Transcript (courtesy of the fantastic CadreScripts) further down the page. Image by Keya Zhou. Listen in the embedded player above!

Recorded live from the Davos on Air booth at the World Economic Forum’s Annual Meeting of the New Champions in Dalian, this special episode of Sinica tackles the “pacing problem”: the widening gap between how fast AI moves and how slowly regulation can catch up. I sit down with Xue Lan, dean of Schwarzman College at Tsinghua University and one of the architects of China’s concept of “agile governance,” to unpack what that term means in practice. He traces China’s regulatory evolution from the 2017 AI plan through the generative AI rules and the 2021 tech crackdown, compare Chinese, American, and European approaches, and ask whether Beijing’s adaptive style can travel to other political systems — including liberal democracies.

• 00:09 – Live from Dalian: the “pacing problem” and why AI has turned it into a chasm

• 03:18 – Introducing Xue Lan, dean of Schwarzman College and architect of “agile governance”

• 04:34 – Why AI’s pace makes it uniquely hard to regulate

• 06:01 – Defining agile governance: mindset, partnership over adversary, and light-touch tools

• 11:54 – From the 2017 AI plan to today: China’s two-track approach to tech and governance

• 20:07 – Balancing development and security amid the US-China AI race

• 23:24 – Revisiting the 2021 tech crackdown: failure of the model, or agility of a different kind?

• 26:14 – The “DeepSeek moment,” open-weight models, and regulatory uncertainty by design

• 37:10 – EU comprehensiveness vs. US patchwork vs. China’s modular, adaptive approach

• 46:59 – Can agile governance travel to liberal democracies? Finding common ground on global AI risk

Transcript

Kaiser Kuo: Welcome to this special edition of the Sinica Podcast, a weekly discussion of current affairs in China, coming to you this week from Dalian, from the Davos on Air booth at the World Economic Forum’s annual meeting of the New Champions, also known as Summer Davos.

In this program, we look at books, ideas, new research, intellectual currents, and cultural trends that can help us better understand what’s happening in China’s politics, foreign relations, economics, and society. Join me each week for in-depth conversations that shed more light and bring less heat to how we think and talk about China.

I’m Kaiser Kuo. For over 20 years now, I’ve had the distinct privilege of working with the World Economic Forum as an official writer. And this year, they’ve asked some podcasters to team up with them to bring you shows both under the World Economic Forum banner and under the banner of their own podcast. So, I’m delighted to be able to do this this year with Sinica.

Listeners, please support my work by becoming a paying subscriber at sinicapodcast.com. I do need your help to keep doing this work and to keep bringing you these conversations.

Technology has always run ahead of the rules meant to govern it. Scholars call this the pacing problem, the chronic lag between what innovators can do and what regulators have figured out how to actually handle. We’ve seen this with nearly every major new wave of technological innovation. Recent examples would include Uber and Airbnb, for example, or how regulation really had to catch up much earlier than that. You could go back to the advent of the automobile.

Cars hit the roads before anyone had invented things like speed limits or driver’s licenses or traffic lights or even the concept of jaywalking. I was lucky enough to be in China and to have a front row seat to watch this whole thing unfold when the Internet really took off in China in the late 1990s. In recent years, artificial intelligence has turned that lag into a real chasm, and nowhere is the dilemma more vivid than in China, a country trying to do two things at once that often can pull in opposite directions to, on the one hand, unleash technological development at extraordinary speed, and on the other, to keep that development firmly within bounds that the state can manage.

Out of that tension has come an idea, “agile governance,” that has worked its way into the global policy vocabulary. The question I want to explore today is whether it’s a genuine model that others can borrow or whether it’s something so deeply rooted in China’s particular system that it can’t really be transplanted. And there’s no better place to ask it than here in Dalian, where this year’s theme is Innovating at Scale. It makes the governance question really more urgent than ever because scaling at innovation, scaling innovation itself, also means scaling the risks of technology.

So, my guest is one of the people who has thought longest and hardest about all of this. Xue Lan is dean of Schwarzman College at Tsinghua University. And because I’ve been involved with Schwartzman for many years, really since its inception, that’s how I know Dean Xue best, but he’s also director of Tsinghua’s Institute for AI International Governance. He’s a Cheung Kong Distinguished Chair Professor with a doctorate in engineering and in public policy from Carnegie Mellon University in Pittsburgh.

He chairs China’s National Expert Committee on the Governance of Next Generation AI. And some of you may recall that was one of those, from China, who spoke to Senator Bernie Sanders of Vermont on cooperation on AI governance back on April 30th of this year. Crucially, for our purposes today, he is also one of the intellectual architects of this very concept of agile governance as a concept in Chinese policymaking. So, there are few people who are better placed to tell us what it really means and whether it travels. Dean Xue, it is a real pleasure to have you at last here in Dalian, and a warm welcome to Sinica.

Xue Lan: Thank you, my pleasure.

Kaiser: So Dean, let’s start with the basic problem. Every regulator faces what’s been called this pacing problem, technology evolving faster than the rules that can keep up with it. This isn’t genuinely new, but it does seem newly acute. What makes it so? It’s not just AI either. It’s biotech. It’s robotics. It’s new materials. It’s quantum. And more, yes?

Dean Xue: I would still argue that AI is really unique. I think partially because AI has been changing so fast. If you look at the other technologies, I think that very few that can develop so fast. I mean, think about the frontier models.

Kaiser: Right.

Dean Xue: In the last few years, I think it’s maybe every half year, not every two months and every month, even just few weeks. So, the rapid evolution, I think, it’s just really unseen.

Kaiser: Yeah.

Dean Xue: I think that’s part of one aspect. The other thing is also the impact on so many domains daily life of our economic activities. So bio maybe is in certain sectors, but not in all. AI, you can’t think of it, an area that AI would not touch on.

Kaiser: Right.

Dean Xue: Yeah.

Kaiser: Yeah, absolutely. So you are very closely associated with this concept of agile governance. So maybe in just a couple of sentences for our listeners, what does that actually mean? And just as importantly, what is it a reaction against? Agile can sound like a Silicon Valley slogan, you know, move fast and break things. So, how is the governance version different from simply light touch regulation or from deregulation?

Dean Xue: Sure. Indeed, I think those two words actually are kind of a very strange combination. We think about the governance, of course, it’s very official, very formal, is going to take a long time, and so on. So you have that image there. Agile is something that’s light, quick, and then the change fast. So those two combinations, I mean, it’s kind of weird combination. But that’s exactly what I think that we’ve been trying to achieve. That is, you want to achieve the function of governance. But at the same time, the way you achieve that is not through the traditional, you know, official approach.

But rather you try to learn from the, you know, in other spheres, for example, in industry and so on. You try to accelerate. So that’s the combination that we’re trying to achieve. I think, in general, I think there core elements, what I see as really embodied in the so-called the agile governance. And the first thing is that, you know, I’m a scholar of public policy. So, when we think about governance, we think about regulations, you always try to study this thing very thoughtfully, I mean, very thoroughly.

And so, you want to make sure that you’re not leaving any gaps. You want to review all the evidence, all the problems and so on. And then you come up with a comprehensive, accurate kind of a regulations that you very thoughtfully deliberated. And then you go through, you know, very elaborative process, being reviewed by experts, by stakeholders, and going through the kind of a due process, then to get your final thing coming out.

And that’s the regular governance that we have to go through. Very unfortunately for a technology like AI, by the time you’ve gone through that process…

Kaiser: The thing you’re regulating has changed.

Dean Xue: The thing you’re regulating has already changed. It’s totally been the way. So, what do you do? And that’s so in a way, if you really want to be useful, you really have to change your mindset. You can’t be comprehensive. You can’t be accurate on everything. And you really have to move fast. That’s the, I think, the first thing is that you have to change your mindset. The second thing I that you also have to change the idea that the regulator and the regulatee, the companies being regulated, you are the enemy. You are playing the cat and mouse game.

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Recorded live from the Davos on Air booth at the World Economic Forum's Annual Meeting of the New Champions in Dalian, this special episode of Sinica tackles the "pacing problem": the widening gap between how fast AI moves and how slowly regulation can catch up. I sit down with Xue Lan, dean of Schwarzman College at Tsinghua University and one of the architects of China's concept of "agile governance," to unpack what that term means in practice. He traces China's regulatory evolution from the 2017 AI plan through the generative AI rules and the 2021 tech crackdown, compare Chinese, American, and European approaches, and ask whether Beijing's adaptive style can travel to other political systems — including liberal democracies.

• 00:09 – Live from Dalian: the “pacing problem” and why AI has turned it into a chasm

• 03:18 – Introducing Xue Lan, dean of Schwarzman College and architect of “agile governance”

• 04:34 – Why AI’s pace makes it uniquely hard to regulate

• 06:01 – Defining agile governance: mindset, partnership over adversary, and light-touch tools

• 11:54 – From the 2017 AI plan to today: China’s two-track approach to tech and governance

• 20:07 – Balancing development and security amid the US-China AI race

• 23:24 – Revisiting the 2021 tech crackdown: failure of the model, or agility of a different kind?

• 26:14 – The “DeepSeek moment,” open-weight models, and regulatory uncertainty by design

• 37:10 – EU comprehensiveness vs. US patchwork vs. China’s modular, adaptive approach

• 46:59 – Can agile governance travel to liberal democracies? Finding common ground on global AI risk

Our phrase of the week is: “The Card Master” (卡牌大师 kǎ pái dà shī)

Context

At the 2026 World Cup, which kicked off on June 11, China's national team is absent again. In fact, Team China hasn't qualified for the tournament since 2002.

There is, however, one Chinese representative on the pitch: head referee Ma Ning (马宁). His first match was Ecuador versus Curaçao on June 20, which drew over 10 million Chinese viewers on social media platform RED.

Born in 1979, Ma Ning started his career as a university PE teacher in Wuxi. He began refereeing as a hobby in his spare time. At age 26, he came top of the Chinese Football Association’s national referee programme, then worked his way up from the lower leagues to the Chinese Super League, making international referee in 2011.

He made the officials’ list for Qatar 2022 but only as fourth official and VAR assistant, never taking charge of a match. That looked like his last chance, yet he trained four more years and, against the odds, made the refereeing squad for this World Cup at 47.

Ma Ning is a hit with fans in China. But not just because he is China’s “only starter” (唯一首发) on the pitch at the World Cup. It’s his unforgiving, principled style which has won fans over and given rise to his nickname:

Within the profession, he’s known as “The Card Master.”

It’s not a jab, but a respectful acknowledgement.

His approach on the pitch is simple to the point of stubbornness: he follows the rules, not a player’s reputation.

业内人送他外号“卡牌大师”。这不是调侃，是带着敬畏的认可。他的赛场逻辑简单到近乎固执：只认规则，不认脸。

And with that, we have our Sinica Phrase of the Week.

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What it means

"Card Master" (卡牌大师 kǎ pái dà shī) is an internet slang phrase which came from online gaming and is now the nickname given to Ma Ning.

It’s origin is League of Legends (英雄联盟), the hugely popular online battle game, and the source of many other well-known internet slang phrases. The “Card Master” (卡牌大师) is a characters in the game. He’s a champion who fights by hurling playing cards, and is known in English as Twisted Fate.

The Card Master is a notorious yet charming gambler and con man. He is world-famous for his skill with a deck of cards and always keeps an ace up his sleeve. Everything he does revolves around cards: he flings them at enemies, draws blue, red or gold cards for different effects, and has a signature move that reveals every opponent on the map.

The nickname crossed over into football, and onto Ma Ning himself, after a notorious Shanghai derby in May 2015, between Shanghai SIPG (上海上港) and Shanghai Shenhua (上海申花). During that match he handed out 12 cards in total: nine yellow and three red. His liberal use of cards drew the comparison to the Card Master in League of Legends, and the name stuck.

Ma Ning has since become a superstar in China, and his nickname “Card Master” has followed him as an admiring nod to his adherence to the rules, and his willingness to punish any player who breaks them, no matter how big the name.

With China’s national team watching from home, Chinese football fans have turned to the Card Master for someone to support at the World Cup, calling him the most neutral official at the tournament.

Andrew Methven is the author of RealTime Mandarin, a resource which helps you bridge the gap to real-world fluency in Mandarin, stay informed about China, and communicate with confidence—all through weekly immersion in real news. Subscribe for free here.

Read more about how this story is being discussed in the Chinese media in this week’s RealTime Mandarin:

RealTime Mandarin

#282: The Card Master: China's Unlikely Face at the World Cup

Welcome to RealTime Mandarin, a free weekly newsletter that helps you improve your Mandarin in 10 minutes a week…

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4 days ago · 2 likes · Andrew Methven

My guests Angela Huyue Zhang, a law professor at USC, and S. Alex Yang of London Business School, have a striking answer: think of Beijing less as a central planner and more as a platform company — like Nvidia or Apple — one that builds the architecture and governs the ecosystem. They call it the “platform state,” and I sat down with them at the WEF Annual Meeting of the New Champions in Dalian to unpack what it means for the AI race.

Audio podcast will drop next week!

Last week in Brussels, EU leaders held their first sustained debate on China policy in three years, and were so wary of Beijing’s reaction they wouldn’t print the word “China” on the agenda. The trigger: a goods-trade deficit closing in on 360 billion euros, and, for the first time ever, all 27 member states in the red. Recorded at Summer Davos in Dalian, I sat down with economic historian Adam Tooze to ask why the panic, and why now. Polanyi, the Plaza Accord, “glut shaming,” a $1.2 trillion surplus, and what Europe and China each most need to understand about the other.

04:26 – Why the alarm now? Imbalances are decades old, so what changed—and the shift from China slotting into Western supply chains to climbing the value chain

07:04 – Karl Polanyi, the “double movement,” and how the European working-class question becomes the politics of right-wing populism

11:21 – Autos as the core of the fight—12 million jobs—and why the Ukraine alignment gives the whole thing its moral charge for von der Leyen

14:14 – “Glut shaming”: the accusation of illegitimacy baked into the Western framing, and how it lands on a Chinese ear

18:16 – Wěiqu (委屈)—the swallowed sense of being wronged and why the EU should exercise a bit of cognitive empathy

20:14 – Merz reaches for the 1985 Plaza Accord, and the empathy gap that lets a German politician miss what that signals in Beijing

22:00 – The currency-manipulation argument, Germany’s own history with the euro, and why Switzerland is the real manipulator

25:49 – The $1.2 trillion surplus—”nothing we’ve ever seen before”—and the consumption China refuses to do

26:12 – Sorting the sectors: solar, batteries, and EVs where resistance is futile, versus steel and shipbuilding as “Polanyi double-movement as cosplay”

32:04 – The Draghi report and the house of mirrors: is China the cause of Europe’s malaise or just the thing exposing a homegrown one?

36:27 – If Tooze had von der Leyen’s ear: investment-linked talks, phased protection with a clear exit, and “investment, investment, investment”

41:16 – The October clock on the U.S.–China truce, and why this autumn could get very ugly

43:09 – Closing advice: what Europe and Beijing each most need to understand if this ends in managed rebalancing rather than a trade war

Transcript (courtesy of the fantastic CadreScripts) further down the page. Image by Keya Zhou. Listen in the embedded player above!

Last week in Brussels, EU leaders held their first sustained debate on China policy in three years, and were so wary of Beijing’s reaction they wouldn’t print the word “China” on the agenda. The trigger: a goods-trade deficit closing in on 360 billion euros, and, for the first time ever, all 27 member states in the red. Recorded at Summer Davos in Dalian, I sat down with economic historian Adam Tooze to ask why the panic, and why now. Polanyi, the Plaza Accord, “glut shaming,” a $1.2 trillion surplus, and what Europe and China each most need to understand about the other.

04:26 – Why the alarm now? Imbalances are decades old, so what changed—and the shift from China slotting into Western supply chains to climbing the value chain

07:04 – Karl Polanyi, the “double movement,” and how the European working-class question becomes the politics of right-wing populism

11:21 – Autos as the core of the fight—12 million jobs—and why the Ukraine alignment gives the whole thing its moral charge for von der Leyen

14:14 – “Glut shaming”: the accusation of illegitimacy baked into the Western framing, and how it lands on a Chinese ear

18:16 – Wěiqu (委屈)—the swallowed sense of being wronged and why the EU should exercise a bit of cognitive empathy

20:14 – Merz reaches for the 1985 Plaza Accord, and the empathy gap that lets a German politician miss what that signals in Beijing

22:00 – The currency-manipulation argument, Germany’s own history with the euro, and why Switzerland is the real manipulator

25:49 – The $1.2 trillion surplus—”nothing we’ve ever seen before”—and the consumption China refuses to do

26:12 – Sorting the sectors: solar, batteries, and EVs where resistance is futile, versus steel and shipbuilding as “Polanyi double-movement as cosplay”

32:04 – The Draghi report and the house of mirrors: is China the cause of Europe’s malaise or just the thing exposing a homegrown one?

36:27 – If Tooze had von der Leyen’s ear: investment-linked talks, phased protection with a clear exit, and “investment, investment, investment”

41:16 – The October clock on the U.S.–China truce, and why this autumn could get very ugly

43:09 – Closing advice: what Europe and Beijing each most need to understand if this ends in managed rebalancing rather than a trade war

Transcript

Kaiser Kuo: Welcome to this special edition of the Sinica Podcast, a weekly discussion of current affairs in China, coming to you this week from Dalian, from the Davos On Air booth at the World Economic Forum’s Annual Meeting of the New Champions, otherwise known as Summer Davos. In this program, we look at books, ideas, new research, intellectual currents, and cultural trends that can help us better understand what’s happening in China’s politics, foreign relations, economics, and society.

Join me each week for in-depth conversations that shed more light and bring less heat to how we think and talk about China.

I’m Kaiser Kuo, and for over 20 years now, I’ve had the privilege of working as an official writer for the World Economic Forum, as some of you listeners will know. And this year, they’ve asked some podcasters to team up with them to bring you shows under both the WEF banner and the banner of their own shows. So, I am delighted to be able to do this with Sinica.

Listeners, please support my work by becoming a paying subscriber at sinicapodcast.com. I do need your help to keep doing this. Please subscribe so I can continue to bring you these conversations.

Last week in Brussels, the leaders of the European Union’s 27 member states sat down to a working dinner. The single item on the menu read Global Macroeconomic Imbalances and Their Implications for Europe’s Competitiveness and Prosperity. Everyone in the room knew precisely what was actually being discussed, and that, of course, was China. As one diplomat put it, “We all know the imbalances discussion is about China. It was the first time in three years that EU leaders had held a sustained debate about China policy, and they were so wary, I guess, of Beijing’s reaction that they wouldn’t even print the word on the agenda.

The numbers behind that dinner are quite stark. In 2025, the EU’s goods trade deficit with China reached very nearly 360 billion euros. So, if you think about that, it’s close to a billion euros a day cumulative. So, the largest so far in the bloc’s history. And for the first time ever, every single one of the 27 EU member states was actually running a deficit with China. Jens Eskelund, who heads the EU Chamber of Commerce in Beijing, captured the mood with an image that stuck. The relationship, he said, is less a partnership than a giant container ship that sails to Europe stacked high and comes back to China nearly empty.

By the end of the dinner, according to reports, the leaders had handed Commission President Ursula von der Leyen a mandate to develop new and, in the words of one official, “Very powerful tools,” while carefully framing it all as resting on two pillars — European unity, of course, and dialogue with China. So that’s the mood music. Now, here’s why I wanted today’s guest in particular for the past couple of years as this overcapacity and imbalances panic has built across the West. One of the very few prominent voices willing to look at in the eye and ask, “Wait, why are we panicking and why now?”

He has been my guest many times now on Sinica. Sinica listeners will know him well, and this is what makes him, I think, the perfect person for this conversation. He is not some apologist because he’s also quite candid about the fact that there really is a China Shock 2.0, that it’s unlike anything we’ve ever seen, and that this time the principal target is not the United States, it is Europe. Adam Tooze has been on the show, as I said, a bunch of times, most recently just a couple months ago after the China Development Forum, in an episode that we rather cheekily titled, “Adam Tooze is China-maxxing.”

Adam is an economic historian at Columbia University, where he directs the European Institute. He’s the author of a shelf of indispensable books, The Wages of Destruction, Crashed, Shutdown. He is the force behind the Essential Chartbook Newsletter, the co-host of the Ones and Tooze podcast. And he’s also got a book on the energy transition on the way, which I very much want to get my hands on.

Adam, welcome back to Sinica. Great to see you again here in Dalian.

Adam Tooze: It’s a pleasure to be here.

Kaiser: So let’s start with exactly where you started in, I think it was Chartbook 1,442,000. But it was the question hanging over the whole Brussels dinner of why now? The IMF and the World Bank gathered in April. The word on every macroeconomic analyst’s lips was imbalances. But you point out that imbalances are hardly anything new. The U.S. and the U.K. have run deficits for decades.

China, Germany, and Japan ran surpluses for decades. And by the IMF’s own data through 2024, things aren’t dramatically worse, really, than they were in any past moment. So I’ll put your own question back to you. Why the alarm at this particular moment?

Adam: Well, I think there is a general concern about this phase of China’s development because it moves from, shall we say, the convenient phase of Chinese development, which was inserting China in a relatively subordinate position into Western-led supply chains. That’s the story of the 2000s. And unsurprisingly, there could be trade hawks in the U.S. that would make an issue out of this. But what’s happened in the 2010s is China moves up the value chain. I mean, most notoriously, the 2015 program made in China 2025, that date’s obviously passed.

That itself, in fact, it turns out, ironically, was a borrowing from a German industrial initiative, in fact, closely associated with WEF, which was Industry 4.0, which was launched at the Hanover Trade Fair, I think, in 2011. A bunch of Chinese engineers were there, thought that sounded like a pretty good idea, and kind of went ahead and actually did it. And the consequences of that now are really very dramatic across the middle to top tier of manufacturing, where China is emerging as a key competitor. And here’s the crunch point for Germany.

And because they emerge as a key competitor for Germany, that changes the European conversation. Because up to this moment, there was really a German roadblock on any tough talk about China trade, because Germany actually ran a trade surplus or balanced trade with China, and key industrial interests in Germany, the Siemenses, the BMWs, the Mercedes, the VWs of this world, were deeply invested in the China market, and so, tough talk about China trade is still extremely sensitive for them, but it’s a sign of the times that this is shifting.

The other key component is what’s at stake here are industrial jobs. And so, with the industrial jobs question comes the European working class question, and with the European working class question comes the politics of populism and right-wing populism in particular.

Kaiser: And in discussing that idea, you reach for Karl Polanyi, the author of The Great Transformation and this idea that, well, globalization without political and social embedding eventually produces a backlash, what he calls this “double movement.” Can you explain who Karl Polanyi was and why he’s relevant at this moment? Unpack for us this idea of the double movement and why it’s relevant to the EU trade impasse with China right now.

Adam: So, I mean, he’s an Austrian emigre. He’s one of that group. But unlike, say, the Hayek’s of this world, more from the center left, the social democratic left, a kind of Marxism figure, though never really explicitly identified with Marxism, leaves Austria in the 1930s, has a sojourn in the UK like so many, ends up, in fact, at Columbia, could never fully situate in the U.S. because his wife had a Communist Party past, and so she was stuck in Canada.

He used to commute from Canada to Columbia to teach, famous later in his career for his deep anthropologies of the economy and fundamental work on the emergence of trade and production organized around money in the classical period, in classical antiquity, but relevant in this context because in the ‘30s and ‘40s, he began thinking very hard about crises of capitalism, and in ‘44 published one of the great books of the 1940s, Hayek’s Road to Serfdom, on the one hand, The Great Transformation, on the other by Polanyi is one of the great products.

And it’s a book which argues essentially that economic liberalism of the 19th century form, and this is where his anthropology kind of mindset comes in, shouldn’t be taken as a natural condition. It shouldn’t be taken as the obvious reality. In fact, it should be viewed as the rather strange, shall we say, fetishistic superstition of the 19th-century bourgeoisie who set about creating an essentially unreal world.

He talks about fictitious commodities in which they took land and labor, and money and turned them into abstract entities that functioned according to their own rules. All of this, of course, the artifice of a certain quasi-theological kind of construction. And this always ran up against the reality that work is people’s lives and people’s livelihoods and the gold is not necessarily the foundation of money, which is really a social artifact, and so on, and so forth. And so those tensions explode for Polanyi and unload for Polanyi in the mass mobilizations for various types of protectionism in the early 20th century.

People will be filling in, if not with Polanyi, then people like Barry Eichengreen or O’Rourke and Williamson, who, in a very mainstream mode, from the early 2000s onwards, were arguing that the glory days of globalization might actually have a ticking time bomb hidden within them, which would be the blueback about against globalization that then finally came really on the large scale in the 2010s. so, Polanyi, since the advent of Brexit and Trump, has become a key figure for thinking about this phase of backlash.

And one would have to say that in the current moment, the effort by the Europeans to craft a response to the success of China’s industrialization has about it the feeling of this kind of protective double movement defense. And I think that’s something to take seriously and not just to dismiss. The key area here is not aluminum and steel or cement or any of those old things which feature quite large in American debates about Chinese trade, but cars, autos, whatever you call them, motor vehicles.

Kaiser: Right.

Adam: Because that is the core of the European manufacturing sector. It’s 12 million plus jobs. And to lose those to the Chinese EV “invasion” would, I think, undisputably be a huge challenge for the stability of the European political economy as we know it.

Kaiser: European leaders aren’t coy about this either. They talk directly about the jobs — von der Leyen says flat out she won’t let unfair competition gut Europe’s industrial base. Cheaper EVs and all these good things that come of trade, supposedly, they are cold comfort to a laid-off autoworker in Saxony, who then goes on to vote for AFD.

Adam: That’s the narrative. And it’s indisputable, I think, that China subsidized its EV sector. I mean, the most comprehensive assessment I know in the West, which

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The conflict that erupted at the end of February 2026 was, among other things, an energy shock. Nine weeks of disruption in and around the Strait of Hormuz pushed Brent to nearly $120 a barrel, sent liquefied natural gas (LNG) prices to multi-year highs, and forced governments to confront the fragility of supply chains they had spent the post-COVID years assuming were secure. The shock exposed which economies had built genuine resilience into their energy systems, and which had merely diversified their suppliers of imported hydrocarbons.

On paper, China should have been among the most exposed economies. Columbia’s Center on Global Energy Policy has noted that roughly 45-50% of its crude imports transit Hormuz, and nearly a third of its LNG comes from the Gulf. But China’s economy proved considerably more insulated than those numbers would predict. Goldman Sachs trimmed its 2026 growth forecast for the country by only 0.2 percentage points – the smallest downgrade in the Asia-Pacific region.

Part of that cushion was conventional: a strategic and commercial crude stockpile of some 1.2 billion barrels, enough to run the country for over 100 days with zero imports, and supply lines diversified toward Russia, Central Asia and other non-Gulf sources. But the deeper reason is that the marginal growth in energy demand over the last decade has been met not by more imported oil but by domestically generated electricity.

Transport electrification has converted what would have been gasoline demand into power demand. Rhodium Group estimates that China’s electric-vehicle fleet alone now displaces over 1 million barrels per day of oil demand, “equivalent to roughly the daily oil production of Oman.”. Industrial electrification is beginning to do the same in steel, cement and chemicals – the hard-to-abate sectors where progress has been slowest globally, but where Chinese firms have made measurable headway. The grid build-out, especially the network of ultra-high-voltage transmission lines that move electricity from the wind and solar resources of the west to the load centres of the east, enables domestically generated power to reach the places that need it. China’s structural exposure has been shrinking for years.

The Hormuz shock has also accelerated something that was already underway: a global reframing of the energy transition from a climate question into an energy-security question. But how did a single country come to occupy the position from which it could better absorb a shock of this magnitude than many other nations?

No one foresaw this moment. But the system that has absorbed it relatively well was the product of sustained planning and sustained pressure – of bets that Chinese policy-makers made deliberately and of responses to problems they had not chosen and could not have wished for. The compounding of the two, over a quarter-century, produced what the rest of the world now needs.

Chokepoint vulnerability and an emerging security strategy

China’s Five-Year Plans have included renewable energy development goals since the 10th Five-Year Plan (2001-2005). Since then, the plans have continued to play a crucial role in setting priorities for officials and enterprises. But it would be a mistake to overstate the role of contingency and improvisation: the Chinese position in the energy transition was also the product of a confluence of pressures, decisions and capacities that compounded over roughly a quarter-century, during which any number of different choices could have been made, and several of them very nearly were.

The catalysing pressures arrived in the early 2000s, and they were about energy security well before they were about climate. China’s oil import dependence, near zero in the early 1990s, crossed 40% around 2003 and kept climbing. The country was already importing through the Strait of Malacca, the Strait of Hormuz, and the South China Sea; Chinese strategic planners were beginning to articulate what came to be called the “Malacca dilemma“ – the recognition that an enormous and growing share of the country’s energy supply transited a chokepoint controlled by potentially hostile naval powers.

During the same period, electricity demand outpaced generation capacity. Brown-outs and load-shedding became routine in major coastal provinces in 2003 and 2004 as the coal transport infrastructure creaked under surging demand. The SARS outbreak compounded the sense that the system’s margins were too thin. Out of this period came a series of decisions whose consequences would not be fully visible for 15 years: a commitment to ultra-high-voltage transmission as a national grid backbone, the establishment of the National Energy Administration’s institutional predecessors, and the early framework for what would become a sustained policy of moving electricity from interior generation to coastal consumption.

The conclusion Chinese planners eventually drew from the chokepoint vulnerability was to reduce the dependency itself. The country could not realistically power its rapid economic growth and achieve hydrocarbon self-sufficiency the way the United States did through shale; its endowment was too thin and its consumption too large. What it could do was build the manufacturing base and the grid that would let domestically generated electricity displace imported oil and gas in transport and industry over time. The Chinese transition turned out to be a security strategy that was incidentally a climate strategy.

Beijing’s ‘airpocalypse’

The second pressure was air pollution, which became politically unignorable in the late 2000s and the early 2010s. Beijing’s airpocalypse of January 2013, when PM2.5 readings broke the upper limit of the US Embassy monitor, was the visible apex of a problem that had been building for years. The political response was real and consequential. Coal-fired industrial boilers were phased out in dense urban regions and replaced by electrified or gas-fired alternatives. Emission standards on power plants were tightened to levels that, by the late 2010s, exceeded those in force in US. Particulate concentrations in major cities have since fallen sharply – by 41% nationally between 2013 and 2022.

To be sure, the pollution problem is not solved. But the crisis did something else as well: it gave the public a stake in the energy transition that was immediate and tangible, in a way that long-horizon climate arguments rarely do. People in Chinese cities could feel, on their skin and in their lungs, what cleaner energy meant.

2008 financial crisis and ‘new infrastructure’ investment

The third pressure was the 2008 financial crisis and the 4 trillion yuan stimulus that followed. These measures are remembered in the West primarily for their excesses in real estate and heavy industry, but a significant share was directed into renewable energy capacity, grid infrastructure and what would later be called the “new infrastructure” categories. The investment pushed Chinese solar and wind manufacturing onto the steep part of its learning curve at exactly the moment the global market was contracting.

The energy evolution

The fourth pressure came from the leadership itself. In June 2014, Xi Jinping delivered a speech to the Central Financial and Economic Affairs Commission that introduced what came to be known as the “Energy Revolution” – a four-part formulation calling for revolutions in consumption, supply, technology, and institutions, with international cooperation as a fifth element. The speech matters less for any specific policy it announced than for what it signalled: that energy was now a top-leadership concern, rather than a sectoral matter handled by line ministries.

That framing has held. In September 2020, Xi announced at the United Nations General Assembly that China would peak its carbon emissions before 2030 and reach carbon neutrality before 2060. The 14th Five-Year Plan, released the following year, began the institutional work of translating that target into operational targets across ministries, provinces and state-owned enterprises, including the consequential shift from controlling energy consumption to controlling carbon emissions.

What looks in retrospect like a coherent trajectory was, in real time, a sequence of pressured responses to immediate problems – energy insecurity, air pollution, and post-crisis demand for stimulus. The system that resulted was the product of those alignments, not of perfect foresight.

The market that had to be made

Most cleantech in 2005, 2010, or even 2015 had no natural market. The cost curves for solar, wind and lithium-ion batteries were still descending from levels that made unsubsidized deployment uneconomic in most applications. Electric vehicles were an off-puttingly expensive niche product. The technologies existed, often in forms perfected by Western and Japanese firms, but the demand to absorb them at scale did not.

A market for clean technology had to be built – by policy, by procurement, by regulation that priced out the incumbent – before the technology could reach volumes that would bring costs down to the point where it could compete on its merits. This is what Western coverage of Chinese industrial policy most often misses. It is also what sets the Chinese approach to energy security apart from most other large economies. The conventional response to import dependence is to make the imports themselves more secure: diversify the suppliers, build strategic reserves, protect the sea lanes, secure oil supplies. China did all of that, but the larger bet was on the demand side. If the economy ran increasingly on electricity generated at home, the reliability of any given shipping lane would weigh less on it each year.

The tools were varied and, taken individually, unremarkable. Most had analogues elsewhere. What was distinctive in China was their accumulation and the willingness to apply them across multiple cleantech sectors at once.

EVs and the dual credit system

For electric vehicles, the most consequential tool was the dual-credit system introduced in 2017, which required automakers to produce and sell a rising share of new energy vehicles or buy credits from competitors who exceeded their quotas – a mechanism modelled directly on California’s Zero-Emission Vehicle programme. Tier-one cities reinforced the pull by tying license-plate access to EV ownership: In Beijing, where internal-combustion plates were rationed by lottery, EV buyers could obtain plates with significantly less wait time; in Shanghai, where plates were auctioned at prices around 90,000 yuan, EV buyers were exempted from the auction. Public charging infrastructure was rolled out by the Big Five state power generators under explicit central direction, with State Grid Corporation alone committing to install hundreds of thousands of charging points by the early 2020s – a public investment that closed the range-anxiety gap that had deterred private buyers from EVs through the early 2010s.

Solar and wind: construction of demand

For solar, the Golden Sun programme of 2009 and the feed-in tariff regime that followed in 2011 provided guaranteed offtake at administered prices, giving developers the revenue certainty needed to deploy at scale through the period when generation costs still exceeded grid parity.

For wind, the early concession-tendering rounds and the 2005 renewable energy law established mandatory grid-purchase obligations that converted intermittent generation into a viable commercial proposition.

Across all these instruments, the common feature was the construction of demand at administered terms long enough for the supply side to reach scale, after which the administered terms could be wound back as cost curves did the rest.

What the demand created was a supply side that, within a decade, became the most cost-disciplined and vertically integrated clean-technology manufacturing base in the world. The pattern was visible across sectors but clearest in batteries. CATL, founded in 2011 in Ningde, scaled from a battery supplier to a single domestic automaker into the dominant global producer of lithium-ion cells in under a decade, helped by an early partnership with BMW. BYD took a different route, using its battery-making heritage as a structural cost advantage that competitors could not replicate. By the early 2020s, these two firms together accounted for over half of global EV battery production.

The competition that produced this position was, by most accounts, brutal. Profit margins among Chinese cleantech firms have run consistently lower than those of their Western and Korean competitors. The same dynamic is now playing out in EVs, where domestic competition among more than a hundred EV brands is widely expected to produce a similar shakeout.

The grid story: supply side - but also demand

The spine of that system is ultra-high-voltage transmission. The technology, developed at scale almost nowhere else, lets electricity move at very high voltages and very low losses over continental distances. China made an early commitment to UHV in the mid-2000s and has since built a network that connects the wind and solar resources of the western and northern provinces – Inner Mongolia, Xinjiang, Gansu, Qinghai – to the load centres of the eastern coast. The engineering is unforgiving. The country’s longest UHV line, the 1,100-kilovolt Changji-to-Guquan link, runs more than 3,200 kilometres and can transmit 12 gigawatts – enough to power 50 million households – at loss rates that make transmission across such a distance economically viable.

Variable renewables present an integration problem that grids designed for dispatchable thermal generation handle poorly. Curtailment – generation produced but not absorbed by the grid – ran painfully high in the wind-rich north-west in the early 2010s, with rates above 30% in some provinces. The response combined transmission build-out, dispatch reform, and market mechanisms that priced curtailment into generators’ returns. The IEA reports that Chinese curtailment fell from 16% in 2012 to less than three per cent by 2022, enabled by what it calls “large-scale investment in grid infrastructure” averaging $75 billion per year. The integration problem is not solved, but the trajectory is one of an integration challenge being managed in real time rather than outpacing policy.

The demand side of the grid story has had less attention than the supply side, but the latter is structurally the more interesting half. Electrification has not been confined to passenger cars. China’s intercity rail network, the world’s largest, is more than 75% electrified. Fifty-four cities have built subway systems totaling nearly 11,000 kilometres, almost all of which were built since 2000. More than 400 million electric two-wheelers have replaced the two-stroke gasoline scooters that fueled urban air pollution across much of the developing world. Marginal energy demand in Chinese cities is met by electricity from a grid steadily shifting toward non-fossil sources, rather than by imported gasoline and diesel. Whether the system has reached the point of producing an absolute emissions decline, or only the slowing of their growth, is the question that now matters.

The trajectory now: have renewables grown fast enough to bend the emissions curve?

The course corrections have been real. A power crunch in 2021 slowed the pace at which coal was retired, and the oft-cited surge in new coal-power approvals in 2022 and 2023 reflected an explicit reprioritization of energy security.

Speaking at the Xiong’an headquarters of Huaneng Group in March 2026, Xi insisted that coal-fired power remained “the foundation of our energy supply” and would “continue to play a backstop role” even as the system pivoted toward renewables. This looks at first glance like a contradictory picture – China being simultaneously the world’s largest builder of renewables and the world’s largest builder of new coal capacity. Both reflect the same underlying strategy.

The more interesting question is whether the renewables line has now grown fast enough to bend the emissions curve. The data through early 2026 suggests it has, and that this plateau is different in kind from the ones before it.

China’s emissions have fallen four times in the past four decades, but every previous decline was the by-product of economic weakness: the industrial slump of 2015, the zero-COVID contraction of 2022. Demand fell, so emissions fell. What began in March 2024 is the opposite. Lauri Myllyvirta of the Centre for Research on Energy and Clean Air, whose quarterly analyses for Carbon Brief are the standard reference on Chinese emissions, reports that the country’s CO2 emissions have now been flat or falling for 21 months as of February 2026 – not because demand stalled, but because clean-power generation has been growing faster than demand. Myllyvirta’s February analysis found a result with no modern precedent: In 2025, coal-fired power generation in China fell for the first time in over half a century, even as the economy kept expanding.

Whether this is the peak is a different question. Emissions remain only slightly below the previous high, which means a single bad quarter for renewables – a dry year for hydropower, a slowdown in capacity additions, a surge in chemical-industry coal use – could push the headline emissions number to a new record. And the 15th Five-Year Plan, released in March 2026, has been criticized by Myllyvirta and others for setting a carbon-intensity target that, under a revised methodology, could permit absolute emissions to rise three to six per cent over the next five years.

But the plateau is nonetheless real. The system is now capable of producing an absolute emissions decline. Whether the policy framework will allow it to is the open question.

A replicable story for other countries?

The temptation is to draw the wrong lesson from this story: that other countries should copy the Chinese model. They cannot.

“China’s energy transition demonstrates the power of long-term planning,” says Espen Mehlum, Head of Energy at the World Economic Forum. “Guided by successive Five-Year Plans, the country has improved energy security, sustainability and affordability while reducing import dependence and local air pollution.

“In parallel, it has built globally leading capabilities in clean energy industries such as electric vehicles, batteries and solar manufacturing – progress reflected in its strong performance in the World Economic Forum’s Energy Transition Index.”

The Chinese trajectory was made possible by a specific institutional configuration: a state with the planning horizon to make 20-year infrastructure commitments, the fiscal capacity to absorb a decade of thin margins in strategic industries, the bureaucratic reach to align provincial incentives with national targets, and the political stability to weather repeated course corrections without abandoning the underlying direction. Few other nations possess this, and no liberal democracy is going to acquire it by importing a five-year plan.

What to build domestically and what to source

The right lesson is different. The energy transition demands certain capacities, and those capacities can be sourced through different institutional means. China sourced them through a particular form of state-directed capitalism. Norway and Costa Rica achieved high EV adoption without industrial policy at all – by using simpler tax and import mechanisms in countries small enough that domestic production was never the goal. California pioneered the credit system that China later adapted, and continues to lead US clean-energy policy through state-level regulation that the federal government has not matched. The European Union is pursuing a managed engagement model in which Chinese firms invest in European production under terms that include technology transfer. India is building its own clean-tech base by combining domestic incentives with selective sourcing from Chinese suppliers. Brazil is positioning itself as a destination for Chinese investment that brings manufacturing capacity rather than raw-material extraction.

Each of these is a recognizable response to the same structural facts: The cost of clean technology has fallen far enough to compete on merits, the supply chain runs largely through China, and the strategic question is what to build domestically and what to source.

The energy transition is no longer a climate question

The harder lesson, for countries that have spent the past decade treating the energy transition primarily as a climate question, is that it is now also a security question – unmistakably so after the Iran shock.

While the two framings can sometimes produce win-win outcomes, they can also produce different politics. A country that wants energy independence in 2026 can plausibly build toward it through electrification, but the path may run through Chinese supply chains in the medium term, producing dependency challenges. A country that frames the transition primarily as a contribution to global decarbonization tends to find its political coalitions narrower and its policy horizons shorter. Whether the shift towards security produces durable policy in the US, the EU and the major emerging economies is the question the rest of this decade will answer.

After Iran

The Chinese system that absorbed the Iran shock was not designed to absorb it. It was built, over a quarter-century, in response to pressures that were mostly local and mostly immediate: an oil-import dependency that had become strategically uncomfortable, an electricity grid that could not keep up with industrial demand, an air pollution crisis that had become politically unsustainable, a stimulus moment that needed somewhere to go, and a leadership that came to treat energy as a top-tier concern.

But ad hoc though China’s energy strategy may have been, the Iran situation revealed the value of a second kind of security the country had been accumulating. This is the security that comes from grids able to move power across the distances China spans, from factories that turn out panels, batteries, and transformers in the volumes the transition demands, and from the engineering depth to build all of it faster than politics can dictate alone. An economy with those capacities bends under an oil shock. An economy without them breaks. China didn’t set out to build any of this for a conflict in the Gulf. It was built by solving other problems over 25 years. 2026 was just the moment the rest of the world noticed what it had.

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Our phrase of the week is: “The Great Duck-Leg Scam War” (鸭骗战争 yā piàn zhàn zhēng)

Context

For more than a decade, a roadside vendor known to students across Beijing as “Goose-Leg Auntie” (鹅腿阿姨) sold roast goose legs from a tricycle cart outside the city’s most prestigious universities: Tsinghua, Peking, and Renmin Universities.

She had no shopfront and no delivery service, just a charcoal grill, and a three-wheeler.

Her real name is Chen Xiufeng (陈秀凤). She came to Beijing from Jiangsu in 2,000, first selling fruit at the southwest gate of Peking University. Around 2011 she switched to grilling goose legs. By late 2023 “Goose-Leg Auntie” was a campus legend. Students in the three universities competed to lure her to their campuses.

But earlier this month that all came crashing down.

It was triggered when Chen shared in a customer group chat an announcement admitting she had been using duck legs, not goose legs, for fifteen years. She added that she had been reported to the authorities by a customer and was now cooperating with an investigation.

Her post was shared on social media and went viral.

Beyond the shock and anger of many customers at being deceived for years, there was also humorous mockery of elite students who were made fools of and unable to discern the difference between duck and goose legs.

One viral post framed the saga in the language of a great historical conflict:

“The hashtag #GooseLegAuntieScandal# briefly shot to the top of the trending searches.

Turning the saga into what can only be described as “The Great Duck-Scam War” fought on the campuses of Peking and Tsinghua Universities.”

#鹅腿阿姨塌房#一度干到热搜第一，这就是一场属于清北的“鸭骗战争”。

And with that, we have our Sinica Phrase of the Week.

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What it means

“The Great Duck-Leg Scam War” (鸭骗战争 yā piàn zhànzhēng) is a newly invented internet slang phrase, coined in the days after Goose-Leg Auntie’s downfall. The characters are “duck” (鸭), “to deceive or scam” (骗) and “war” (战争).

The pronunciation and tones of the characters in “duck-scam war” (鸭骗战争) are exactly the same as the “Opium War” (鸦片战争 yāpiàn zhànzhēng), the mid-nineteenth-century conflicts between Qing China and Britain that opened the country to the foreign opium trade and are remembered in China as the start of its “century of humiliation”.

There were two Opium Wars, so students dubbed the Goose-Leg Auntie affair as the “Third Duck-Leg Scam War” (第三次鸭骗战争), casting themselves as the latest generation to be humbled and humiliated by a superior invading force.

The phrase joins a long list of animal-based Chinese expressions for deception. Such as our 2023 Phrase of the Year, “calling a rat a duck” (指鼠为鸭), which is a riff on the ancient idiom “calling a deer a horse” (指鹿为马) meaning to deliberately misrepresent something as its opposite.

The humour of this new phrase pokes fun at the victims of the scam. They are the country’s brightest students, elites who are selected through a punishing exam system. They supported and happily bought from Goose Leg Auntie for years and never once noticed they were eating duck, not goose.

So a case of mislabelled meat has become a grand reckoning, with the students on the losing side. Which is why we translate this phrase as The Great Duck-Leg Scam War.

Andrew Methven is the author of RealTime Mandarin, a resource which helps you bridge the gap to real-world fluency in Mandarin, stay informed about China, and communicate with confidence—all through weekly immersion in real news. Subscribe for free here.

Read more about how this story is being discussed in the Chinese media in this week’s RealTime Mandarin.

RealTime Mandarin

#281: Goose Leg Auntie and the Great Duck Leg Scam

“Goose-Leg Auntie” (鹅腿阿姨) is a Beijing street seller who’s recently found herself at the centre of a social media storm…

Listen now

10 days ago · 4 likes · Andrew Methven

Some things that are true can disguise the truth. For instance, it is common to point out that China — unlike most nations in Asia and Africa — was not made a European colony. Although parts of the country came under foreign control — many of which I have written about here, like Hong Kong, Zhoushan, Guangzhouwan, Qingdao, and parts of Shanghai — the empire, and later the Republic, remained independent. That is not to say that Chinese did not feel oppression from colonial attitudes and actions. Indeed, the interactions between foreigners and Chinese shaped China’s modern history in fundamental ways.

Such was the case in Tianjin in the spring of 1870. The city and the surrounding region, like much of China, had been turned upside down in the preceding decades as European colonialism flooded the empire in the years following the Opium War. Foreigners, and foreign interests, spread inland from the coast and along China’s rivers, especially in the Treaty Ports. Tianjin — the port city of Beijing — was not among the first Treaty Ports opened by the Treaty of Nanjing in 1842, but was included in a second round of ports opened following the Second Opium, or Arrow, War. In the spring of 1861, the foreign presence in Tianjin increased sharply.

The terms of the treaties ending the Second Opium War permitted Christian activities and institutions in treaty ports. In Tianjin, one of those was a mission led by the Lazarist Chinese priest, Joseph Tsiou. Tsiou’s priority was baptizing gravely ill infants — some of whom had been abandoned as acts of infanticide. From Tsiou’s perspective, his work was merciful, offering innocent souls entry to heaven. (The fate of unbaptized babies is a surprisingly complex theological debate, which includes the now-out-of-favor notion of “limbo,” but this column takes no official stance on such matters.)

To the non-Christian people of Tianjin, though, the effects of Tsiou’s ministry seemed clear: he sought out infants — sometimes paying for the privilege — and the great majority of them died soon after he took them in. Tsiou himself died of illness just months after beginning his mission; he was soon replaced by a French order, the Sisters of Charity. These nuns followed the practice of a Catholic society called the Holy Childhood Program, focused on the baptism and education of infants and which had grown explosively across the world starting in the 1840s. (Historian Henrietta Harrison has detailed the work of the Holy Childhood Association in China, which had branches in many treaty ports.)

The Sisters of Charity continued the work that Tsiou had begun. By 1870, there were ten nuns in Tianjin working to educate, baptize, and care for abandoned infants. The project was becoming increasingly controversial in the eyes of the local population. The nuns’ focus on infants, many of whom were sick or poorly nourished, meant that most of the children they brought in died soon thereafter. The pattern was unmistakable, even if the reason for the correlation was not sinister.

It was true that the sisters sometimes offered money to parents to surrender their babies. In the nuns’ eyes, this may have been a double-charity, benefiting the parents’ who had been driven to desperation while also helping the child, either in the present or in the afterlife (perhaps both), but it created a troubling incentive. Motivated by

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On this week’s Trivium China Podcast, host Andrew Polk is joined by Trivium’s Lead Macro Analyst Joe Peissel to unpack the latest economic data and what it reveals about the increasingly uneven nature of China’s growth story.

The two discuss:

• Why China’s economy is increasingly operating on “two tracks”

• The continued boom in AI, semiconductors, clean energy, and export-oriented manufacturing

• Why much of the rest of the manufacturing sector is struggling

• The first year-on-year decline in retail sales since the pandemic

• What collapsing auto sales reveal about the limits of Beijing’s trade-in subsidy program

• Why consumer confidence continues to deteriorate despite policy support

Andrew and Joe also examine the growing constraints on policymakers as fiscal pressures mount across the country.

Overall, the discussion reveals an economy that remains remarkably strong in a handful of strategic industries — but increasingly fragile everywhere else.

Transcript:

Andrew Polk: Hi, everybody. Welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder, Andrew Polk, and I am joined today once again by our Lead Macro Analyst, Joe Peissel. Joe, how are you doing, buddy?

Joe Peissel: Hey, Andrew. I’m good. Thanks, mate. And I’m pleased to be here as always.

Andrew: Yeah, great to have you on. I am back in Washington, D.C. and getting settled in after a week in Shanghai. So, it’s good to be back on the pod and glad to have you on. We are going to talk today about the latest monthly macro data as we do each month. And this one in particular is going to be quite interesting because the macro data, some of it’s very bad. And it also really just shows how unsustainable, I think is a really good snapshot of how unsustainable China’s growth model currently is.

So, I don’t want to give away too much, but we’re going to getting into all that with Joe. But of course, before we do, we got to start with the customary vibe check. Joe, how’s your vibe today?

Joe: My vibes are good, Andrew. I live about three minutes from the sea. So, on my lunch break, I went for a swim, first swim of the summer. I mean, it’s pretty horrible because the sea’s still freezing and, typical British weather, it started raining halfway through my swim. But I came out of the sea feeling invigorated and still invigorated for this podcast.

Andrew: Amazing. I love that. I love that. Wow. I didn’t realize, I knew you lived close to the water, but I didn’t realize you lived three minutes away. That’s awesome.

Joe: Yeah, I can see it. I can see it from my window. I’ve timed it. It’s literally a three-minute walk to the beach. It’s glorious.

Andrew: That’s amazing.

Joe: I’m sure it will be glorious once the sun comes out and it stops raining mid-swim.

Andrew: That is one thing that I don’t love about Washington and didn’t like about living in Beijing. I like to be close to the water. So maybe at some point in my life, I will be living on the water again. But I’m jealous of that. And it’s a great vibe check. Love that you get to dip in the ocean in the middle of your lunch break. My vibe is still jet lagged just back again from China, but it was great. I mean, I talked about it a little bit last week, like we had 10 Trivium people together in one room, which almost never happens.

I think that’s the most people, most Trivium colleagues that we’ve had together physically in one place ever. So always pumped, always interesting, also to hear from executives on the ground what they’re seeing, some really interesting anecdotes, specifically on kind of what the local government chicanery around still doing the audits, the back taxes, all that stuff. So that was really interesting. I will say one of my colleagues said I need to be more energetic at the beginning of the pod. So, I’m trying to bring some of that energy.

Feedback is good. I welcome constructive criticism. So anyway, that’s a kind of scattershot vibe check, but that’s all going into my vibe today. So, with that out of the way, I also have to do quickly the housekeeping up top. The number one thing today is just to let listeners know that we’re going to be off for the next couple of weeks. I’m going to be on vacation. I had hoped to maybe pre-record a couple of pods, but unfortunately, time did not permit that.

And so, we’re going to be off until the first week of July, but that will give us a chance to kind of reset, get some new content going. So sorry for listeners that you’ll have a couple of weeks without us, but we will be back in your feed soon. Otherwise, the typical housekeeping reminder, we’re not just a podcast. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape. That, of course, includes policy towards China out of Western capitals like D.C., London, Brussels, and others.

So, if you need any help on that front or on navigating domestic policy in China, please reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund. Otherwise, if you’re interested in receiving more Trivium content, check out our website, again, triviumchina.com, where we’ve got a bunch of different subscription products, both free and paid. They’re all Chinese policy intelligence, Chinese policy tracking, monitoring, and analyzing products, but they’re products around tech policy, markets policy, any kind of policy that’s going to impact business.

So definitely check those out if you haven’t had a chance to yet. You will definitely find the China policy Intel option you need on our website. And finally, I always say it, but I mean it, tell your friends and colleagues about Trivium and about the podcast. It helps us to grow the listenership, grow the business, which is what we’re trying to do here. So, we really appreciate those word-of-mouth recommendations. All right, with that stuff done, Let’s get into it, Joe.

So, I already previewed it a bit. China’s economy slowed significantly throughout May after really a pretty solid start to the year, we should say. But what’s the big takeaway from the May data? What’s your headline?

Joe: So, I think the big headline is this is a clear two-track economy now operating in China. And by that, I mean that manufacturers and the export base that’s related to AI and to clean energy is booming and continue to boom throughout May. I mean, the numbers are just striking. So, exports grew by almost 20% of which semiconductor chip exports more than doubled, computer hardware up more than 70%, car exports and batteries up more than 40%, just crazy numbers, absolutely booming in these segments of the economy. And of course, all this export activity, unsurprising, it’s feeding through to manufacturing activity.

So, manufacturing output of those industries also grew really strongly. Output of semiconductors and consumer electronics grew by double digits. Manufacturing of cars almost hit double-digit growth. So, really strong exports leading to really strong manufacturing output in one part of the economy. But when we look at China’s manufacturing base, why I refer to it as two-track is put AI and clean energy aside, and the rest of China’s manufacturing sector, particularly that that’s more related or more reliant on domestic demand, isn’t performing anywhere near as well.

So, we could think of things like metals processing, or petroleum processing, or textiles production, even things like food manufacturing, beverages, all of this stuff that some of it is exported, but the proportion of exports is much smaller than AI and clean energy. So, these more domestic-oriented industries, the manufacturing either grew really slowly, or in a lot of cases, manufacturing output actually declined. And clearly that’s domestic demand story going on. So that’s what I mean by a two-track.

You’ve got one part of the economy kind of heavily reliant on exports and booming. The other part of the economy that’s more reliant on domestic demand is struggling to grow or, in some case,s actually declining.

Andrew: Yeah, we’ll get into the domestic demand piece of that in just a minute. Something I was just thinking about while you’re saying that is, you know, when you break it down like that, everyone obviously externally is unhappy with China’s export-driven model currently. But it kind of sounds like, from this data at least, China’s basically riding the ai and clean energy boom, as are many economies. The U.S. economy is riding that boom, of course, is more domestic, but when you think about it that way, a lot of their exports are growing because that’s where the specific growth in industry is throughout the globe, and also because these companies are really competitive in these areas — AI and chips production and related items and clean energy in particular.

What do you think about that? In a way, should we give China, I don’t know, not more of a pass, but they’re clearly just hitching their ride or hitching their wagon to a global economic trend in a way? I don’t know. What do you think about that? Does that provide any area for China to push back against the European export-dependent economy model in your mind?

Joe: Well, I mean, I’m not sure whether, from a European or from a Western policymaker perspective, I’m not sure whether that’s a reason to give China a pass because it’s still concerning. I mean, they’re seeing a hollowing out of their industrial base because China is so competitive. That’s concerning from a Western economic perspective. But I mean, I certainly think we can give China credit for running an extraordinarily successful industrial policy over a number of decades, right? It’s this tried and tested playbook of identify kind of upcoming and emerging technologies, throw loads of money at it, utilize its ultra-competitive domestic market to build world-leading firms, and then start exporting.

And we see that with solar, with batteries, with EVs, you name it. It’s the same tried and tested playbook, and it works really well. The consequence of that is that China then becomes this integral part of the global manufacturing supply chain. And so even if countries want to diversify, or even if countries are mad with Beijing’s policy toolbox. There’s nothing they can really do about it because they’re reliant on Chinese intermediate inputs, or in some cases, Chinese final products to grow their own industrial base or to grow their own economies. I mean, think about decarbonization.

Lots of economies can’t decarbonize without Chinese clean tech. So, I don’t think it’s a case of giving China a pass on its industrial policies, but it’s more just about giving it credit. It’s worked really well. And this is part of the reason why China’s achieving such strong growth in these areas.

Andrew: Great points. Yeah, I think that’s a good framework, giving them credit for being able to look ahead and say, you know, this is what seems to be upcoming, and owning kind of the clean tech space in particular, I think makes sense. Of course, totally understand all the complaints, you know, the subsidies and competing on a level playing field. But as Cosimo, our colleague Cosimo Ries, said last week, you know, in many cases, especially in Europe, like local companies have had the chance to step up and just decided they don’t want to do it, right?

This isn’t an industry they want to get into, various parts of the clean tech supply chain. So, again, not trying to like, as you say, give China a pass per se. I’m just trying to kind of tease out whether this issue is a little bit more complicated than the politicians often seem to make it.

Joe: Yeah, it’s not as simple as saying subsidies and an unlevel playing field. It doesn’t always make sense. Actually, this is a bit of a diversion, but I always chuckle when I think one of the things that people complain about is, or politicians might complain about, is Chinese government providing cheap credit to their manufacturing base, along with all of these other support, kind of overlooking the fact that the ECB ran negative interest rates for the best part of the decade or something like this.

It’s definitely more complicated than simply saying subsidies and an unlevel playing field. China also just has a very successful, ultra-competitive industrial policy toolbox.

Andrew: Totally. I mean, again, we don’t want to belabor this, but there are two things I will say. One is I recently, so on the American side, I often talk to U.S. government officials, U.S. policymakers around like, should we at least think through how U.S. policy might be contributing to the imbalance? Because, right, this is a global economy. An imbalance on China’s side is an imbalance on someone else’s side by definition, right? And so, everyone seems to think China is the motive actor.

But at the same time, are we undertaking policies that are sort of keeping us from being as competitive or keeping us running very large current account deficits? Which I think the answer is almost certainly yes in the latter case. The other thing, I saw something online recently. This is kind of zombie-brained China takes where someone was talking about how, yeah, China’s auto industry is competitive, but they learned from and stole the tech from the Americans.

And it’s like, there’s like very little U.S. or other tech in Chinese EVs. Like, these are just totally different products. Just because they carry you on the road doesn’t mean they’re the… Like the EVs and ICEs are totally different products. And U.S. companies have proven they really can’t compete on EVs because they aren’t good at the tech and the software stuff. They’re really good at making the engines. But, you know, the tech and the software, and then the internal part of the car is actually pretty easy.

You see that because companies in China, like Xiaomi or Huawei, who are tech companies, who’ve never made a car before, can spin up a pretty decent model in a few months. Anyway, this is all another pod, but I just kind of wanted to layer in some of these bigger ideas to the monthly data. All right. So that’s the story on the strength of the economy, very clearly tied to AI, clean energy, and particularly to the export of those products, those industrial products. The issue obviously is domestic demand. You already previewed it, that it was not great, but talk to us a little bit more about what that looked like.

Joe: Yeah, so May was pretty significant in that retail sales of consumer goods declined. They fell by 0.6% in May. That’s the first decline in over three years. So, the last time retail sales of consumer goods declined, this is year on year, right? So, May 2026 relative to May 2025. The last time there was this year-on-year decline was during the pandemic. So, we’re talking over three years ago. So that’s pretty significant symbolically, if nothing else. And some of the biggest drivers of this decline were these big-ticket items, which we’ve talked about previously.

So, autos, home appliances, furniture. And these things have fallen by double digits or close to double digits. In autos’ case, I mean, sale of autos collapsed by, I think in value terms, 17%, 18%. And in unit terms, in models, I think it’s over 20%. It’s just huge decline. Now, why is that significant? Well, that really tells us that the government’s trade program, this subsidy-driven consumption stimulus has totally run out of steam. It’s no longer working. And we’ve talked about this before, so I won’t labor this point, but that’s to be expected because what trading subsidies do is encourage consumers to upgrade early.

So, it pulls forward future demand. So as a consumer, if I was thinking of buying a car next year, maybe I’ll buy it this year instead because I can take advantage of the subsidies. So, we saw a huge surge in sales of these items, these same big-ticket items in 2024, 2025. It’s kind of no surprise that the program’s now come to a standstill, it’s no longer stimulating demand for these items. But consumption weakness goes well beyond just these big-ticket items. So, we saw sales in a broader range of categories as well.

Things like sports equipment, recreational equipment, jewelry sales, things like this. So, this is really reflective of declining, well, a decline in consumers’ willingness to spend, a decline in consumer confidence. Consumer confidence, as measured by the Stats Bureau, they have a Consumer Confidence Index. It’s household survey level data. The most recent data was for April. That’s dropped to like a 12-month low. So consumer confidence is declining again from an already very low base.

I think there’s maybe a couple of caveats to this doom and gloom. So, I think the first thing to say is because autos are such a big part of retail sales just because they’re very expensive, if we exclude autos, so retail sales excluding autos, that grew by 1.1%. There’s nothing to shout about, but it’s just to say this decrease in retail sales, this first year-on-year decline in three years, that’s driven by the decline in autos if we exclude that. There’s still very modest, very low growth in overall sales. The other thing to point out, which is slightly more positive, is spending on services. We estimate that grew by 4.6%.

That’s an estimate because the MBS doesn’t release monthly growth rates for services. But we estimate it’s grown by about 4.6%. That’s a decent rate, right?

Andrew: Mm-hmm.

Joe: Although with a caveat that it’s dropped sharply. So, for comparison, in April, retail sales and services grew by 5.9%. So, it’s a sharp slowdown. So overall, it’s a very bleak consumption picture. I just want to kind of point out those two caveats to say this, like, I mean, you could say there’s kind of pockets of strength, perhaps, in the consumption picture, but overall, it’s very bleak. And it gets bleaker because there’s very little upside for consumption. When we think about, okay, income growth is slowing. In real terms, that slowdown is going to be even sharper because of this uptick in inflation from the Iran war.

We’ve just discussed that the government’s flagship consumption support policy, the trade-in program, has fallen flat. And there’s really limited fiscal maneuverability from the government side to support consumption. So, not only is consumption doing pretty badly now, there’s very little upside for consumption growth in the coming months.

Andrew: Not a pretty picture. I have a few follow-ups. One is, you know, just to highlight for folks, one of the reasons we spend so much time on the auto market is because it’s a, I don’t know if micro is the right word, but it’s more of a micro issue than a macro issue, but it feeds into it and informs the macro picture so substantially, right? As you say, it’s a big chunk of any individual, any household’s income or purchasing basket in any given year or really lifetime, I guess.

It’s a big driver of consumer growth, consumption growth, and also industrial production, exports, and of global competitiveness between China and the rest of the world. So, it’s a sort of industry with outsized importance. So, it’s one reason we spend so much time on it. And obviously, Chinese companies sort of stepping onto the world stage in this industry has been very abrupt in some ways. I mean, in some ways, it’s been a long time coming, but also just seems to have happened very suddenly in terms of Chinese EVs being everywhere.

So, that’s just one thing for listeners to keep in mind is that’s why the auto market’s so important, or one reason. The other question I wanted to ask you is what’s your read on, and I guess we’ll get into this when we talk about the fiscal piece in just a minute, but why aren’t officials doing more to support consumption? We’ve been having this conversation for years, every month for the past several years, but it was pretty obvious that consumption was going to contract this month.

That was all the estimates from various economists ahead of the data release, in large part because the consumer trading program or the consumer goods trading program has been losing steam and was funded at a lower level this year than it was last year. So, this seems like something that could absolutely be seen in advance by policymakers and yet no real action. What’s the story there, you think?

Joe: I mean, that’s a huge question. That could be a podcast in and of itself — Beijing’s reluctance or inability to stimulate consumption. So, one part of the puzzle is kind of this ideological preference for supply-side stimulus. And so, when Beijing releases a consumption support policy, generally, it’s through supply-side stimulus, supply-side support. So, for example, policymakers, they will argue they’re trying to boost consumption by unlocking latent demand, which is essentially the idea that consumers want to spend their money. It’s just there’s not an adequate supply of high-quality goods or services for them to spend their money on.

So, policymakers think, okay, well, if we have a supply-side stimulus to improve or to expand the supply of goods and services, then consumers are going to spend more. So, I think this is one of the puzzle. Actually, Beijing releases lots of “consumption support policies.” It’s just they’re generally geared towards supply-side stimulus, which doesn’t really work in the current macroeconomic climate. The second thing to say is there’s been lots of nudges towards trying to boost consumption. So let’s think about the trade-in program this year. You’re right to point out the level of subsidies were reduced, but the scope of the program was expanded to include things like AI-related products, like smart consumer watches, things like this.

So, there’s actually an expansion in program eligibility into new goods types. There’s a subsidy for consumer loans to encourage consumers to take loans to spend on goods and services. So, there’s been kind of some nudging around the edges. It just hasn’t been that effective. One of the reasons is because of a lack of fiscal firepower, which is really like the second part of this puzzle, which is like the policymakers, particularly at the local level, don’t have the fiscal maneuverability to stimulate consumption.

Policymakers at the central level don’t really have the desire because of these ideological reasons. They’d rather use that money for infrastructure stimulus or for supply-side support. I think those are the two of the main reasons.

Andrew: Well, so a couple of things. One, I want to share this anecdote, which I sort of alluded to earlier in the pod. I had a bunch of good anecdotes from my trip to China, but one of them, you talk about fiscal maneuverability and all this stuff, the chicanery around local government finances. We were talking to a company in China last week, and they were talking about how they had been waiting to get some subsidies for an investment; foreign company, which also gets subsidies.

People should remember that foreign companies also receive subsidies in China, but had been waiting and waiting, waiting to get the subsidy for an investment they were making — excuse after excuse, apparently from the local government. And then they had the ceremony, I believe, to mark the investment or kick off the investment. And they got the subsidies announced or whatever, officially paid around that ceremony. And then the very next day, the local government gave them a tax audit and fined them the exact amount of subsidies they had just received in back taxes the very next day.

And I just like, you multiply that times a million, and that’s happening just all over China. Dinny McMahon, our colleague, is pointing out that that’s basically local government fiscal austerity, right? China style. But I just thought that was too good of a story.

Joe: Not even subtle, right?

Andrew: Oh, not at all.

Joe: They could have waited a week or something.

Andrew: Yeah, yeah, yeah, exactly. And then the other thing I was going to ask you about on the consumption side, this is another company, this wasn’t for my trip, but a company we’ve been working with that’s a consumer-facing company. We were working with them on some conversations, basically with kind of public comments that they wanted to make around consumption. And they were making the argument, which I thought was smart, and I think partly true, but also maybe partly just diplomatic, which is they’re saying it’s not that consumption’s weak fundamentally.

It’s that consumers are becoming more value-oriented and more discerning. And so, companies have to bring better value if they want consumers to buy their products. What do you think of that as a framing for what’s going on? I guess it’s not mutually exclusive. Of course, when consumer confidence goes down, consumers become more discerning. But I don’t know. Can you just talk me through…? Sorry, I also think that’s actually a good framing for a company to take and think through.

Because whether or not it’s because macro consumption is weak or consumption is weak from a macro level, it is true that you’ve got to provide more value to the Chinese consumer, to find a way to do that. But anyway, I just wondered what you thought of that as a framing.

Joe: I think that’s quite a smart way to think of it. Particularly as China has a growing middle class, they kind of satiate their demand for low quality or for cheap, accessible goods and services. And so, you can kind of imagine that their demands also move up a value chain, right? They start to demand higher quality goods and services, which don’t necessarily exist at the moment or aren’t supplied, there isn’t adequate supply.

I mean, that actually goes back and gives weight to policymakers’ idea about trying to unlock latent demand.

Andrew: 100%.

Joe: Yeah. And so maybe there’s some truth behind that. Maybe this latent demand approach is part of the formula that’s needed for trying to unlock consumption. I think that’s probably part of the story. I mean, if you look at the data, there’s undoubtedly other structural factors at play here. Collapsing consumer confidence, slowing income growth, dropping property wealth. All these things are going to constrain consumers’ willingness to spend as well. But I think there’s some truth to that. I think in a similar vein, there’s also an argument that if you look at China’s consumption, not in terms of value, but in terms of volume, so you could think about, I don’t know, the number of cars per capita or the number of shoes purchased per capita, then in terms of volume levels per capita, China’s consumption isn’t that far off more developed economies.

Part of the reason in value terms it’s much lower is because the quality of these goods and services they purchase is much cheaper because the quality is lower. And so again, this kind of feeds into the idea that perhaps one of the ways to unlock more consumption is to actually try and move up the value chain, expand provision of higher quality goods and services, which is super relevant from a company perspective, right?

Andrew: Yeah. Yeah, that’s a really good point. Yeah, I think we always poo-poo the idea of this, like, oh, there’s just not the types of consumer goods that people want, but then maybe there is some validity to that. And definitely, companies should basically be thinking that way. And also, I mean, they should be thinking, like, we need to bring more value, right? Because in this kind of environment, consumers are going to be more choosy. But also, everything’s true when it’s China. Sort of everything’s true at the same time, right? So it can be weak consumer confidence. It can be more discerning. It can be moving up the value chain. It can be a weak macro environment, kind of all rolled into one.

Joe: I think even if we accept that unlocking latent demand is part of the puzzle, the reason it’s not working at the moment is because if Beijing plays or rolls out these policies without addressing the other macroeconomic issues, like slowing income growth or collapsing consumer confidence, then only increasing latent demand without addressing these other issues isn’t going to stimulate consumption. Consumer willingness to spend still remains low.

Andrew: Yeah. And a lot of that’s in the property market, which we’ll get to in a minute, which of course has undermined Chinese wealth and Chinese wealth expectations. But before we go to property, the other piece related to fiscal weakness, so we talked about lack of government spending to support consumption, but also fiscal weakness or the lack of a fiscal expansionary environment has undercut infrastructure spending as well. So, talk to us about the infrastructure side.

Joe: Infrastructure declined 9.5% infrastructure spending in May, which is just a, I mean, it’s a striking data point when we think about, A, the importance of infrastructure traditionally as a growth engine, but also how vocal Beijing has been about boosting infrastructure this year. So, it’s remarkable that after all this lip service policymakers have paid to infrastructure, it’s actually declined. This is the second consecutive month of declining infrastructure spending. And there’s a couple of reasons behind this. So the first is related, and Andrew, you and I talked about this the last time I was on the pod, so I won’t kind of go into too much detail about this, but state-owned enterprises, they are now obligated to remit a larger proportion of their profits to central government than they did before.

And it’s a huge step up. In some cases, it’s up to a 100% increase. So, the amount of profits, the amount of retained earnings of state-owned enterprises transferred to the government has doubled in some cases. So, this is hammering, absolutely hammering their retained earnings. They’re holding less capital. And as a consequence, they invest less because they use the capital as an equity injection into any sort of infrastructure project. So, that’s part of the reason why infrastructure has declined is because SOEs have less retained capital because of this new policy. And the second reason is special purpose bonds, which is a local government debt instrument, which traditionally was used to fund infrastructure investment, is now being diverted to other things.

So, infrastructure-related SPBs in May dropped, the issuance of infrastructure-related SPBs dropped by 60% in May. And that’s because a big chunk of these SPBs are no longer being earmarked for infrastructure. They’re being used for things like paying down hidden debt, or they’re being used for land buybacks, which is really a property support policy. The idea being if a property developer has bought land and they haven’t utilized it, so they’re sitting on this unutilized land, then the local government buys that land back off the property developer. The idea being to try and inject liquidity into property developers, which have a huge credit crunch.

So, kind of a good idea in principle, but this unintended consequence of crowding out infrastructure investment because all this money is instead being spent on paying back hidden debt and land buybacks. And as a consequence, infrastructure is now declining.

Andrew: Just another thing to undercut domestic demand. I think when we talk about domestic demand, we often kind of emphasize the consumer part of demand, but infrastructure and investment is also part of domestic demand, right? And so, just further sort of weakens the domestic economies need to buy up products. So also translates into weak imports. And, you know, I was actually, again, on my trip to China, one of the other presenters at one of the things I was at was talking about, like, what is China even going to import in the future? Like, with the property sort of realignment, they are not importing anywhere near the commodity base they were for construction. And then, even we’ve seen the pieces in The FT and others recently that China’s really ratcheted down its oil imports.

And it’s like, is China going to be importing anything for the rest of the world? So, that’s also a problem for other countries, right?

Joe: Yeah. Kind of just to real briefly touch on imports because import growth was really strong in May, but that’s a little bit misleading. That’s because of a huge increase in the cost of commodities and raw materials. In volume terms, China’s import of commodities actually decreased year on year.

Andrew: Yeah. And that seems to be a trend.

Joe: Yes.

Andrew: Okay. Last piece, property sector. You already touched on it a little bit, at least to how developers and their financing are sucking up some of the fiscal resources that would otherwise be diverted to, or not diverted, but spent on infrastructure. But talk to us about what you’re seeing in the property market, which the previously all important property market, increasingly less important, but still highly germane to the outlook for the economy. What do you see in there?

Joe: Yeah, increasingly a smaller part of China’s total economy, but still dragging economic activity as of now. So, for a while, we’ve been tracking the property sector and saying there’s kind of these very early tentative signs that the property market may, at some point, start to bottom out. I’m being really tentative in my language there, right? But what I mean by that is home sales, the decline in home sales is moderated for six consecutive months. That’s really positive, actually, if we’re trying to look for the market bottoming out.

Same idea of house prices. House price declines have slowed. And in first-tier cities, prices are now growing. So, all this stuff kind of thought, okay, well, maybe this is the beginning of a bottoming out. But May’s data kind of pours cold water on that idea. We saw an acceleration in the home sales decline. So, it kind of reversed this six consecutive months of decline moderation. And other real estate metrics, their decline also quickened. Real estate investment declined by almost 25%. That’s the highest on, I don’t know how long. It may be a record drop. I’m not sure. Don’t quote me on that.

But earlier this year, it was declining by somewhere between 10% and 15%. It’s now accelerating April to about 20%, in May to about 25%. So, kind of, again, a reversal of what we are hoping was the beginnings of a bottoming out of the real estate sector. I think, particularly when we think about real estate investments, real estate construction, these metrics are going to keep falling for a long time, even if we do eventually see a stabilization in home sales and prices.

And that’s because right now, property developers are sitting on a huge amount of unsold stock, essentially a massive infantry overhang, which they want to sell down before they start building new properties. And interestingly, we’re also seeing a shift in consumer preferences away from new homes towards secondhand homes, which are cheaper, and there’s not a risk of completion delays and things like this. So, I mean, it’s kind of much the same with the property sector, yet this decline is ongoing. These tentative signs we thought might mean at the beginnings of a bottom out have reversed in May. Yeah.

Andrew: The drama continues.

Joe: Yeah.

Andrew: We keep thinking there’s got to be a bottom at some point, but it’s a protracted adjustment. Interestingly, I think we’ve talked about this on the pod, the policymakers have even stopped, in some documents and some for a, talking about property in the context of the macro economy. Instead, they talk about property policy in the context of social policy. Like, here’s what we want the housing market to look like from an affordability standpoint, from an urban renewal standpoint, from a livability standpoint.

I mean, they’ve officially made the transition. This is not a macro growth driver anymore. And so, this is the new world we’re in. Okay, so we’ve gone through the main parts of the economy. Let’s wrap it up. So, two kind of related questions. Put this in context. So, we had a really great beginning of the year. As I said, Q1 data was better than I think policymakers expected, most analysts expected. Did Beijing just bank Q1 and say, “Okay, that got us a long way to where we wanted to go in terms of the growth target for the year. And so, we can just kind of take our foot off the gas pedal”? Or what’s going on? And then this data was bad in May. Is it going to get worse?

How bad is it? Was it hair-on-fire bad? Or I don’t know. Just talk to us about the contextual piece and what you expect going forward, both from the economy and from policy.

Joe: From a policy perspective, I don’t think we can characterize it as policymakers taking their foot off the pedal so much as there’s been a bunch of external events which have really thrown a spanner in the works, right? Iran war, imported inflation, tariff war, all this geopolitical uncertainty. So yeah, whilst I don’t think we can say, “Okay, well, policymakers just kind of chilled out and have taken their foot off the pedal,” what I do think we can say is that they’ve been kind of remarkably consistent in their reluctance to unleash any big bank stimulus. And we say that in the monetary policy side and the fiscal policy side. So, in many respects, policymakers have been very disciplined. Despite these external events, they’re sticking with their game plan.

Now, the outlook for the year, a lot of it depends on exports, right? Because that’s the main growth driver, not just through the trade surpluses that contribute to GDP, but through supporting manufacturing and the spillover on the labor market and wage growth and things like this. Now, the issue being, as we discussed earlier in May, China’s export growth was really centered on two areas — AI and clean tech. And that leaves the economy very vulnerable to changes in geopolitical dynamics, right? So, I mean, that’s certainly something to look out for is what’s going to happen with China’s trade dynamics.

In terms of GDP overall, I don’t think we’re at the stage where we should be panicking and thinking the economy is not going to hit its growth target. Remember, Beijing has flexibility this year. Their target’s 4.5% to 5%, or 4.5%. I think it was 4.5% to 5%, yeah. They hit 5% growth in Q1. So, they’re way above the baseline of their targets. And I think there’s enough potential tailwinds in terms of fairly robust services growth, fairly robust manufacturing output, obviously, really strong export growth that’s going to get the economy over the line.

But given all these challenges we’re seeing, particularly the decline in retail sales, the reversal in the property sector, the slowdown in the property sector decline, which is now accelerating, I mean, we’ve adjusted our expectations. We don’t think the economy is going to hit the target, at the top range of that target towards the 5%. It’s going to be close to the 4.5%, 4.6% area. Yeah, kind of the long and short of it is there’s a bunch of headwinds, but I think there’s sufficient tailwinds to get the economy over the line.

Andrew: Yeah. I think we often sort of focus on the headwinds to growth and forget that there are still some tailwinds. This is an economy that still has some fundamental strengths. Obviously, advanced manufacturing being one, and as you say, consumer services being increasingly one as well. You’re 100% right that the external environment is going to be important, which is, just to tie that back to our conversation last week or my conversation last week with Joe Mazur and Cosimo Ries, this could become an issue if Europe decides it’s ready to get into more of an overt trade war with China.

But I did like there, again, I think it was an FT headline that said something like, if Europe starts a trade war, China will end it. I was like, oh, okay. Well, really appreciate you walking us through all this. Just for listeners, we have a whole service that goes through macroeconomics and dynamics that impact anyone who’s, first of all, running business in China, but also investors thinking about China, especially from a macro standpoint. It’s our China market service. Joe does a bunch of work on that. We have a whole team that works on that. So, a little bit of an organic plug there for that work.

As I said at the top, check out our website or reach out to us and we can tell you some info about that. The team does really great work. And we’re going to throw some of Joe’s charts in the pod notes this week because some of them are quite striking, especially like the absolute reliance on semiconductors and clean tech when you see it in a chart compared to the other industrial parts of the economy. It’s pretty striking. So, be on the lookout for that. Otherwise, Joe, thanks, man, for the time. Really appreciate it. Really appreciate your insights today.

Joe: Yeah, cheers, Andrew. It was good fun, as always.

Andrew: Yeah. All right, man. We’ll see you next time, and thanks, everybody, for listening. Bye, everybody.

This week on Sinica I’m joined by Robert Wright, author of The Moral Animal, Nonzero, and The Evolution of God, for a conversation that runs a little outside our usual beat, though China sits closer to its center than you’d expect.

The occasion is his new book The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning, which reads the AI revolution as the latest turn in a story going back billions of years. We get into the French Jesuit paleontologist Teilhard de Chardin’s “noosphere,” Bob’s argument that we evolved large language models rather than engineered them, the cognitive empathy we’ve both long preached, and the two-word talking point — “But China!” — that Bob thinks is most likely to lead us astray.

6:56 – Teilhard de Chardin, the noosphere, and why a planetary “global brain” has become necessary

14:49 – Directionality without the mysticism: complexification, teleology, and the “cell’s-eye view” worry

21:57 – The God Test: is moral progress really the price of governing AI, and is that hopeless on a short clock?

28:33 – Why Bob says we evolved large language models rather than built them, and the sycophancy problem that follows

35:19 – Open weights and open source: a real safety argument, or competitiveness in safety’s clothing?

40:03 – Cognitive empathy as the master key, and the same capacity as an engine of deception

48:06 – Arms-race fatalism and its limits: cheetahs, gazelles, and the rival who can pick up the phone

53:40 – “But China”: fear of Beijing, Anthropic and Amodei, Jeff Ding, and the chip-control backfire

1:10:48 – Nonzero: game theory, common threats, and the takeoff scenarios that worry Bob most

1:23:22 – Attribution error and projection, Ed Fredkin’s old warning, and the actual first move

Paying It Forward: Garrison Lovely, author of the forthcoming Obsolete (Nation Books) and the Substack of the same name on the AI race.

Recommendations:

Bob: Pantheon, the animated series on uploaded minds and emergent superintelligence; and the Crowded House song “Don’t Dream It’s Over.”

Kaiser: Kyle Chan’s High Capacity podcast, especially his episode with Carnegie’s Matt Sheehan, “Is China Getting Worried About AI?“; and Patrick O’Brian’s Aubrey-Maturin novels.

Listen in the embedded player above. Transcript courtesy of CadreScripts follows the podcast info below. Image by Keya Zhou.

This week on Sinica I’m joined by Robert Wright, author of The Moral Animal, Nonzero, and The Evolution of God, for a conversation that runs a little outside our usual beat, though China sits closer to its center than you’d expect.

The occasion is his new book The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning, which reads the AI revolution as the latest turn in a story going back billions of years. We get into the French Jesuit paleontologist Teilhard de Chardin’s “noosphere,” Bob’s argument that we evolved large language models rather than engineered them, the cognitive empathy we’ve both long preached, and the two-word talking point — “But China!” — that Bob thinks is most likely to lead us astray.

6:56 – Teilhard de Chardin, the noosphere, and why a planetary “global brain” has become necessary

14:49 – Directionality without the mysticism: complexification, teleology, and the “cell’s-eye view” worry

21:57 – The God Test: is moral progress really the price of governing AI, and is that hopeless on a short clock?

28:33 – Why Bob says we evolved large language models rather than built them, and the sycophancy problem that follows

35:19 – Open weights and open source: a real safety argument, or competitiveness in safety’s clothing?

40:03 – Cognitive empathy as the master key, and the same capacity as an engine of deception

48:06 – Arms-race fatalism and its limits: cheetahs, gazelles, and the rival who can pick up the phone

53:40 – “But China”: fear of Beijing, Anthropic and Amodei, Jeff Ding, and the chip-control backfire

1:10:48 – Nonzero: game theory, common threats, and the takeoff scenarios that worry Bob most

1:23:22 – Attribution error and projection, Ed Fredkin’s old warning, and the actual first move

Paying It Forward: Garrison Lovely, author of the forthcoming Obsolete (Nation Books) and the Substack of the same name on the AI race.

Recommendations:

Bob: Pantheon, the animated series on uploaded minds and emergent superintelligence; and the Crowded House song “Don’t Dream It’s Over.”

Kaiser: Kyle Chan’s High Capacity podcast, especially his episode with Carnegie’s Matt Sheehan, “Is China Getting Worried About AI?“; and Patrick O’Brian’s Aubrey-Maturin novels.

Transcript

Kaiser Kuo: Welcome to the Sinica Podcast, a weekly discussion of current affairs in China. In this program, we look at books, ideas, new research, intellectual currents, and cultural trends that can help us better understand what’s happening in China’s politics, foreign relations, economics, and society. Join me each week for in-depth conversations that shed more light and bring less heat to how we think and talk about China.

I’m Kaiser Kuo, coming to you this week for the last time from my soon-to-be former home in Chapel Hill, North Carolina. All packed up, the movers are coming soon, and it’s official. We’re putting the house on the market.

Sinica is supported this year by the Center for East Asian Studies at the University of Wisconsin-Madison, a national resource center for the study of East Asia. Listeners, you can support my work by becoming paying subscribers at SinicaPodcast.com. I do need your help to keep this work going, so please subscribe so I can continue to bring you these conversations.

This week on Sinica, a conversation I’ve been looking forward to for a long time, and one that takes us a little outside our usual beat, though as you’ll hear, China sits much closer to the center of it than you might expect. My guest is Robert Wright, and if you don’t know his work, you are in for a treat. Bob is one of the most original and consequential thinkers that we have on the big questions of today. Where our species came from, where it might be headed, and how the technologies we build are bound up with both.

He is the author of a string of books that have shaped how a generation thinks about human nature and history, certainly me — The Moral Animal: Why We Are the Way We Are, the new science of evolutionary psychology, which was his landmark 1994 book on evolutionary psychology. I will confess I read it when it came out with enormous relish. I think I had just read, either before or right afterward, Consilience by Edward O. Wilson. I was really on a kick. And this was one of those just landmark books for me. It’s stuck with me really ever since.

There’s also Nonzero: The Logic of Human Destiny, which argues that the long arc of biological and cultural evolution has a direction driven by the logic of non-zero-sum games, highly relevant to today’s discussion, as you will see. The Evolution of God, a finalist for the Pulitzer Prize, and Why Buddhism is True, a bestseller on meditation and the modern mind.

Bob writes the widely read Nonzero newsletter and hosts the Nonzero Podcast. He’s taught at Princeton, at the University of Pennsylvania, and he’s been a New America Fellow. But more than any of the titles, what comes through in his work is a rare combination of intellectual range, genuine humility, and a stubborn insistence on cognitive empathy as the thing we most need and most lack. And there’s the personal connection, which I’m happy to finally get to repay. We are both big fans of cognitive empathy.

I’ve had the honor of being a guest on Bob’s podcast twice now, and I’m delighted to at last be able to reciprocate and have him on Sinica. But the truth is, I became reacquainted with his work after those Moral Animal years at a very particular moment. Right around the time I was starting Sinica, I heard Bob articulate this idea that he was calling cognitive empathy, this discipline of genuinely modeling what’s going on in another person’s mind as distinct from feeling basic emotional empathy for them.

And I had a small jolt of recognition because I’d been going on about exactly the same thing for ages, except that I’d been clumsily calling it informed empathy, my own coinage. He had the better name for it and the better account of why it really matters, a more sort of expansive view of it. And it’s become super central to how I think about China ever since. And it turns out to be really central to his new book, too. Indeed, that book is a marvelous melding of many themes from Bob’s work spanning three decades. It is called The God Test, and it’s the reason we’re talking today.

It’s an ambitious, genuinely cosmic reckoning with what artificial intelligence means, not just for jobs or geopolitics, though that’s important in it, but for the deep story of life on this planet. It’s a truly terrific read. Bob’s voice is at once really erudite and playful, and his ability to think about all the implications, to really ask all the right questions, to come up with these brilliant analogies, and keep the reader just cruising along through the text, it makes it just one of the best books I’ve read yet on AI and the human condition, seriously.

Bob argues that large language models that we’re all super familiar with now are best understood not as things we built but as things we evolved, that the AI moment is forcing a kind of test on our species, and that whether we pass that test depends on our capacity to transcend the kind of tribal psychology that’s really bedeviled us since the dawn of history.

And running right through the heart of it, more than I think many readers will expect, is China, the race framing, you know, the foot race between China and the United States, the AI race, the export control wars over advanced semiconductors, the question of whether fear of Beijing is itself the thing most likely to lead us astray. It’s a book that rewards a China-minded reader, and I’ve got a lot I want to put to him about it.

He’s also, I should say, just an all-around great guy, just warm and funny and intellectually fearless, and exactly the kind of person you want to think out loud with about the largest questions that we now face.

Bob Wright, a very warm and long-overdue welcome to Sinica.

Bob Wright: Well, thank you, Kaiser. I don’t know if I’m going to be able to live up to that billing, but it felt really good to hear it. And I know it partly is rooted in your generosity to be so kind in your introduction. In any event, it’s an honor to be here. You know I’m a longtime listener and admirer. And I guess I should be even more honored if this is the final production from this particular location, your home, right?

Kaiser: Yeah, leaving Chapel Hill. I mean, it’s been something in process for a while. I’ve spent most of this year already living in Beijing. I just came back because I had some talks to give and my daughter’s graduation, and we sort of put off the finishing touches on getting the house ready for the market until this trip. But no, I’m headed back to Beijing in the middle of the month, and we say goodbye to Chapel Hill.

Bob: Well, cool. I hope you’ll be willing to appear in my podcast from Beijing.

Kaiser: Happily, happily, happily. So, Bob, let’s jump right in. I guess the place to begin is you place Pierre Teilhard de Chardin near the center of this book’s imaginative architecture. Teilhard was a French Jesuit priest and a paleontologist who died in 1955. He was a man who spent his life trying to reconcile evolution with his faith. And his more mystical writings were actually suppressed by the church in his lifetime. Teilhard, gentle listeners, is a name you’re going to hear a lot in this conversation, so you should probably take note. T-E-I-L-H-A-R-D. Teilhard.

Bob, Teilhard gives you this idea of the “noosphere,” the thinking envelope of the Earth, a kind of planetary mind, which you illustrate beautifully with what you call a sort of Martian’s eye view. If you can imagine sort of a time lapse of life on Earth viewed from afar, evolving from the biosphere that we have around our atmosphere, and then life on Earth into networks of human communication, just speech, writing, trade networks, radio, television, and then eventually the Internet.

And now, finally, AI. Again, listeners, I’m going to flag this word noosphere, N-O-O-S-P-H-E-R-E, because it’s going to come up again. So, noosphere. We have Teilhard and the idea of the noosphere. So, Bob, could you walk listeners through Teilhard’s idea of this noosphere and explain why you think AI makes that idea newly urgent rather than just, I don’t know, just poetically suggestive?

Because you actually make a really strong claim here, not merely that a global brain is now possible, but that it’s become necessary, that there’s no realistic alternative that can safeguard human interest in the age to come. So, why is it necessary, and why is it kind of inevitable?

Bob: Yeah, so he coined that term in 1923, comes from the Greek word for mind, noos. And I believe in intentional reference to the term biosphere.

Kaiser: Yeah.

Bob: Certainly, one of the people who embraced his term, Vernadsky, this Russian thinker, was the person who had done more than anyone to popularize the term biosphere already by that time. The Martian’s eye view you alluded to captures how sweeping Teilhard’s vision was. He got the big picture. He was a paleontologist as well as being a Jesuit priest.

And he saw that life had kind of climbed to this hierarchy of organization in some sense. You get cells, you get multicelled life, you get societies of multicelled organisms. Then one society of multicelled organisms, that is, human society,

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Jonathan Cheng’s new book “Korean Messiah” updates my understanding of North Korea, and helps bridge the gap between the shown and the experienced, between the heavily airbrushed image of the country and my own interactions with its people, by revealing the remarkable influence of Christianity on the country and on its founder Kim Il-Sung.

Part social history and part historical biography, Cheng’s sprawling seven-hundred-plus-page work also helps explain the historical and spiritual conditions of the North Korean system, tracing how this once deeply Christian country became home to one of the most durable political cults in modern history.

It is an astonishingly challenging subject, one Cheng found almost no prior literature on, and made harder by the nature of North Korea itself, where history and mythology have merged, subsuming much evidence needed to understand its origins. But against these odds, Cheng has succeeded, drawing from interviews and archival material to write a brilliant historical narrative reflecting on nationalism, religion, historical trauma, and human resilience.

The Jerusalem of the East

Cheng’s starting point is the late 1800s. Korea, a conservative Confucianist country that had held its place for centuries within a stable East Asian order, is being compressed on multiple fronts: the arrival of Western colonial powers, the rise of Imperial Japan, and the decay of Qing dynasty China. Into this volatile mix come American missionaries such as Samuel A. Moffett, who arrives to “set up the cross of Christ” in the Hermit Kingdom. They are ignored, face the genuine risk of beheading, and little comes of their proselytizing until the destruction of Pyongyang in the 1894 Sino-Japanese War hands them an opening. The missionaries work together with locals to rebuild the ruined city, and the Koreans take to the foreigners and their strange religion, with such speed and fervour that within a decade Pyongyang is hailed as the “Jerusalem of the East.”

However, darker chapters lie ahead. Imperial Japan slowly and inexorably subjugates Korea, forcing its emperor to abdicate, and annexing the country wholesale in 1910. Koreans now reduced to servitude in a land no more their own, this profound national tragedy gives birth to a generation of deeply Christian nationalists: An Ch’ang-ho, the silver-tongued Christian orator; Yi Tong-hwi, advocate of armed struggle; and Kim Hyong-jik, the student activist. Cheng captures the tension they face, caught between tradition and modernity, militarism and pacifism, and profound human emotions: righteous anger, raw fear and deeply held hope. Christianity itself is pulled in every direction: first embraced as an antidote to Korean backwardness, then adopted as a defining mark of national identity, and many decades later, replaced by an even more enduring state religion revolving around one man.

The Captain History Underestimated

That man is Kim Il-Sung, born 1912 to Kim Hyong-jik, the aforementioned student activist, and his wife, Kang Pan-sok. The couple are Christians, and the boy Kim is thus raised in this atmosphere thick with historical tragedy and national awakening. Other Christians play key roles in Kim’s life, such as Rev. Son Chong-do, the Methodist minister who became his surrogate father. And while Kim’s family could boast of excellent nationalistic credentials, Kim’s rise to supremacy years later is anything but preordained.

Yes, Kim boasts of military credentials as a guerrilla fighting the Japanese in the 1930s, and as a captain in the Soviet Red Army during World War II, but on the eve of final Japanese defeat, he is by some accounts an insignificant figure, a man some place “on the sidelines of history” and “just another Korean guerrilla exile.” Nonetheless, the 33-year-old captain somehow becomes Moscow’s point man in Soviet-backed North Korea, a rise as startling in its speed as mysterious in its origins, as Cheng finds few credible explanations for Kim’s stunning ascent.

It is as if history had underestimated the man, and would continue to do so. Soon after the devastating Korean War (which saw Pyongyang’s churches and buildings destroyed by U.S. bombers), Kim deftly maneuvered between Moscow and Beijing, swiftly dispatched his internal rivals and would-be challengers, and consolidated his leadership in North Korea. All the while, official hagiographers quickly embellished his past: Ten-year-old Kim is painted returning to Korea crossing the rugged mountains alone. Eighteen-year-old Kim supposedly conceived the Juche ideology, and it was General Kim who led the fictitious Korean People’s Revolutionary Army to victory over the Japanese, diminishing the role of the Soviet Red Army. And what of Kim’s Christian past? Downplayed or wiped clean. In this way, history and mythology merge, and the audacity of the project at first rivals, then surpasses, that of fellow Communist giants Stalin and Mao.

By his later years, long after Stalin and Mao’s legacy had been reassessed, Kim Il-Sung stood alone as the greatest cult of personality the world had ever seen. He was immortalized with hundreds of statues and portraits throughout North Korea, and honored and worshipped like a god by its people who dutifully wear lapel badges bearing his portrait.

It is tempting to let one’s eyes glaze over these icons and invocations, to succumb to cynicism or to give in to simplistic explanations, but Cheng avoids this trap. He suggests that after decades of colonial subjugation and an endless cycle of wars that killed millions, a deep yearning welled in the traumatized yet proud Korean people for one of their own to provide a heroic narrative. And in this confused post-war state, where competing ideologies vied for primacy, Kim Il-Sung’s ideology — an eclectic mix of the hero-narrative, communism and Christian elements — conveniently stepped in as the ideological heir to Christianity to crystallize the Korean national identity. This new state ideology drew on imagery and constructs familiar to the heavily Christianized north: the preordained coming of a savior, the holy trinity of the leader’s family, and study halls and self-criticism mirroring churches and confessions.

Further, this metamorphic process of Kim Il-Sung-ism replacing Christianity was not due to Kim’s efforts alone. Others were complicit and while some benefitted from this, some did not. There was Rev. Kim Ik-du, the celebrated Christian revivalist who was co-opted into drawing North Korea’s sizable Christian community into the national fold, only to be killed as a traitor in 1950. There was Hwang Jang-yop, the chief official tasked with propagating Kim’s Juche ideology, but who later defected to South Korea in 1997 after falling out with Kim’s son and successor, Kim Jong-il.

Most poignant of all was Kang Yang-uk, Kim’s right-hand man for religious issues, whose life was marked by Learian registers of tragedy, revenge, and faith. A soft-spoken man, whose early ambition was a quiet life devoted to the Church, Kang rose to become a key ally to the Great Leader. But his life was shattered when assassins bombed his home, killing his son and daughter. In the book’s most chilling scene, Kim consoles Kang, urges him to turn his “sorrow into contempt,” and pressing a pistol into his hand, says to the broken man, “Now, let’s take revenge.” Rising from despair, Kang’s zeal for Christ transmuted into fanatic rage at North Korea’s enemies, among them the Christians who dared challenge the State.

The Autumn of the Great Leader

At its peak, Kim’s cult of personality saw all North Korean history, mythology, and hagiography revolving around him. The man himself was now ethereal, less a person than the embodied spirit of a nation, and to wonder aloud about Kim’s mortality brought punishment.

But as time passes for all men, the autumn of Kim’s life also saw him reminiscing about his parents and his legacy, and a coming-to-terms with his Christian heritage, which he set down in his memoirs in 1992. This forms the last third of Cheng’s book and here we see tantalizing details of the person behind the personage, a welcome respite from the flattened, heavily embellished narrative of Kim’s life. His memoirs, written with what Cheng describes as “an unmistakable sense of wistfulness,” reveal never-before-seen personal reflections: his gratitude for the Christians in his life, among them his surrogate father Rev. Son Chong-do, and his near-remorse over the treatment of Christians who were “indiscriminately prejudiced against… in spite of my repeated warning against it.”

Though some scholars believe that Kim’s “coming-to-Jesus” moment was merely a ploy to whitewash his reputation, this slight unmasking of the man foreshadowed momentous albeit temporary changes. North Korea suddenly permitted state-sanctioned Christian congregations to worship, allowed foreign Christian delegations in, and improved relations with South Korea and the external world. Even world-famous evangelist Billy Graham is invited to preach, and met the Great Leader.

But in 1994, the Great Leader breathed his last and North Korea dissolved into a monumental outpouring of grief. Cheng hints at lost potential; weeks earlier, Jimmy Carter’s visit had defused the nuclear weapons crisis and sown the seeds for a first-ever inter-Korean summit, but Kim passed before the summit, leaving his coming-to-terms project somehow unfinished. Yes, the North-South détente did hold for a time; the year 2000 brought the first North-South family reunions and the summit between North and South Korea, but as the years passed, the politics changed. North and South Korea eventually drifted back into animosity and mistrust, and a curtain drew on North Korea’s opening to the world.

This book endures in the memory long after reading. After finishing it, I came away with a sense that this was not a work that sought merely to uncover a hidden history, or to pass judgement on Kim Il-Sung or North Korea, a “regime” that has surprised naysayers with its durability, and with China – North Korea relations once again in the global spotlight, may well have been underestimated on the world stage. Instead, this work, originally conceived as a magazine article that expanded into a decade-plus-long project, reveals the very nature of collective nation-building and individual sense-making. Nearly destroyed by incredible internal and external pressure, the Korean nation and the Korean person drew, for better or worse, on the ideals, iconography, and ideology of Christianity, Communism, and yes, the Cult of Kim Il-Sung, for their sustenance and reconstitution. Thus, Cheng’s book lingers as a meditation on Korean history, on national and personal trauma, and as Cheng reveals, as a tribute to the spirit and resilience of the North Korean people, the faces of which I recall more vividly than the state propaganda. Behind North Korea’s impenetrable wall, its flattened and controlled narrative, its indecipherable actions coded in the blustering rhetoric, were and have always been real people – living, breathing, imperfect human beings grappling with history and meaning, and their own personal and unique circumstances often beyond their agency.

This does not suggest that the global community be naïve about Kim’s legacy and the brutality of the North Korean regime – the country remains a violent outlier to international norms – but it does suggest that there might be clues to help us at least understand how the system came to be, even as we remain vigilant about the system itself and critical about the action it takes. To this effort, Jonathan Cheng has written a remarkable, timely and breathtaking masterwork that demands to be read.

Calvin Quek is Executive Director, Nature Finance, Oxford Sustainable Finance Group. Director, Transition Asia. All photos by Calvin Quek.

• On this week’s Trivium China Podcast, host Andrew Polk is joined by Trivium’s Head of Geopolitical Research Joe Mazur and Head of Clean Energy and EV Research Cosimo Ries to unpack these two critically important developments in China’s external relations.

First, Andrew and Joe break down Xi’s first trip to North Korea in nearly seven years and what it reveals about Beijing’s priorities amid shifting regional dynamics.

The two discuss:

• Why Xi chose North Korea for his first foreign trip of 2026

• China’s complicated relationship with its only formal treaty ally

• How North Korea’s growing ties with Russia are reshaping Beijing’s calculations

• What practical outcomes may emerge from the visit

Then, in the second half of the pod, Andrew, Joe, and Cosimo turn to Europe, where concerns about Chinese industrial competition are fueling calls for tougher trade and investment measures.

The conversation covers:

• Whether “China Shock 2.0” is the right way to think about Europe’s challenges

• Growing tensions between the EU and China over trade imbalances and industrial policy

• Why clean energy, EVs, and advanced manufacturing sit at the center of the dispute

• How Chinese companies are responding through localization and investment in Europe

• Whether Europe and China are headed toward a full-blown trade war – or a prolonged period of managed friction

As always, the guys cover a lot of ground, so sit back and enjoy!

Transcript

Andrew Polk: Hi, everybody, and welcome to the latest Trivium China podcast, a proud member of the Sinica Podcast Network. I’m your host, Andrew Polk, and today I’m joined by two of my colleagues, a semi-regular on the podcast — First off, Joe Mazur, our Head of Geopolitical Research. Joe, how are you doing, man?

Joe Mazur: I’m doing great.

Andrew: Good to have you here. And then we have a new Trivium guest on the podcast, and that is our Head of Clean Energy and Renewable Energy Research, as well as our Head of EV Research, and that is Cosimo Ries. Cosimo, great to have you on, man. How are you doing?

Cosimo Ries: Yeah, doing great. Glad to be on the podcast.

Andrew: Yeah. So, with Cosimo and Joe today, we’re going to get into a little bit of geopolitics. So, we’re going to talk about the sort of big geopolitical news when it comes to China with Xi Jinping’s trip to North Korea over the past few days. So, we’ll talk about sort of what happened there and what the implications are, how to read it. And then we will also talk about sort of the budding, heightening tensions between the EU and China.

Tensions have been rising for a while, but over the past few weeks, they really seem to have taken another leg up. And the EU and China seem basically like they’re on the precipice of potentially yet another trade war or another front in the trade war for both economies. So, we’ll talk through that. Joe, of course, is our head of geopolitical research, so he’ll bring that aspect.

And then Cosimo not only is our head of renewable energy, clean energy research, and EVs, but also is our resident Italian citizen. So, we’ll bring a perspective, a European perspective, but also a lot of this clean energy stuff is key to sort of that whole trade dynamic and diplomacy dynamic. So, we’ll also bring his expertise there as well. Excited to get into it. But before we do, we’ve got to start with the customary vibe check. Joe Mazur, how’s your vibe today?

Joe: My vibe is good. Cosimo and I are usually based in Beijing, but we are in Shanghai this week. It’s kind of a sort of a company get-together/retreat, get to see some colleagues that we haven’t seen in a while. And so, I’m going to say my vibe is grateful for a change of scenery, not only in geographical terms, but also the fact that it’s been quiet on the U.S.-China front, which means I get to take a kind of a break from Trump watch.

And so, it’s quite invigorating to not just be going through the same routines, whether that’s your same old commute or the same old, you know, issues you’re looking for in U.S.-China relations.

Andrew: Yeah, waking up to see what bleats came out overnight or what Truth Social posts came out overnight. Yeah, everybody needs a break from Trump Watch, I think. You most, more than most.

Joe: Yeah, I’ll enjoy it while I’m laughing.

Andrew: Cosimo, how’s your vibe?

Cosimo: Yeah, I second what Joe said. And it’s great to be down here hanging out with colleagues, getting some good food in. Yeah, and the space I’m watching, it’s been very interesting and eventful, I think, especially in terms of Chinese auto-EM’s overseas expansion efforts. It’s really picking up, really blistering pace. So yeah, always interesting that things are happening.

Andrew: Yeah. Well, you definitely are in a pretty sexy space when it comes to your research agenda, your research portfolio. We’ll definitely get into that. I’m excited to have you on for the first time to talk about some of that stuff. I, similar to you guys, am also in Shanghai. I hesitate to say because I was not very good on this trip about letting folks outside of the company know that I was coming. So, I set up very few external meetings. So, I’ll probably have some listeners yell at me after hearing that I’ve been in town for the week and I didn’t reach out to many folks outside of Trivium.

But the whole point of the trip was to hang out with you guys, the Trivium folks on the ground. And it’s been fantastic as always. Always love getting here and seeing the team and catching up with everybody and hearing what’s going on and getting a little FaceTime and getting some excellent Chinese food, of course. So yeah, my vibe is thrilled to be here, which is just a pretty steady vibe for me. Always thrilled to be wherever I am, thrilled to be on the podcast.

But we, of course, will get into all the meat of this stuff, but we also have to do some quick housekeeping. Just a quick reminder to everybody, we’re not just a podcast here. Trivium China is also a strategic advisory program that helps businesses and investors navigate the China policy landscape. And that, of course, includes domestic policy in China and a range of issues, as well as policy towards China out of Western capitals like D.C., London, Brussels, and others, much of which we’re going to get into today.

So, if you need any help on that front, please reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund. That’s hq@triviumchina.com. Otherwise, if you’re interested in receiving more Trivium content in general, check out our website. Again, triviumchina.com, where we have a bunch of different subscription options, both free and paid. We’ve got policy intel updates around the markets for investors, policy intel updates on tech policy, on general business developments for business executives. So, you’ll definitely find the China policy intel option that you need on our website. So, check that out.

And finally, as always, please do tell your friends and colleagues about Trivium. It helps us to grow the listenership and to grow the business. And we really appreciate those word-of-mouth recommendations. So, with that, let’s get into it, fellas.

We’re going to start with North Korea. Joe, I’ll go straight to you as the expert. Just maybe fill us in, kind of, on the details for listeners who don’t know. When did Xi Jinping go to North Korea? How long was he there? What were the key outcomes? And then we’ll get into sort of what the impacts were and how to read it.

Joe: Yeah. So he was in North Korea from June 8th to June 9th. This is going to be his first visit in very nearly seven years. I think it’s almost exactly seven years since he was in the country last. And what’s also interesting is that this is Xi Jinping’s first foreign visit of 2026, believe it or not. We’re almost halfway through the year, and this is the first time that he’s left China. And this is usually kind of an indication from a protocol perspective that whatever country he goes to first in the new year, or really any time, Xi Jinping can be sort of roused to leave Beijing, that’s a pretty good indication that the country he’s going to is going to be a major priority for Chinese diplomacy in the coming year.

So yeah, I mean, I think probably before we talk about the specifics, it’s worth getting into a little bit of context about China-North Korea relations. And I think, you know, if I can use one word to sum up the relationship, it’s weird. You know, North Korea is China’s only treaty ally, right? So, I think that in the media, we hear a lot of stuff about, you know, oh, Russia is China’s ally, and Iran as China’s ally. That’s not technically true. I mean, sort of a metaphorical sense, they’re maybe aligned on things, but China only has one treaty ally, and that’s North Korea.

And in fact, that was kind of the anniversary that Xi’s trip was centered around. It was the alliance treaty that the two sides signed in 1961. So, commemorating the 65th anniversary of that. But it’s a weird relationship because on the one hand, they’re ideologically aligned in the sense They’re both communist powers, albeit they look kind of very different in practice in terms of how their economy and political system is structured. But there is sort of a historical pedigree there, and that was one of Xi Jinping’s kind of major talking points, and we’ll get into that a bit later.

And of course, China is by far North Korea’s biggest trade partner, provider of foreign aid, etc. It’s not even close. But equally, I think that China has oftentimes kind of looked askance at North Korea, given what a geopolitical wildcard it tends to be, right? I think sort of even dating back to the time of the Korean War, the concern was about instability, right? At that time, there was concern that sort of the Americans and the UN forces would push up right to China’s border.

And sort of, subsequently, the fear of North Korean collapse has been one concern. Something that might send millions of refugees potentially across China’s border. But also the fact that it has sort of been daring the U.S. and other countries to do something about its nuclear program. And sort of that instability on China’s border makes Beijing obviously very nervous. So, it’s kind of this weird relationship where on the one hand they’re technically very close and obliged to support one another. But in practice, I think that oftentimes North Korea is more of a liability than an asset in China.

Andrew: Yeah, well put. I think with the liability piece and also just the moniker of weird, I totally agree. I’m actually reminded, I forget exactly what the anniversary was, but there was some anniversary in China, some big political anniversary. I want to say it was 2017, 2018. And my friend and former colleague, Jude Blanchett, who we were working together at The Conference Board, I believe at the time, or maybe I just left. He’s currently at RAND. I’m sure listeners will be very familiar with Jude, who’s a political analyst on China.

He was on Bloomberg TV, and the host asked him, “What do you think about the fact that Kim Jong-un has sent this congratulatory letter to Xi Jinping on this political anniversary?” And Jude’s response just off the cuff was, well, it’s a little bit like getting a birthday card from your ex-wife. And I thought that kind of summed up pretty well kind of what this relationship is like. With the ex-wife, you’ve still got shared interests in some ways. You’ve got to have a-

Joe: Shared history. Yeah.

Andrew: Exactly. If you’ve got kids together, you have some shared responsibilities. You have obligations to each other. And sort of you have to make it work. So, I thought that was just another way to say weird, I think, is right. So anyway, go ahead.

Joe: And not to mention the phrase that China, I think North Korea also used to describe the relationship as being as close as lips and teeth, which is a very kind of evocative, if slightly weird way of putting it. Anyway, so while we’re in the territory of weird but apt metaphors, there’s another one for us.

Andrew: Yeah, Joe, you and I are as close as lips and teeth, right?

Joe: I will report this conversation to HR immediately.

Andrew: All right. Maybe it’s time to move on. So I do want to press on one point, which is, you said this is Xi Jinping’s first trip abroad in 2026, which is pretty striking. I mean, it’s early June. It’s pretty wild that he hasn’t left the country all year. Part of that’s because this year has really been marked by a steady stream of foreign leaders coming to Beijing. And that’s been characterized in various ways. You know, some people saying, well, with the U.S. being somewhat more erratic or less of a reliable ally, the Europeans are coming over.

Of course, some people characterize it as kowtowing. I think either way, whatever you want to characterize it, the optics are pretty good for Xi Jinping, right? That the steady stream of leaders, including Donald Trump, have been coming here. So, maybe just talk to us about, I don’t know, that aspect of how you put this North Korea trip in that context, even though that’s a wider context. Talk to us a little bit about that. And then also, you know, what does that say about how important this trip was for Xi Jinping?

Joe: Yeah. So, I mean, in this case, it’s kind of funny because the shoe’s a little bit on the other foot. And I think you’re right, kowtowing, whether you’re talking about foreign leaders going to Beijing to meet with Xi Jinping is probably too strong a characterization. But equally, though, I mean, Xi Jinping is, yeah, I’m not going to say like a supplicant because that’s certainly not true given the massive power imbalance. But there is sort of a dimension of Xi Jinping trying to sell a lie with his trip to North Korea.

And the context here is that, to go back a little bit further, following the collapse of the Soviet Union, and maybe even before, I’d have to look at the trade data there, but China’s been sort of, like I said a minute ago, far and away North Korea’s most important economic lifeline. During COVID, the border closed, and that did a lot of damage to the North Korean economy because it was sort of cut off from this important economic lifeline in China. But then with the outbreak of the war in Ukraine, that kind of presented an opportunity for Kim Jong-un.

And since then, he’s obviously dispatched something like 16,000 North Korean soldiers who have fought in Ukraine on behalf of Russia. In return, Russia has bought North Korean munitions, which has provided a boost to the economy. In addition to soldiers, North Korean laborers have been sent to Russia to earn money for the regime. Russia’s been offering oil in return, technology, weapons. And, obviously, for those North Korean soldiers fighting in Ukraine, that’s real combat experience that for as much as the Kim regime depends on the military, it’s a basically untested military.

So, some real-world combat experience. So, in this context, you sort of have Pyongyang tilting more towards Moscow in a way that it hasn’t before. And I think this is something that makes China uneasy, even despite the fact that China is also a close partner of Russia, because it does kind of, to a certain extent, put Kim Jong-un in the position where he can pick and choose a little bit and kind of erode somewhat Chinese influence in North Korea.

I think China’s really eager to maintain or reassert that influence because it’s important for all the reasons I just mentioned earlier, right? You know, best scenario, having leverage over North Korea is, in effect, leverage over the U.S. and South Korea, both of whom want to see the country denuclearized. But equally, it’s an important form of being able to conduct damage control, right? If Beijing gets concerned about how aggressive or how kind of unpredictable or erratic North Korea is getting, it wants to be able to have enough and pull the step in and say, “Hey, chill out.”

So, for both those reasons, it makes sense for China to sort of really jealously guard that influence. And I think that’s kind of been the theme of Xi Jinping’s message was he put a lot of emphasis on historical ties, but also on the future, on continued trade cooperation, governance, experience sharing, and the like. So yeah, really, I think, by Xi Jinping, to remind the North Koreans about the benefits of partnership with China.

Andrew: Great points. And I would say it strikes me also as a pretty sort of easy give for Xi Jinping. It’s not a very long trip. He has the stature of everyone coming to China this year and can kind of say, “Listen, I’m going to come to you as a,” I don’t know, an olive branch or whatever, you know, whatever you want to call it to the Kim regime and say, “We’re going to show you that respect and remind you, like, we’re willing to do that. We want to work with you.” It’s a pretty, I don’t know… It just strikes me as a bit of a savvy move because it’s really pretty low-hanging fruit or very little downside to doing that. Do you agree?

Joe: Yeah.

Andrew: One last piece on this, and then I think we’ll move on to the Europe stuff, which is just, how did potential denuclearization of North Korea feature in the discussion at all? Because that was a part of the conversation between Donald Trump and Xi Jinping. When Trump was in Beijing just a few weeks ago, like three and a half weeks ago, and it’s an issue the U.S. administration really wants to push with China. And my understanding is didn’t really feature it at all. And I think there’s differing accounts between the U.S. and China on this, or at least Trump has said, like, “Oh, yeah, Xi Jinping’s on board and doesn’t want a nuclear in North Korea. Wants North Korea to denuclearized.”

But the Chinese just haven’t said anything about it, I believe. Is that right? Am I getting that right?

Joe: Yeah, that’s correct. So, I mean, as far as I could tell from the readouts I saw from the meetings between Kim and Xi, there was no discussion of denuclearization, or at least there wasn’t one that was mentioned. And you’re right. I mean, there were sort of differing accounts from the Trump visit about how much that was discussed, or if it was discussed at all, right? The U.S. side said they had discussed it. The Chinese side didn’t say if they had one way or another. And I think that that’s sort of in recognition of the fact that there’s absolutely no incentive for the North Koreans to give up their nuclear weapons. Like, absolutely none.

I mean, you could point to a number of examples, the most immediate one being sort of Iran, how sort of the denuclearization process did not help, did not save Iran from U.S. intervention and war with the U.S. You could even point to Ukraine, which gave up its nuclear weapons sort post-fall of the USSR in exchange for security guarantees, which, guess what, were not honored.

So I mean, China’s position has historically been that it wants to see the denuclearization of the Korean Peninsula, which is kind of an interesting way of phrasing it because there’s only one nuclear power on the Korean Peninsula, that’s North Korea. But I think it also kind of implies that obviously China would not want to see South Korea get its own nuclear weapon. It wouldn’t want to see the US stationing nuclear weapons in South Korea. So. it’s a slightly more broad thing. And in the past, China’s been sort of an active participant in trying to get North Korea to denuclearize.

But I think now at this point, there’s a recognition that like, no, it’s never going to happen. I mean, the North Korea’s nuclear status is sort of its ultimate hedge or trump card against sort of US or Western aggression as they would see it. And so, I think probably officially denuclearization is still China’s preference and policy. But if it was discussed, and it may have been, it certainly, I think, Xi Jinping and his team went in understanding that there’s no way they’re going to get Pyongyang to denuclearize.

Andrew: Yeah, so why even push on that issue? I think that totally makes sense. But I think, yeah, it’s pretty well understood and mostly agreed at this point that, yeah, it probably is in North Korea’s interest staying onto those nukes because it just gives it a level of security and outsized importance, frankly, that it wouldn’t have otherwise. We should pivot to the Europe piece of this, but anything else from this trip or just broader China and North Korea that we should be thinking about that you want to highlight before we move on?

Joe: No, not really. I mean, I think what I’ll be watching is if we get a sense of what kind of material support, if any, China has offered to North Korea, right? I got to imagine that in addition to all the rhetoric and just kind of the pageantry of Xi Jinping having gone there, there are probably also some meaty deals that were done, but we’re probably not going to get a clear sense of that until we, for example, look at trade data or get some kind of update on that. So yeah, just seeing what this visit changes in practical terms, if anything.

Andrew: Yeah. Yeah. Okay. Great. Well, thanks for that rundown, Joe. Super helpful. Let’s now turn to Europe. As I mentioned at the top, there’s sort of a brewing Europe-China trade war seemingly on the horizon. Quite a bit has happened in the past couple of weeks with some key European meetings, specifically about China, and then the EU trade commissioner speaking with the Chinese side and also trying to sort of ramp up negotiations, it sounds like. Can you start to give us the lay of and then we’ll bring in Cosimo as well to tell us, you know, things we should be on the lookout for?

Joe: Yeah, I’ll just give some kind of initial context, and I’ll let Cosimo get into the nitty-gritty of it. But basically, this has been kind of something that’s been in train for a while. Europe has been increasingly concerned about its trade imbalance with China and the hollowing out of key industries that support many, many jobs within the EU.

And so, I mean, there’s a number of factors that are converging here. So, one is that Chinese products have increasingly moved up the value chain and compete directly with European companies in a way that they did not before. So, you know, the example par excellence, which I’ll leave it to Cosimo to kind of talk more in depth about, is cars and EVs, right? It’s no longer a case of Chinese cars being kind of an inferior knockoff and a novelty. In a lot of cases, they’re as good or better than their European counterparts at a more affordable price.

So, that’s one. And you see that also in the cleantech industry. But the other is the fact that as energy prices have risen in Europe as a result of the war in Ukraine, and more recently kind of accelerating with the disruptions in the Strait of Hormuz, that’s really crushed the margins of a lot of key European industries. And I think chemicals is a good example here, where this is a very energy-intensive industry, which is very sensitive to the price of energy.

And so what’s interesting about that is while Europe does not import a lot of chemicals in their initial state from China, they do import a lot of the midstream and downstream products, which effectively takes market away from these key European players. So, all of this has kind of, I think, in the first half of this year, led to panic. And I think we’re seeing an inflection point in Europe trying to put together a pretty robust series of measures to counter that on a timeline that’ll be fast enough to save these industries.

Because, I mean, the European Union does tend to be somewhat hamstrung in the sense that it’s process bound and requires a lot of consensus from constituent states, which have their own kind of interests that either overlap or compete or both. And so, for that reason, it is very hard to kind of get an agreement on things in sort of a timely manner. So, some of these measures are aimed at allowing the EU to react more quickly and more decisively than in the past.

Andrew: Thanks for laying out that kind of context there, Joe. And we’ll get Cosimo in here in just a second. But can you also just give us some detail, I mean, there were some recent meetings by the European Commission specifically on this issue, can you just walk us through that process in terms of how the specific meetings that European leaders are having in order to move this issue forward from their side?

Joe: Yeah, so there was a debate at the European Commission on May 29 about China. And the readout that came out from that was we didn’t really get much meat from that, but said the current state of trade investment relationship is not sustainable. And sort of the very next day, China’s Ministry of Commerce fired back and said it would resolutely take countermeasures to safeguard its own interests.

And then on the same day, Yuyuantantian, which is sort of, for folks who don’t know, which is sort of a state-affiliated blog, which kind of is in this position where it can elaborate on the official line in a way that sort of presents itself as journalistic, but is a little bit like kind of an unofficial mouthpiece, which can warn certain countries or regions about what they can expect.

Insider Sources is saying that China may initiate anti-discrimination investigations and supply chain security reviews if Brussels doesn’t change course. So, I mean, that all sounds pretty bad. There’s going to be an EU leaders meeting on, I believe, June 18th and 19th, where I think we may get some more color on what’s kind of coming down the pike. To be clear, there’s been reports that one of the major pieces of legislation that the European Union is looking at would be effectively requiring companies to diversify sources of critical inputs and relying on something like no more than 30% or 40% from any one country, if I’m remembering that correctly.

But basically, that’s the kind of thing that’s under discussion. So yeah, I mean, I think, again, we’re still at the very beginning of this process. And even this thing, which is meant to be moving quickly to address a crisis in the European context, still moves pretty slowly. So, you know, I think it’s going to be a while before we see this even fully agreed upon, let alone fully implemented.

Andrew: Yeah, no, that whole diversification thing of critical inputs is one of those things that I’m watching because it sort of like makes sense on its face. Like you can see how somebody came up with that as a policy issue. But from a company’s perspective, it is like something that no company is going to want to do. One. And secondly, it may be impossible for a lot of these companies to do. And even if they can do it, it’s going to cost them a ton of money. So, I wonder if policymakers are thinking that through fully. But we’ll see.

I mean, that hasn’t become policy. It’s just something that’s been floated. But anyway, let’s bring in Cosimo. Cosimo, I’ve been speaking with a ton of European diplomats and companies over the past few months throughout 2026. And I mean, there is legitimate angst around China Shock 2.0 that is hitting Europe in a way that I hadn’t seen in previous years. Real concern about the industrial juggernaut. A lot of that is around renewable energy and EVs. But how do you see the debate playing out among sort of the countries in Europe that really matter in terms of shaping the policy response?

Cosimo: Yeah, thank you for the question, Andrew. So, yeah, I guess I do have a bit of an issue of the characterization of China shock 2.0. Because I think it’s an oversimplification of a lot of issues that are happening. For example, when China shock 1.0 happened, it was effectively a more cheaper, more competitive Chinese exports that crushed a series of legacy industries. And I think a lot of European industries certainly find themselves in that position, right? from mechanical steel or even autos and so on.

But I think that’s definitely not entirely the case, right? If you look at, for example, batteries, energy storage, and EV batteries, a huge export industry. Europe effectively does not have any local alternatives that it can even protect to begin with. I think you can say, for example, in the solar space, China shock 2.0 has already ended. I think it ended in the early 2020s when Chinese, yeah, were driven by the Ukraine energy crisis, started importing solar panels in huge quantities, and that basically Chinese exports, completely demolished Europe’s manufacturing base.

So I think that’s in many ways already over in their areas. Like, say, you know, electrical transformers and a host of grid equipment’s and all kinds of equipment that are crucial to Europe’s wind energy supply chains. And these are areas where Europe has, you know, a lot of domestic supply shortages, right? It’s now more and more tapping Chinese suppliers to try and meet, right? So I think calling this China shock is yet not entirely fair, right?

When it’s often cases that it’s European companies that are tapping Chinese suppliers to meet real needs and urgent needs that they’re trying to address. So I think that’s kind of how I view it to begin with. And yeah, in terms of, I think, the internal debates, I think, as with a lot of European policymaking, there is tons of internal disagreement. I think you have the France-led camp that’s more pro-industrial policy, more pro-European strategic autonomy, and so on.

And then you have obviously the northern, more kind of free trade liberal economies like Germany, the Netherlands, Nordics, and so on, who I think until quite recently viewed industrial policy as a dirty word. I think they’re not quite in favor of this type of extremely aggressive Europe-wide investor policy that rocks the boat and also the fundamental economic interests of these countries, also drive this diverging approach. Obviously, the German industry is far more exposed to the China market than almost any other country.

So, they’re also beyond the receiving end of a lot of retaliation. And obviously, in many of the Southern European countries that advocate for more EU-wide industrial policy, they’re in a lot of debt. France, Italy, they all have debt-to-GDP ratios of more than 100%. So, if the EU takes common debt to fund industrial policy, in the end it would be the more frugal Northerners who have low debt who have to pay for it. And also, it’s obviously very convenient getting the economic benefits and not paying for it yourself.

And also, I think it was important to mention that there were also a lot of disagreements between industries. The EU recently proposed this new steel industry safeguard measures, which proposes basically cutting down the quota of import-free steel imports. And so, obviously, this is protecting your steel by giving them more protection against more competitive inputs.

But obviously, this also then raises costs for a host of downstream industries that have to pay for more expensive European steel. Yeah, it’s important to see these internal differences about policies like the government plays. They inevitably hurt some and benefit others.

Andrew: That’s a great point. And I actually want to sort of pause on that, the point you made about saying that China’s shock 2.0 is not the right characterization. I mean, that’s a pretty hot take. I like it. The reason I say it’s a hot take is I feel like every European company or policymaker I talk to is talking about China’s shock 2.0. So, I guess two questions. Do you think they have the analysis wrong on saying China’s shock 2.0, or do you think they’re using that term for political reasons? Because they truly are worried about the de-industrialization of the European industrial base.

So, generally speaking, if you can generalize, would you say they’re getting it wrong analytically or that it’s maybe more a political argument? And then secondly, how would you characterize the competition? If it’s not China Shock 2.0, what’s a better sort of general framework to think about it in your mind?

Cosimo: Yeah. So, I mean, it’s definitely, I’m not saying it’s fully wrong. I tried to get at that at the beginning, right? I think there are definitely a host of industries that are very much exposed to the China shock 2.0 characterization. I think it’s entirely fair, but I’m saying it’s not entirely fair to characterize everything across the board as falling under this. And in many ways, I think it’s somewhat self-serving because when Europe had its Ukraine-Russia energy shock at the beginning, what did they do? They turned to Chinese solar manufacturers. They imported record quantities now year after year.

And that’s been absolutely crucial in helping Europe navigate a lot of the energy crisis that has come from the Russian gas being cut off and everything. So, when it was time to import, that was all well and good.

But now suddenly, when they face a huge record trade surplus, then it’s no longer good. We don’t like this. And you’re seeing the episode dynamic take place. It’s needing Chinese industrial equipment to tackle really urgent needs, often, especially in the energy space. And then, yeah, complaining about the trade circles, I think it’s, yeah, that’s how I see it, or at least for some cases. And I think that’s definitely politically convenient, in my opinion.

Andrew: Do you have thoughts on how they should be thinking about it? Like, what a better framework is? If you don’t, that’s fine. I’m just curious.

Cosimo: Yeah, I think it’s just, you know, there are also so many areas on the clean energy supply chain where everyone knows that Europe desperately needs to ramp up its domestic capacity and its [[inaudible 00:31:52] firms that could do it, but they’re just not doing it. They’re forcing firms that are further downstream to turn more and more to Chinese alternatives. I think that’s, yeah, it’s a bit of a patchwork issue. It’s like industrial policy doing something, but not others.

Andrew: Yeah. Well, we need to work on this. We should come up with a that says it’s not China Shock 2.0 and kind of proffer an alternative framework. I’ll pick that up with you because I feel like that would be added to the discussion. I really like that perspective that you have and we should continue to pursue that in this pod and in our writing. I want to bring Joe back in quickly. You touched on some of the things, Joe, that you think. So, whether or not China Shock 2.0 is the right framework, it’s definitely the ones that many in Brussels are using.

And you touched a little bit on kind of the increasingly aggressive tools that the Europeans are looking at using to fight back. But can you touch on some others? What else are you hearing? What’s kind of the mood that you’re seeing? I mean, in my mind, this is ramping up. Do I have that right? And if I’m right, like what should we be on the lookout for in terms of concrete actions from the EU side?

Joe: Yeah, I mean, maybe I’ll slightly reframe the question to talk about the EU-China dynamic more broadly. As I said at kind of the beginning, and as Cosimo alluded to, this is not really a new phenomenon. It’s maybe gotten more acute in the past several months. But I mean, what’s been really interesting is that as the EU has been trying to, I guess, from their perspective, save their industry from what they view oftentimes as unfair Chinese competition, China has been exercised, I guess, what I would call a significant amount of strategic patience.

So, when you look back to the tariffs that the European Commission imposed on EVs, electric vehicles, back in, I think it was October or November 2024, the Chinese response was pretty muted. They did launch a number of anti-dumping and anti-subsidy probes into things like European dairy, pork, brandy. But all of these were sort of pulled punches in the end. I think they were sort of there as leverage. And so, in the end, none of them really came down with the full force they could have done. And the damage to EU industries and farmers in particular was pretty toned down, pretty mild.

So I think the question now is, at what point is enough going to be too much? And I think that China’s been pursuing that strategy with hopes of kind of being able to dialogue it out with the EU and just trying to be able to get to a mutually acceptable agreement. The problem is the two sides are kind of poles apart. The trade deficit that the EU runs with China keeps growing. Chinese industries are incentivized to continue exporting for reasons related to the domestic market, right? That the consumption is not there to the extent that these companies need.

So it’s kind of doubtful how much room there is for the two sides getting to yes. So, you know, I think that ultimately China doesn’t want to fight a trade war with the EU. But at some point, I think it is going to adopt this sort of tit-for-tat approach, whereas anything that the EU does, which is viewed as harming Chinese interests, will be met with comparable response from the Chinese side that attacks EU interests. And equally, I think there’s going to be a tit-for-tat approach to de-escalation. So there are going to be off-ramps. And so one thing I’m looking for here is Šefčovič, the EU trade chief, he met with Li Chenggang, who is China’s top trade negotiator.

Coming out of that meeting, there seemed to be a renewed push for dialogue. And I think that that’s probably an avenue that the EU should be exploring because I’m not particularly optimistic about the EU’s ability to successfully wage a trade war with China. I don’t think it’s really got the leverage or the chops to do that and certainly can’t mobilize political will as quickly as China can. Maybe Cosimo can chime in with his perspective if that’s a fair characterization or not.

But, you know, I guess what I’m going to be looking for is, first of all, what does the EU do on what timeline and how hard does China hit back? Because I think that will give us a better sense of when we’ve left the era of strategic patience and entered the era of honest-to-goodness trade war.

Andrew: I’ll just posit something before I bring Cosimo back in, but I do kind of wonder if both sides are sort of like, well, we’ve had trade tensions, well, in particularly the European side, but we haven’t wanted to fight a trade war on two fronts. We’ve been fighting with the U.S. since, you know, Liberation Day, you know, April 2025. But those tensions seem to have dialed down as, you know, the U.S. the IEEPA tariffs got shot down by the Supreme Court. And the U.S. generally has been focused elsewhere geopolitically with Iran and Venezuela and things like that.

And just generally like a little bit less focused on tariffs. You know, China has obviously struck some sort of deal with the U.S. Or at least they’ve struck a deal. We don’t know how long it’s going to last. But my point being, both of them seem to have gotten some sort of stability on trade with the U.S. And so maybe now they’re ready to take the gloves off with each other. What do you think about that idea, Joe? Am I wrong there?

Joe: Šefčovič said basically as much in his comments after he met with Li Chenggang and said basically, oh, well, we realized that for the U.S. and China to hash out their differences, it took six or seven meetings. And so I think that, yeah, the EU is in a very, very tough position where, you know, whether or not you want to call it China Shock 2.0 or whatever it is, it is facing, I think, in a lot of ways, kind of an existential crisis for its industry. There’s no question that they are being hollowed out.

And now, yeah, I think the EU would be in a significantly stronger position if it wasn’t having to also face down tariffs and trade war threats from a country that until recently it thought it could rely on. So, it’s a very tough position for the EU to be in. And I do sort of feel that exhausting all options for dialogue is probably the better option for the EU at this stage.

Andrew: Cosimo, what do you think about all this? We all hazard to make predictions, but do you think that EU is going to lean into dialogue, or is your read that they are going to try to use some of the actual legal and regulatory tools at their disposal? And sort of what do you think of the timing of all of it? Do you think sort of officials think, all right, we’re stable with the U.S., we can be a little bit more aggressive towards China? Just kind of walk us through your thinking.

Cosimo: Yeah, to me, I think like in the past couple of years, I think it’s going to continue to be a combination of both. Unfortunately, yeah, some of it will, you know, just simply the time it takes to put policy frameworks in place is the issue. I think with the solar industry, you know, the EU’s been talking about protecting its domestic manufacturing sector, you know, for many years now. But in the meantime, you know, in the time that it took them to come up with concrete policy mechanism like they’re proposing now with the Industrial Accelerator Act, Europe’s solar manufacturing industry had all been wiped out by Chinese competitors.

In the meantime, the timing is a big issue. And I think the EU, for a lot of things, it moves very slowly, right? So, a lot of the, yeah, industrial policy measures talked about in the Industrial Accelerator Act, we’re waiting until 2029 before they’re being put in place, right? So, a lot can happen in that time. So, I think, yeah, what Joe said, the timing is very, very important, right? And yeah, then again, I think in terms of how aggressive they’re going to try to be, I think that’s a big consideration as well. Europe’s economy has been quite stagnant now for some years.

So, to try and fund the big, expensive industrial policy program when your economy is not really doing well, when you have a lot of debt, and you also have a big trade partner that’s going to try and hurt you back, I think, yeah, we’ll see how much appetite there is for all this.

Andrew: Yeah, when push comes to shove, yeah, the tune might change. That’s a good point. Joe touched a little bit on kind of how China’s approached all this. What do you think China’s reaction will be if Europe starts turning up the heat? Will they go tit for tat or will they kind of pull a rare earth’s trump card and kind of not go nuclear, but like really up the ante and say, “Do not mess with us on this. We have leverage, We have choke points”? How do you think the Chinese are thinking of this from your perspective?

Cosimo: Yeah, I mean, I feel like that’s certainly always an option, right? But then, yeah, I think in some ways, like the EV example is a good one, right? EVs and autos more broadly, where, you know, there was a lot of anger about the tariffs and so on. But then in the meantime, yeah, nothing happened, right? Like Chinese auto exports to Europe have grown exponentially, right? in April, they took a 15% market share on the continent. And that was like 2% in 2024. And, you know, all the mid-big players are seeing exports to Europe growing at triple digits.

And so that’s, I think, the reality, right? Yeah, we’ll see how effective a lot of these policies are, right? Because if they’re nominally very, very tough, but then doesn’t actually do enough to change the reality, I think maybe Beijing would be okay with it. Or yeah, same with other measures like sea ban or the steel measures. Yeah, I think we just have to see.

Andrew: Yeah, that’s a great point. Yeah. It’s one thing if the Europeans kind of up the rhetoric and then take some policy actions that actually don’t have really all that strong of an impact. I do think that the Chinese have shown, at least with the U.S., and I think with other countries, in times of tension like this around trade, they’re willing to sort of sit back and assess kind of the practical impacts to shape a response.

So, a lot of times, yes, they do have to react sort of for tat on a not rhetorical basis, but sort of a symbolic basis. But really, at the end of the day, if the other side’s taking action that they don’t deem to be actually that inimical to Chinese interests, then why fight back that hard, right? If the actual regulations aren’t going to reduce the ability of Chinese companies to sell into Europe, as with the EVs, which is a really, really good example. One last one for you or getting towards the last kind of set of questions here is, I mean, you follow Chinese companies closely on all of this, again, primarily renewable energy, cleaning energy and EB space.

I mean, how are Chinese companies reacting? I mean, the obvious one answer is they’re investing a lot more in Europe. Is that a solution to this problem from their standpoint and from the European standpoint, and what other kind of general trends are you seeing in terms of Chinese EV investment, what are these companies kind of trying to accomplish? Those are two kind of big questions, but what are the companies involved, the Chinese companies doing, and how do you think that will impact the back and forth?

Cosimo: Yeah, I think absolutely in terms of the auto industry, I think that’s just an established global norm. If you want to be a truly well-established player in the market, you have to localize in the long term. And I think that’s exactly what we’ve seen where the Chinese OEMs, they’re relying a lot on exports in the short term. But the amount of projects that have been announced and are underway now in Europe has been pretty mind-boggling. Just in the past two, three weeks, we’ve seen, I think, maybe five or six new projects.

So, yeah, I think they’re very well aware of that fact that they want to be in Europe long term. They’ve got a manufacturer there. You’ve seen something like BYD that’s announced that it’s going to be manufacturing all the cars it sells in Europe. And, yeah, so I think, broadly speaking, they also understand the political implications of flooding a market with exports, destroying its industry is not creating any local jobs. I think they’re obviously looking to accommodate but then the reality then is how does that take place?

And I think if you look at the latest price undertaking a framework that the EU proposed some months back, and yeah, it’s a pretty onerous list of requirements in terms of the EU domestic content requirements, the investments. So, they obviously want most of the economic benefits coming from Europe to be generated in Europe. And I think the Chinese OEMs will need to make their calculations and see how much it makes sense, if it makes sense.

I think that’s something we’ve got to see how it’s going to shape out. But unfortunately, I think Europe’s also making it relatively difficult now for a lot of projects. We see that in the wind industry or countries like the UK, so not in the EU anymore, and Germany, and so on, are taking pretty strong steps on security reasons to try and shut out a lot of Chinese turbine manufacturers from even entering the market. So, that’s a situation where the Chinese industries are trying to come in and invest and create jobs and are not allowed to. Yeah, I’m not entirely sure how that could play out. Yeah, the industrial policy requirements are just too onerous for it to make sense anymore. And yeah, I think we’ve not seen that answer yet.

Andrew: Good point on the investment side. I mean, that’s obviously happening again. Maybe not obviously. That is happening in the U.S., making it much more difficult for China, Chinese companies to invest in the U.S., a lot of pushback even against Chinese investment in a range of industries, definitely in the vehicle industry, which is unfortunate because most U.S. auto companies know that they need certain types of Chinese technology if they want to compete in the market going forward.

And so, I personally don’t love that trend, that policy. I think we should do the exact opposite and encourage more Chinese companies to create value, invest, and make things in the United States. And so it’s interesting that that’s happening across Europe as well. Interesting and unsurprising, right? Especially if what you’re worried about is deindustrialization. And you’ve got companies who are saying, “Hey, we’ll come manufacture there. We’ll create jobs. We’ll create tax revenues, all that stuff to push them out on security grounds.” I mean, obviously, legitimate security grounds are important. But I think oftentimes the national security argument is made a little bit too widely. Just last one for both of you guys.

Cosimo, I’ll start with you and then we’ll wrap up with Joe. It’s just, I mean, where do you see things going trade-wise, tension-wise between Europe and China? Can we dial things back at some point or just in the near term, or are we in for kind of more of a rocky, higher tensions, more of a rocky relationship? What do you think?

Cosimo: Yeah, I see it going on for longer, especially because there just seems to be more and more new kinds of exports that Chinese companies find a way to ship out and that there actually is a genuine need in Europe as well. So, if that’s the situation, then I think the localization piece is something I’m watching because if there is a more systematic effort where Chinese companies to localize and then China and Europe are industrially tied together in that way through supply chains, I think that could be, in the longer term, a way to de-escalate when your economic interests are shared that way. But yeah, I think until that happens, I don’t think it’s going to get better anytime soon.

Andrew: Yeah. Well, a good analysis, unfortunately somewhat pessimistic, although I’m glad you brought up that point again, sort of just the absolute flood of Chinese exports into Europe, which is going to be a challenge, is a challenge. I mean, maybe that also, not maybe, almost certainly that also informs the timing here, which both sides have sort of gotten some sort of trade stability with the U.S., but part of that trade stability has been much fewer Chinese exports into the U.S., and a lot of those are being rerouted to Europe.

So that’s only further made the flood even more aggressive of Chinese goods into Europe because they’re not going into the U.S. That just kind speaks to the whole idea of really, if this is an issue countries want to address, this being the onslaught of Chinese exports is going, countries are going to have to do it basically in global concert, not just allied countries, not just a few countries. Everybody’s going to have to work together. Otherwise, those exports are just going to keep coming. Joe, I’ll throw to you for the last word here. Where do you see things going in the next few months? Are you with Cosimo, kind of pessimistic when things are going to get worse before they get better?

Joe: Yeah, I mean, certainly I don’t see an easy resolution to this issue, kind of as you just alluded to, right? China doesn’t really have the incentive to do much about it. And I don’t think the EU has the means to make them do something about it. Kind of what I expect to see is maybe something a little bit less dramatic than we saw with the U.S.-China trade war. Maybe something kind of like a two-track approach where, on the one hand, you have the EU introducing new measures that China views as unfriendly. China will respond with a probe or countermeasures of its own. Meanwhile, you’ve got dialogue happening in the background.

And I think also it’s worth remembering this is kind of a very multifaceted issue in the context of Europe, both sectorally, because there are so many different sectors kind of at play, which are subject to this challenge from China, but also because you’ve got not just the EU at a block level that you’re dealing with, but individual EU countries. So I expect we’ll see a lot of back and forth and sort of, okay, there’s been an escalation and that was a de-escalation and this sector is heating up and this sector is cooling down. So, it’s not going to be quite the same as last year with the US and China where you just had this giant blanket series of tariffs. And that was kind of just the one discrete issue, more or less, that was being discussed.

I mean, it’s a bit of a oversimplification, but I think you know what I mean. So I think it’s going to be an uneven process. I think maybe there is some scope for Europe to kind of implement some measures that gradually diversify away from China and gradually kind of reduce dependence on China. And yeah, maybe that’s the sort of thing, if it happens on a gradual enough timeline and China doesn’t feel that its companies are being singled out, then maybe there’s scope for China being able to accept that, given, especially as we’ve mentioned a number of times now, the long timelines that these sort of things happen on. So, I don’t think it’s going to be sort of a dramatic escalation and de-escalation. I think it’ll be a little more piecemeal than that.

Andrew: Yeah. Well, I like that slightly more optimistic take. It’s still not usually optimistic, but slightly more optimistic. So, we’ll take it. I mean, as I always say, we’re not really here to predict far into the future because there are so many unknown variables. But we are here to help companies kind of think through the scenarios and how to react to whatever does play out. And this is definitely one where we will be monitoring closely and helping our clients sort of think through the right way to play this, whether they’re American, European, or otherwise, companies doing business in China or with China. So, guys, I really appreciate the time today. This was an excellent discussion. Cosimo, thanks so much for coming on the pod for your first time and sharing your expertise with us, man. I appreciate it.

Cosimo: Yeah, happy to be here. Thanks for the invite.

Andrew: Of course, we’ll get you back on soon. And Joe, thank you as well, man, as always. Appreciate it.

Joe: Yeah, my pleasure.

Andrew: And thanks, everybody, for listening. We’ll see you next time. Bye, everybody.

Our phrase of the week is: “shooting yourself in the foot” (搬起石头砸自己的脚 bān qǐ shí tou zá zì jǐ de jiǎo)

Context

Zhang Xiaolong (张小龙) is the CEO of the listed company Fenbi Technology (粉笔科技). Fenbi is one of China’s biggest online education platforms, specialising in civil service exam (考公) preparation. Millions of students in China pay for Fenbi’s services to get them through that gruelling exam.

Recently, Zhang Xiaolong was invited to give a lecture at the School of Philosophy at Renmin University (人大), the top university in China for training hopeful civil servants. The hundred or so students were in the room were exactly the kind of people who go on to sit that civil service exam, and potentially become Fenbi customers.

Zhang’s talk was meant to cover exam prep and job-hunting. But at the last minute, Zhang changed his topic to “Career Planning in the AI Era” (AI时代的职业规划).

And in under an hour, he managed to insult the students, tell them they had no hope of passing the civil service exam, brag about how rich he was, and how much money he’d recently made trading US tech stocks using AI.

Throughout his speech the room stayed quiet, and some students left early.

Rather than take this in his stride, Zhang began to rant angrily and uncontrollably at the audience. He refused to take questions, told them they were hopeless, and walked out.

The news of Zhang’s outburst spread fast on social media. Many of Fenbi’s own students started demanding refunds, and the company’s share price tumbled. Zhang issued one apology, and another.

But the damage was done:

“He built his name on civil service exam prep and makes his money from civil service exam candidates, yet he disparages those very candidates so openly.

Zhang Xiaolong shooting himself in the foot like this is both deeply baffling and purely farcical.”

靠考公起家，赚考公人的钱，却如此露骨地贬低考公人——张小龙这种搬起石头砸自己的脚的行为，十分令人费解，也十分黑色幽默。

And with that, we have our Sinica Phrase of the Week.

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What it means

“To shoot yourself in the foot”, or, literally “to lift a rock only to drop it on your own foot” (搬起石头砸自己的脚 bān qǐ shí tou zá zì jǐ de jiǎo), is a colloquial Chinese saying.

It does not have a single ancient origin, unlike so many other Phrases of the Week. Dictionaries record it in two forms: the longer colloquial version above, and a tighter four-character idiom, “lift rock, smash foot” (搬石砸脚).

The four-character form is usually traced to a 1973 martial-arts novel by the Taiwanese writer Wolong Sheng (卧龙生). The longer version is most often sourced to Below the Wuling Mountains (武陵山下), a novel about the Communist campaign to wipe out bandits after 1949, by the military writer Zhang Xing (张行).

Its most famous use, though, is by Mao Zedong (毛泽东). He used the phrase to describe what he saw as then British Prime Minister Neville Chamberlain’s policy of appeasing the fascist powers. The remark, from a 1939 interview with the Xinhua Daily (新华日报), was later collected in his Selected Works:

“To lift a rock only to drop it on one’s own foot — that is the inevitable result of Chamberlain’s policy.”

搬起石头打自己的脚，这就是张伯伦政策的必然结果。

Mao was borrowing an existing folk saying, not coining it. And he used “to hit” (打) where the common phrase today uses “to smash” (砸).

Today the phrase is common in political and economic commentary, and in business too. The nearest English equivalent is “to shoot yourself in the foot”, which is how we translate it here.

China’s Ministry of Commerce used it in May 2025, after Washington warned that using Huawei’s Ascend (昇腾) AI chips anywhere in the world would breach US export rules. The ministry said the restrictions would ultimately backfire:

“The result can only be to shoot oneself in the foot.”

其结果只能是搬起石头砸自己的脚。

And that is precisely what Zhang Xiaolong did in his speech last week.

He has built his fortune on the fees of civil service exam candidates, then stood in front of a room of those students, and told them they were worthless. So now his customers are demanding refunds, his share price is tanking, and his reputation is in pieces.

Andrew Methven is the author of RealTime Mandarin, a resource which helps you bridge the gap to real-world fluency in Mandarin, stay informed about China, and communicate with confidence—all through weekly immersion in real news. Subscribe for free here.

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18 days ago · 4 likes · 3 comments · Andrew Methven

Today, I’m happy to announce that I have partnered with Global Dispatches to offer a special benefit: paid subscribers to Sinica can now get a 50 percent discount on a one-year subscription to Global Dispatches. I’m delighted to share that the proceeds from this partnership will be divided between the two of us.

This collaboration is part of the NonZero Network, of which both Mark and I are proud members.

To kick off our new partnership, before I head back to Beijing this weekend, and before I pack my computer up, Mark and I will be sitting down for a livestream today at 12:30 PM EDT. We’ll be having a wide-ranging dialogue about how China is responding to its fast-changing international environment, including its evolving strategic relationships in the region and its shifting posture on the global stage.

Paid subscribers to Sinica can take advantage of the special Global Dispatches offer —and I hope to see you on our livestream later today!

I want to highlight one more thing I’m particularly excited about: once I land back in Beijing, I’ll be publishing a nearly two-hour interview with our colleague, Robert Wright, regarding his forthcoming book, The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning. It’s a fascinating conversation, and not surprisingly, it has quite a bit to do with China’s trajectory in the coming years.