, economic indicators gradually shrank as a proportion of total targets, falling from 60.7% the Sixth to 22.7% in the 11th Five-Year Plan (2006-2010). By contrast, social indicators surged to 90% in the 12th plan (2011-2015). The scope of planning expanded beyond economic metrics to embrace a broad spectrum of social development goals, including ecological protection, cultural advancement, social welfare, land and resource management, and national security.

Education is a case in point. Starting with the Seventh Five-Year Plan (1986-1990), China launched the nine-year compulsory education system. Also, higher education was singled out as a key target for national investment for the first time in that plan. This set the stage for subsequent initiatives such as “the 211” and “985” projects, where the government selected a cohort of universities for prioritized investment to boost teaching quality, research output, and global competitiveness. These initiatives also paved the way for the sweeping expansion of college enrolment in 1999, transforming Chinese universities from an elite privilege into a broadly accessible opportunity. The momentum continues to shape China’s academic landscape today.

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After Xi Jinping took the helm in 2012, China’s five-year plans came to place an even greater emphasis on social development. At the 2015 plenum reviewing the 13th Five-Year Plan (2016-2020), the first such plan formulated in Xi’s era, he introduced the epoch-making “new development philosophy,” highlighting a five-pronged principle: innovation, coordination, green development, opening-up, and shared benefits. As Xi put it, this new vision “will chart China’s development trajectory throughout the 13th Five-Year Plan period and beyond.”

Among China’s post-Mao leaders, Xi stands out as one who regards economic growth not as an end in itself, but as a means to an end—the quality and sustainability of development. In a telling reworking of Deng Xiaoping’s famed dictum, “development is the hard truth,” Xi updated it as “high-quality development is the hard truth of the new era,” marking a clear departure from the growth-first paradigm. Therefore, the five-year plan went through a more drastic change in its role.

This shift is pronounced in China’s green transition. While previous leaders started to pay lip service to environmental protection, the country continued to suffer exacerbated pollution, especially during the enormous infrastructure building drive in the wake of the 4-trillion-yuan stimulus package in 2008. By 2015, Chinese cities ranked among the most smog-choked in the world.

As Xi’s “new development philosophy” began to take hold, the 13th Five-Year Plan fired the starting gun of the most ferocious ecological campaign to date. It set binding targets for air, water, and soil quality, and held officials directly accountable for environmental degradation. In just five years, China—still known as the world’s factory—slashed pollution dramatically, recording the fastest improvements in air quality globally. The parallel efforts to curb traditional energy consumption under the plan inadvertently catalyzed a boom in China’s lithium-ion battery and electric vehicle sectors. By the end of the 13th Five-Year Plan, the country had leapfrogged global rivals in both motor technology and EV output.

Another defining feature of Xi’s 13th Five-Year Plan was its dedicated push toward what is regarded as the elimination of absolute poverty. This goal echoes the second stage of Deng Xiaoping’s three-step strategy for China’s modernization: establishing a moderately prosperous society by the turn of the 20th century. Xi translated the abstract notion of a “moderately prosperous society” into a concrete target: the eradication of absolute poverty by the end of the 13th Five-Year Plan.

In an unprecedented move, the plan’s outline devoted one of its 19 sections entirely to poverty alleviation. The initiative included: establishing a grid-based poverty monitoring system, mobilizing the state-owned sector to deliver aid, and pouring resources into infrastructure construction in far-flung areas regardless of cost. In five years, the government alone sent over three million officials to the grassroots to provide hands-on support. Apparently, this was not the most economically efficient allocation of resources, yet such market-defying policy initiatives constitute the cornerstone of the planning.

To break away from the egalitarian mindset amid the market-oriented drive, Deng Xiaoping once said: “Some regions and some people can get rich first, bringing along and helping the others, so that common prosperity can be gradually realized.” The first half of this dictum had largely come to pass before Xi’s tenure. Xi’s ambition, however, has been to turn the second half—the realization of common prosperity—into a concrete reality during his time in office. At the 2020 plenum that was set to promulgate the 14th Five-Year Plan, Xi specifically referred to the plan’s goal of “achieving substantial progress in common prosperity for all.” He said: “This is the first time such wording has appeared in a Party plenary document.”

In a break from tradition, the 14th Five-Year Plan (2021–2025) set no quantitative GDP growth target, signaling a decisive shift in China’s development priorities. Explaining the rationale, Xi emphasized that medium- and long-term planning should concentrate on optimizing the economic structure and improving the quality and efficiency of growth. Although growth was no longer the headline objective, social welfare indicators assumed unprecedented prominence: metrics related to public well-being accounted for more than one-third of all targets—the highest proportion in the history of China’s five-year plans.

At the 2013 National Conference on Organizational Work, arguably the most consequential meeting determining the yardsticks of bureaucratic promotion, Xi decided to reform the evaluation methods to give greater weight to indicators such as improvements in livelihoods, social progress, and ecological outcomes. “Success can no longer be measured by GDP growth alone,” he declared. Therefore, the five-year plans underwent a decisive recalibration under Xi, playing an increasingly central role in China’s broader governance transformation. As one Chinese scholar observed, it is only a matter of time before social development, rather than economic growth, becomes the principal focus of future five-year plans.

Beyond Five Years

In the communique of the recently concluded fourth plenum that mapped out the 15th Five-Year Plan, a previously unseen formulation appeared: “socialist modernization can only be realized through a historical process of gradual and ongoing development.” Behind this apparently fresh wording lies the Party’s enduring commitment to long-term thinking, one that has taken on sharper focus under Xi. The five-year plan, serving as a medium-term playbook, becomes increasingly interlocked with China’s broader long-term ambitions.

In 2015, when preparations for the 13th Five-Year Plan were underway, China unveiled “Made in China 2025,” a decade-long industrial blueprint aimed at transforming the country’s manufacturing sector from labor-intensive to technology-driven through two five-year plans. In both the 13th and 14th Five-Year Plans, technological innovation was accorded unprecedented importance in the layout of the documents. It was positioned as the first substantive section following the introductory chapter, whereas this prominent position was still occupied by rural development in the 12th Five-Year Plan. Both plans have laid out a systematic strategy of advancing the sci-tech sector: reforming institutions, building innovation platforms, nurturing talent, integrating industries, and creating a new system for mobilizing resources nationwide to make key technological breakthroughs capable of surmounting U.S. checkpoints.

China’s pivot to sci-tech innovation in the latest two plans delivered a string of “Sputnik moments” to the West: from lunar far-side landing and quantum computers to open-source large language models. Cutting-edge manufacturing sectors such as electric vehicles, drones, and 5G equipment now occupy a leading position globally, with “Made in China” gradually shedding its reputation as cheap, low-end, and risk-prone. These achievements stem both from state-led technological breakthroughs and private-sector innovation. Increasingly, five-year plans have become a masterful instrument of statecraft, orchestrating the nation’s full spectrum of activities, steering long-term strategic ambitions, and catalyzing profound structural transformation.

In tandem with the 14th Five-Year Plan, China also unveiled Vision 2035, outlining objectives for the next 15 years. In Xi’s view, 2035 is a crucial milestone, representing the first step of the Party’s current “two-step” strategy, which aims to achieve basic socialist modernization. Accordingly, the latest communique defined the 15th Five-Year Plan as a critical period as the country works to “reinforce the foundations and push ahead on all fronts toward basically achieving socialist modernization by 2035.” The second step, in Xi’s own words, is to “use another three five-year plans to build China into a great modern socialist country.” By that point, China’s level of development and its standing on the world stage will likely defy any prediction or imagination from today’s perspective.

As head of the drafting team of the 15th Five-Year Plan, Xi clearly has huge plans for the next five years and beyond. Where past plans pursued expansion, his ambition lies in steering China toward a holistic transformation—one that redefines what development itself means for the nation.

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Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

Tan Yixiao is a Xinhua journalist. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn

For those locked in a great-power rivalry, courting key regional actors is the name of the game. The Association of Southeast Asian Nations (ASEAN), arguably the most successful regional bloc after the European Union (EU), would surely fall into this category. Representing nearly a tenth of the world’s population and anchoring critical nodes of global supply chains, the region has emerged as a key arena for power projection by Beijing and Washington, and as a touchstone of their diplomatic prowess.

China appears to have made some progress in this regard. The ongoing China-ASEAN Expo (CAEXPO), held in the southern Chinese city of Nanning for 22 years in a row, has drawn a large number of high-ranking ASEAN officials and exhibitors. A fortnight earlier, six ASEAN leaders, among 26 foreign dignitaries, ascended the Tian’anmen Rostrum and beheld China’s grand military parade, an event alarmingly shunned by the West. The Indonesian President Prabowo Subianto, in particular, proceeded with his Beijing tour despite recent domestic unrest.

Yet, while Washington continues to profess its commitment to regional partnerships, its insistence on compelling Southeast Asian nations to choose sides has not been well received. Trump’s tariff-driven approach has also struck a menacing chord in the region. This is not the first time the U.S. has projected hubris in this China-neighboring region—an attitude that once culminated in a humiliating Fall of Saigon—but it could well be the last if such aggressive momentum does not lose steam soon.

Monsoon of Tariffs

The Trump administration’s “America First” trade framework, sometimes labeled as “lone wolf” diplomacy, comprises a mix of economic coercion and unilateral withdrawal. This marks a clear departure from earlier U.S. commitments, such as the annual funding of 12 million USD for Cambodia’s de-mining programs since the 1990s. That support had been vital in helping local communities gain access to safer farmland, schools, and infrastructure, but it was suspended in 2025 as part of broader aid cuts.

In July 2025, a U.S. delegation headed by Secretary of State Marco Rubio arrived at ASEAN meetings in Kuala Lumpur, seeking to cast the region as a “focal point of U.S. foreign policy.” Still, he fell short in his ability to reassure his counterparts as “all of these countries were receiving letters from the White House with their new tariff rates,” according to Gregory Poling, a Southeast Asia expert at Washington’s Center for Strategic and International Studies.

Amid threats of reciprocal tariffs ranging from 20% to 50% on more than 20 countries worldwide, several ASEAN members are falling prey to steep rates, including Vietnam (20%), Myanmar (40%), and Laos (40%). The levy rampage, which took effect on August 1, is expected to reduce Thailand’s GDP growth by over 1% and force Indonesia to offset its trade surplus with the U.S. by boosting 34 billion USD imports from America.

As one critic described, these coercive tactics amount to a “diplomacy of perpetual volatility,” designed to distance the U.S. from its traditional allies and coax its public into a collective state of apathy towards global affairs, prompting its partners to diversify away from the American market.

The sheer scale of U.S. policy extends beyond standard-issue protectionism. It is a deliberate act of turning back the clock on the global integration that the U.S. once evangelized. “My understanding is that the White House no longer uses the term ‘globalization,’ starting from the Biden administration, and they use ‘internationalization’ to replace it,” said Yan Xuetong, a leading political scientist at Tsinghua University. “The American government takes a very firm anti-globalization stance.”

In response to a recent earthquake in Myanmar, the U.S. scrambled a three-person team to the quake-torn area only to have them laid off on the spot, while China dispatched 600 personnel and 14 million USD in assistance. The Senate Foreign Relations Committee Minority report from this July offers a glimpse of this policy fallout: an 80 billion USD withdrawal from multilateral aid, positioning China as the top bilateral donor for over 40 countries.

For China, multilateral platforms like the annual CAEXPO, established in 2004 to promote regional trade and integration, represent a key asset in its diplomatic toolkit for engaging the region—one that the U.S. has yet to match with comparable institutions, even as Washington seeks to magnify its presence in this pivotal geopolitical battleground.

“Over the past two decades, CAEXPO has become more than a showcase of trade and investment. It has grown into a catalyst for deeper integration, innovation, and long-term growth,” said Dr. Kao Kim Hourn, Secretary General of ASEAN, at the opening ceremony of this year’s event.

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U.S. Tollbooth Diplomacy

For ASEAN, a bloc whose 476.8 billion USD in U.S. trade last year employed millions of local workers, Trump’s aggressive approach of reducing trade deficits is tantamount to “extracting rent” rather than forming partnerships, according to Asma Khalid, an American independent researcher.

Deals with Vietnam and Indonesia demand mandatory purchases of American-made jets, energy, and farm produce, effectively turning market access into a “tollbooth.” As critics argue, it monetizes entry into the U.S. market, with governments subsidizing political favors, distorting the free flow of goods, and eroding competitiveness.

The wider Global South also feels the pinch. Trump’s 50% tariff on India, including penalties for its ties with Russia, illustrates how U.S. policy now punishes perceived disloyalty, fracturing trade landscapes.

In response, ASEAN emphasizes purposeful action to boost intra-regional trade, as advocated by Malaysian Prime Minister Anwar Ibrahim, serving as a hedge against volatility. Anwar’s characterization of tariffs as “the new weather of our time” aptly captures the enduring uncertainties and how trade has evolved from a tool for growth to an instrument of pressure, isolation, and containment.

This May, ASEAN held its first-ever summit with China and the six members of the Gulf Cooperation Council (GCC), laying the groundwork for emerging trilateral convergence. With 2 trillion USD in Gulf investments pledged to the U.S. to appease Trump and justify his economic playbook, ASEAN and the Gulf states have recalibrated their strategy via dual summits with China and the GCC, heralding a pivot toward diverse, sustainable partnerships.

Meilleur Derek Murindabigwi, the CEO of Rwanda-based IGIHE, News & Media powerhouse, views this as the Global South’s answer to volatility, tapping into ASEAN’s industrial base and skilled labor with the Gulf’s energy and infrastructure to build resilient trade routes less susceptible to Western whims.

“For Africa, the path is also clear,” said Murindabigwi. “Fast tracking the African Continental Free Trade Area (AfCFTA), investing in regional corridors and leveraging critical minerals and its digital economy to shift from raw exports to value-added production.”

Beijing's Steady Hand

In this maelstrom, China’s policy has burnished its reputation as a reliable partner for ASEAN and the wider Global South. As the entire world grapples with the reigning superpower’s erratic swings, Beijing continues to prioritize pragmatic engagement tailored to partners’ needs.

Recent upgrades to the ASEAN-China Free Trade Area, incorporating digital and green economy provisions, are projected to elevate 27 million people to middle-class status by 2035 via the Regional Comprehensive Economic Partnership (RCEP). China’s Asian Infrastructure Investment Bank has inked deals for climate-resilient projects, arming the likes of ASEAN against U.S.-induced shocks.

“The signing of the CAFTA 3.0 Upgrade Protocol will send a strong signal that ASEAN and China remain committed to upholding a rules-based trading system,” noted Kao. “Even amidst rising geopolitical tensions and global uncertainties, CAFTA 3.0 goes further by making technology and innovation central to our cooperation, deepening supply chain integration and regional prosperity.”

Bounthong Chitmany, Vice President of Laos, is convinced that with transparent mechanisms, along with a human-centered development approach, the China-led global (AI) governance initiative, first proposed in 2023, aligns seamlessly with ASEAN's own AI endeavor.

“China’s push for worldwide AI cooperation, which is built on ideas like open discussions, collaborative efforts, and mutual gains, will help developing nations play a substantive role in shaping AI’s future,” added Chitmany.

Observers note China’s expressed desire for greater U.S. predictability in bilateral dealings, which was evident in Foreign Minister Wang Yi’s July discussions with Rubio in Kuala Lumpur, described as “constructive” and centered on mutual respect and dispute resolution. A follow-up phone call on September 10 reinforced these points, with Wang comparing U.S.-China relations to “two giant ships” navigating forward, while Rubio stressed maintaining communication amid growing tensions over tariffs and defense.

For the other parts of the Global South, China’s outreach, such as the Belt and Road Initiative, has not only offered an alternative to U.S. capriciousness, but has also reshaped global economic geography in favor of Africa and Latin America.

“The difference lies not only in scale but in approach,” said one observer. “Unlike the U.S., which frequently ties engagement to shifting political conditions, China’s cooperation has been predictable and aligned with local development priorities.”

There has even been substantial progress on the primary challenge to China-ASEAN relations — the South China Sea. The Beijing-proposed Code of Conduct has reached a milestone with the completion of its third reading this March, demonstrating China’s measured restraint on territorial disputes with most Southeast Asian neighbors. With differences largely cast aside, China’s share of ASEAN trade rose from 12% in 2010 to 20% in 2023.

The U.S. current trade tactics reflect a notable policy adjustment: a once-open superpower now hell-bent on reversal, viewing alliances as drags and deficits as banes. As Rubio saw it, the postwar order is “obsolete” and a “weapon being used against us,” paving the way for the U.S. to lessen commitments, thus curtailing its international engagement.

As trade negotiations falter over U.S. demands for “rents,” China’s stabilizing role is well-placed to deliver the predictability that ASEAN craves: needs-focused and committed to multilateral gains. For Southeast Asian nations and beyond, aligning more closely with Beijing seems to have become a no-brainer amid U.S. bullying and disengagement.

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Tian Zijun is a Xinhua journalist and researcher of Sinical China. Based in Guangxi Zhuang Autonomous Region in southern China, he is a longtime watcher of China-ASEAN affairs. Email: jeremytzj@qq.com

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

While the Xi-Trump call recharged the momentum behind the Geneva consensus, it remains uncertain what tariff deal will eventually emerge by mid-August between the world’s biggest manufacturing power and the largest consumer market. Anxiety seems to be simmering, especially in the price-sensitive textile sector.

Compared with automobiles, machinery, steel, and other Chinese goods that have fueled Trump’s grievances for Beijing’s alleged “unfair trade practices,” it is the textile and apparel industry, often dismissed as “low-end manufacturing,” that stands as a real hidden giant of China's export economy. From Beijing’s accession to the WTO in 2001 to the first China-U.S. trade war in 2018, the textile sector accounted for 75% of the country’s trade surplus. Its share still hovered around 30% when China’s annual trade surplus ballooned to a record $1 trillion in 2024.

Even under the 90-day truce starting May 12, which lowered additional duties from a staggering 145% to 30%, Chinese textile exports bound for the U.S. still face an average tariff of 54%.

“The Biggest Problem is not High Tariffs, But Uncertainty”

“Whether it is 30%, 54%, or even 145%, all we ask for is a stable duty rate,” snapped Hu Juncheng. Hu is the director-general of a privately-owned garment company based in Jiangxi Province, on the outskirts of the Yangtze River Delta—the heart of China’s textile clusters. With annual revenues of $100–200 million, his company exports 80% of its products to the United States.

Ironically, Hu now finds himself in a bigger dilemma under the temporary tariff relief than during the peak of China-U.S. trade tensions in April. When tariffs skyrocketed to 145%, Hu’s American buyers agreed to shoulder most of the additional costs. But when the rate dropped to 30%, they shifted the burden entirely onto Hu, demanding that he absorb all the remaining duties and eat the losses.

“It’s a psychological game,” Hu said. “When levies soared through the roof, no one expected producers like us to deliver, so clients who desperately needed the cargo had to sit down and talk money.” But after the tariff pause, Hu lost his bargaining power, as buyers believe Chinese suppliers stand to lose everything if the finished goods stay un-shipped.

Ever since the last trade war in 2018, the tariff settlement models for most Chinese garment exporters have changed from “Free On Board” (FOB), where buyers are responsible for all extra costs incurred during and after shipment, to “Delivered Duty Paid” (DDP), where sellers cover all custom procedures and fees. Hu’s company is no exception. “We have to adapt to the growing competition in the market,” Hu said.

Riding the tariff roller-coaster in April and early May, Hu hurried to renegotiate deals one by one, scrambling to persuade buyers to split the surging tariff bills. The 90-day tariff pause has brought yet another ordeal, as he now has to renegotiate already renegotiated deals, while pricing for orders scheduled for delivery after August remains in limbo.

Uncertainty drains time, energy, and money. To hedge against the unknown risks ahead, Hu capped this year’s orders at 3 million units—well below the company’s annual output of 5 million garments when it was running at full tilt.

Shipping costs have become another source of uncertainty. The rebound in China-U.S. trade following the May 12 Geneva announcement has driven freight rates steadily higher.

According to Luo Bin, head of an apparel factory that also primarily targets the U.S. market, the shipping price for a 40-foot high cube container to Los Angeles doubled from $2,000 to $4,000 by the end of May. The rate is expected to jump further to over $6,000 in June.

While China’s exports to the U.S. fell by around 20% in April, after Trump announced the “reciprocal tariffs,” the country’s total export freight volume rose by 5.9% over the same time frame. This suggests that the spikes in exports to non-U.S. markets have offset the decline in China-U.S. trade. It came with a surge in freight rates from China to Southeast Asia, approaching the cost of shipping to America.

And now, the trend has reversed. But whichever way the tide is turning, the cost spike is unavoidable for both sellers and buyers.

“For these 90 days, we are simply wrapping up the previous orders, keeping the factory running,” Luo said. “I just want the tariff rate to stay steady in the foreseeable future, whatever that rate might be.”

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Tradeoff Decisions to Go Overseas

To circumvent uncertainty altogether, it may seem intuitive for Chinese garment suppliers to move production overseas. But that might just introduce another kind of uncertainty.

“Many clothing factories in Southeast Asia and Africa are also owned by Chinese investors, and we’ve received offers from some of them to set up operations there,” Luo said. “But I nipped the idea in the bud. Doing business abroad is no easier.”

Since Trump’s self-vaunted “Liberation Day,” Cambodia and Vietnam initially faced an even higher U.S. tariff wall than China. Their prospects as ideal alternative export bases remain uncertain, as Trump’s bilateral tariff talks with them have seen little progress.

Yet, many Chinese apparel manufacturers have realized that embracing a more globalized supply chain is the key to minimizing exposure to future risks.

Ms. Zhang, deputy head of a 45-year-old garment firm in Guangzhou, said foreign buyers had encouraged the company to move production abroad as early as 2012. But venturing beyond China’s highly sophisticated supply chains was no easy task. Their relocation plan was eventually put on hold due to the outbreak of the global pandemic.

Right as Washington and Beijing exchanged tariff “nukes” in April, Zhang’s company received $30 worth of a sample from an American client, but ended up paying over $1,000 in tariffs just to clear it through customs. This episode served as a wake-up call.

“We originally prepared to move everything offshore after April 2,” Zhang said. Even though she and the other board members breathed a sigh of relief after the Geneva truce, they made a strategic decision to pivot to global supply chains.

Interestingly, this apparel company, whose coming-of-age story parallels that of China’s reform and opening-up, used to focus primarily on the European market 20 years ago. Now, however, orders from the U.S. account for 70% of its business. It is a telltale sign that some Chinese manufacturers are still heavily reliant on the American market.

As it turned out, the opposite is also true. Upon the promulgation of Trump tariffs on April 2, Zhang received numerous calls and emails from American buyers, urging her company not to give up on their orders. “We’re on opposite ends of the same supply chain,” Zhang said. “It takes a lot of effort on their part, too, to find the right supplier.”

Therefore, in the darkest days in April, Zhang’s company continued production at full capacity, even though it was not making any profit. Their slogan of the month was “preserve clients, preserve orders.” Zhang believes their bond with the clients will be forged even stronger once they get through this tough time.

Zhang and her partners’ decision to move production to other emerging markets is emblematic of Chinese manufacturers’ resolve to preserve the mutually beneficial China-U.S. economic interdependence that the likes of Trump are only too careless to sustain.

From time to time, Zhang referred to Trump (“te lang-pu” in Mandarin) as “Mr. Whimsical” (“te mei-pu” in Mandarin). “We will adjust our strategy accordingly,” she said. “You’ve got to have faith in the wisdom of the Chinese.”

“Whoever Sits in the White House, Americans Will Still Need Clothes”

Nothing is certain except death and taxes, but the recent deluge of customs tax doesn’t seem to inflict the same level of pain on everyone.

“As our great leader Mao Zedong once said, don’t panic over something that hasn’t happened yet.” When asked about the uncertainty surrounding the ongoing China-U.S. trade talks, Su Pengfei appeared to have misattributed this quote to the founding father of the People’s Republic of China. Su is the manager of the wool knitwear division at a Shanghai-based state-owned enterprise with $700 million in annual exports, half of which is directed at America.

After a brief suspension of delivery in April, Su and his team have now resumed full-scale production. “The CEO of an American buyer is flying to Hong Kong in June to meet with our top brass for future cooperation,” Su said. “Both parties have been positive about future outlooks after May 12.”

His steadfastness is not without reason. Even though the FOB model has become the industry norm, Su’s enterprise still handles most of its export orders under the DDP model. The company’s global production network, which has gradually taken shape since Trump launched the previous trade war in 2018, now stretches across Cambodia, Bangladesh, Ethiopia, and other developing countries.

At the same time, Su’s company has been “derisking” from the American market, eyeing a sales expansion in Europe, Australia, and Latin America. He expects the future orders from the U.S. to drop to around 30%.

The industrial upheavals brought about by tariffs are nothing new to the company Su works for, whose predecessor was the Shanghai Bureau of Textile Industry. During the 1980s, it once took control of half of China’s textile output, and made up about 40% of Shanghai’s total foreign exchange income. The bureau, with over 500,000 employees, had to go through a painful reform in the early 1990s, as Shanghai lost its competitive edge of cheap labor and the automobile industry began to take its place as the city’s economic pillar. It later morphed into a major textile conglomerate that is still one of the biggest in China.

It is Su’s belief that the core competitiveness of the textile industry still lies in technological advancement, particularly in the areas of materials, dyeing, and pattern design. Although the company has established a global footprint, its design and R&D department remains in Shanghai.

Su stressed that the most skilled professionals in the industry are still in China, where one experienced Chinese technician can easily outperform three or four Southeast Asian workers. Only China has the most complete supply chain capable of serving the world’s largest consumer market, the United States.

“Whoever sits in the White House, Americans will still need clothes. Right?” Su said.

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For a detailed analysis of the ongoing U.S.-China trade talks, we recently interviewed China’s leading trade expert Cui Fan. Here’s full text:

You may also be interested in this analytical article we wrote one month before Trump’s inauguration. It incorporates an all-round analysis of the Chinese economy’s resilience against the U.S. tariff spikes. Read full text:

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

Subscribe to Sinical China for original feature stories and in-depth analyses of Chinese politics, economy, and foreign policies.

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Question 1:

The U.S.-China joint statement in Geneva announced temporary removals and suspensions of the two nations’ tariffs on each other. It is reported that the U.S. tariffs on China have now been lowered from 145% to 30%, and China's levies on American goods from 125% to 10%. What exactly is the current status of bilateral tariffs after the de-escalation?

Cui Fan:

First, the figures of “30%” and “10%” refer only to the additional tariffs imposed this year. For the U.S., the remaining 30% tariffs on Chinese goods are two-fold: the 20% tariffs added this February and March due to the alleged fentanyl claims, and what was left of the so-called “reciprocal tariffs” introduced in April. The reciprocal tariffs on China, which used to stand at 34% in the first place, have now been slashed by 24 percentage points during the 90-day negotiation. That part of the tariffs will remain at the baseline-tariff rate of 10%.

On the part of China, however, the “10%” is not as precise. It largely refers to Beijing’s retaliation against reciprocal tariffs, which has also been cut to this rate after the joint statement. In addition, China’s countermeasures against the “fentanyl-related” tariff barriers have been kept in place. These are not across-the-board levies, but targeted specifically at certain U.S. products such as soybeans and large-displacement vehicles. Therefore, if calculated as a simple arithmetic average, China’s additional tariffs on U.S. goods are actually a bit higher than 10%. Also, some of the non-tariff countermeasures Beijing introduced can not be reflected in the average tariff rate.

Other than the newly-added duties this year, that is the 30% and 10%, today’s actual U.S.-China bilateral tariffs should also take into account the earlier layers that remain in force. These include Section 301 tariffs, Section 232 tariffs, and the WTO-consistent Most Favored Nation tariffs, along with China’s reprisals. According to our calculations, during the 90-day period, U.S. arithmetic average tariffs on China stand at 53.07%, and China’s on America amount to 32.94%. The gap of approximately 20 percentage points was mainly generated by the “fentanyl tariffs” early this year.

Question 2:

How much has this round of tariff exchange affected the U.S.-China trade?

Cui Fan:

Before Washington imposed the “fentanyl tariffs” this February, Chinese exports to America only faced tariffs of approximately 22%. Chinese firms had largely weathered the aftermath of the last trade war through promoting productivity and adjusting their global industrial and value chains. While China has dropped from the top to the third-largest exporter to the U.S., the real share of Chinese goods in the American market actually saw no decline if we calculate based on value added, because the intermediate trade has been a factor. Based on the data we collected for 2022, the value-added share of Chinese goods in the U.S. market was slightly higher than it was before the 2018 trade war.

The two rounds of 10% “fentanyl tariffs” this February and March did not cause a major blow to Chinese firms. In fact, China’s trade volume in the first quarter grew steadily by the month. One contributing factor was of course the frontloading mania prior to the deadline of reciprocal tariffs. So we cannot say for sure whether the 20% “fentanyl tariffs” could have been fully overcome by Chinese firms on themselves.

China’s exports to the U.S. dropped abruptly by 20.2% in April, after the spiral escalation of U.S.-China tariff slapping. However, Chinese exports to the EU, ASEAN, Latin America, and Africa saw significant increases. As a result, China’s total exports in the month following the “Liberation Day” rose 9.3% year-on-year in RMB terms. That is to say, the decline in exports to America was fully compensated by those to the other parts of the world.

Another key indicator for foreign trade is the outbound port cargo volumes. China’s export freight quantity rose by 5.9% in April. The Containerized Freight Index of Shanghai port on May 9th showed a 0.3% increase. These were signs that the cargo flows from Chinese ports stayed steady despite the Trumpian tariff chaos. In contrast, the U.S. began to experience a noticeable decline in cargo volumes starting in late April and early May. The two largest American ports, Long Beach and Los Angeles, then forecast that the cargo volumes in May could slump by at least 30%.

That was why Washington was in a hurry to initiate trade talks with Beijing. Any further delay would have pushed domestic prices even higher with empty shelves in the supermarket. The U.S. would be left with few bargaining chips by then.

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Question 3:

Many observers are now convinced that China has secured a victory in this round of the tariff war. Following the latest joint statement, U.S. levies on Chinese goods have largely returned to pre-"Liberation Day" levels. Does this mean Washington blinked first?

Cui Fan:
The rollback of tariffs will benefit not only China, but also the U.S. and the global economy. The aim of the negotiation is to achieve a win-win outcome that restores a mutually beneficial U.S.-China trade tie. Therefore, it is inappropriate to say either one party has secured a “win.” The greatest achievement of the Geneva talks was de-escalation. It should be noted that the U.S. tariffs on China are still enormous. Geneva has laid the ground for further talks.

One thing is different though. The general tone of the U.S.-China talks this time is no longer marked by Americans’ overbearing arrogance. When the Trump administration first introduced the reciprocal tariffs plan, they urged the other countries not to retaliate or they would face punitive escalation. However, it turned out that Beijing retaliated. And when Washington upped the ante, it found that America bruises much harder.

In my opinion, countries with industrial capacity will prove more economically resilient than those with nothing but printed banknotes. According to the data at the end of 2024, China has been the sole supplier of 254 commodities in the U.S. market, including toasters and alarm clocks. If the U.S.-China trade were to reduce to the point of a de facto mutual embargo, Chinese goods could still turn to alternative markets, but American consumers would only face dusty store shelves with no readily available alternative supplier.

Question 4:

While it took the last Trump administration 18 months to reach a trade agreement with China, there is only a 90-day window for trade talks this time. Wendy Cutler, former Acting Deputy U.S. Trade Representative at the USTR, remarked that “there's no way during this timeframe we're doing a comprehensive agreement with any of these countries.” In your view, is it possible for China and the U.S. to reach a deal within 90 days?

Cui Fan:
The negotiations within the 90-day period will primarily focus on the so-called "reciprocal tariffs," while the issue of “fentanyl-related tariffs” may be addressed as a separate topic. Based on the progress of the U.S. negotiations with other countries disclosed by the media, it appears that the United States may retain a considerable portion of its unilateral tariffs. It has been China’s consistent position that the U.S. should remove all unilateral tariffs. China will not recognize the legitimacy of any remaining U.S. unilateral tariffs and will likely maintain its own countermeasures in response. In the meantime, I believe China is willing to show some negotiating flexibility when it comes to measures that are conducive to mutually beneficial trade relations. I believe China and the U.S. will reach an agreement within the 90-day period. However, we shouldn’t expect a deal that resolves all the differences. Afterwards, further communication is still badly needed to address the outstanding issues between the two biggest economies in the world.

Question 5:

U.S. Treasury Secretary Scott Bessent has claimed that China’s current economic model is built on “exporting its way out of its economic troubles,” and should rebalance towards a consumption-oriented model. According to his op-ed in the Wall Street Journal, he believes China’s rise in global commerce caused America’s manufacturing decline and job loss. Would you agree that such structural tensions exist in U.S.–China trade?

Cui Fan:
What he said is clearly inaccurate. First of all, it is the U.S. that has been a typical case of trying to solve domestic problems through external measures. How come the U.S. has such an enormous domestic demand? The U.S. dollar’s global hegemony. Americans can purchase goods simply by issuing currency. Before the dollar was unpegged from gold in the early 1970s, the post-war U.S. recorded virtually no trade deficit. But ever since the Nixon Shock, the U.S. government’s long-standing lack of fiscal discipline has given rise to its current account deficit. The dollar hegemony came at a price: the decline of its manufacturing sector.

Last year, the U.S. had a total trade deficit in goods and services of US$918.4 billion. At the same time, the federal budget deficit reached US$1.83 trillion, amounting to 6.4% of its GDP, while the commonly accepted warning line for the deficit-to-GDP ratio stands at 3%. If the U.S. were to cut its deficit by half, bringing it down to around 3.2% with a US$915 billion reduction, the problem of trade deficit would largely be solved. But there is no way for Washington to slash the budget deficit on such a scale. The interest payments on U.S. national debt alone are expected to reach US$1.2 trillion this year, which amounts to two-thirds of last year’s federal budget deficit. This reflects a structural inertia embedded in the U.S. fiscal system. Washington has been misguided in accusing China and the rest of the world of generating trade deficits. This does little to address its own structural problems.

The US often claims that it has been taken advantage of under the current global trade system. Let us put it in perspective. It is true that the U.S. maintained relatively low legal tariffs when it still abided by the WTO rules. But why low tariffs? When the U.S. led the establishment of the WTO, it pushed to bring the entire world into a free trade framework, to demand free access to other players’ key sectors, and to install a set of high-standard intellectual property protection norms. The U.S. opened up its own goods market, in exchange for others opening their services market and adopting high-standard intellectual property rules. The multilateral trading system was established under the U.S. leadership, and, overall, serves U.S. interests. The real issue lies in the highly uneven distribution of those benefits within the country.

Reciprocity in international economic and trade relations refers to an overall balance of rights and obligations. The "reciprocity" demanded by the U.S. under its so-called "reciprocal tariffs" refers only to a kind of reciprocity in narrow terms, specifically in areas where the U.S. perceives itself as disadvantaged. For example, it only counts its trade deficit in goods, while ignoring its annual US$300 billion surplus in services trade, its huge investment returns, and the privileges conferred by dollar hegemony. If Washington only looks at the deficit in goods or even simply manufactured goods while ignoring all these other advantages, then this is a form of “lopsided reciprocity,” which can be highly deceptive.

Moreover, from the perspective of macroeconomics, the Chinese economy itself does not exhibit significant external imbalances. Since 2015, China’s current-account surplus has consistently remained around 2% of GDP, and at times has even fallen below 1%. While China’s current-account surplus relative to GDP is not large, it only appears substantial in absolute terms due to the overall size of China’s economy. The Chinese economy has maintained a macroeconomic balance. The real issue lies in the lopsided structure of domestic demand, which is an exclusively domestic problem with little impact on the U.S. whatsoever. If China further expands its domestic demand, whether through consumption, investment, or government procurement, it will further hone the competitive edge of China’s scale-based industries, and China’s manufacturing exports will consequently surge. But again, this does not address the root causes of America’s own economic problems.

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Question 6:

Has China become less dependent on the U.S. market for exports?

Cui Fan:

Back in 2000, 20.9% of China’s total exports went to America. By 2016, just before the last round of the trade war, that figure had dropped to 18.2%. Meanwhile, the share of U.S. exports going to China rose from 2% to 8% over the same time frame. In a normal trajectory, this indicates a growing U.S. dependence on the Chinese market, with mutual market dependence gradually converging. As China’s weight in the global economy has grown, its exports relative to its GDP have been declining, even as its share of global exports has continued to grow. This suggests that while Chinese goods have become even more salient in world trade, China’s own dependence on external markets is waning.

Question 7:

Will this round of tariff conflict lead to the total collapse of the WTO system? And will the global trade landscape be fundamentally changed?

Cui Fan:

Few people have paid attention to this particular detail, that apart from the U.S., all the other 165 WTO members continue to conduct bilateral trade under WTO-compliant low tariffs. This differs sharply from the everyone-for-himself trade wars of the 1920s and 1930s. As of now, only the U.S. has the audacity to disregard international norms. The rest of the world is reluctant to give up such a rules-based global trade framework. The global trade landscape we knew has not been totally shattered.

The two foundational principles of the WTO are the Most-Favored-Nation (MFN) clause and tariff binding. These two principles will stand, even if a new global trade system replaces the current one. Since 1860, the MFN principle has served as a standard non-discriminatory clause in almost all trade agreements concluded on good terms. It is a rule with enduring vitality and is unlikely to fade away. The principle of tariff binding is essentially about keeping one’s word: countries commit not to raise their tariffs beyond the ceilings promised to the WTO. The U.S.’s wayward tariff policies have been called out partly because the U.S., as a WTO member, is obligated to uphold its commitments and cannot unilaterally raise tariffs at will.

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You may also be interested in this analytical article we wrote one month before Trump’s inauguration. It incorporates an all-round analysis of the Chinese economy’s resilience against the U.S. tariff spikes. Read full text:

Xu Zeyu, founder of Sinical China, is a senior journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com

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