Friends,
For the last few years, the research firm Rhodium Group puts together an excellent year-end analyses of the PRC economy. Last year’s report, “Through the Looking Glass: China’s 2023 GDP and the Year Ahead” convincingly demonstrated that the PRC Government was lying about the state of the Chinese economy and warned against the narrative that the Chinese economy was just in a cyclical downturn.
The team made the argument that the PRC’s problems were structural, not cyclical, and that the PRC was concealing the scope and scale of their problems to prevent further capital flight and loss of confidence.
This year’s report, “After the Fall: China’s Economy in 2025” builds on last year’s work and includes one of the politest accusations of deception that I’ve seen.
They call it “authority bias” and they accuse the International Monetary Fund (IMF) of willfully promoting Beijing’s false data and the Party’s Potemkin village.
As the folks at Rhodium point out, staff at the IMF likely know they are abetting these lies. They likely rationalize this to themselves by asserting that it is necessary, so they can do their jobs. They likely believe that if they were to call out these deceptions or point out clearly falsified data, they would lose access. They probably tell themselves that these lies don’t hurt anyone or that they are serving a higher purpose of providing policy advice to PRC leaders.
So, they go along and lend their legitimacy to the Chinese Communist Party.
What would be particularly interesting is if a political scientist or sociologist pursued a research project to examine how international organizations, like the IMF, get captured by authoritarian regimes. One could do it on the World Health Organization (WHO), the World Trade Organization (WTO), or the World Bank as well. I suspect it isn’t some nefarious scheme or massive influence operation mounted by United Front actors (though the Party certainly wants those efforts to achieve these results).
It is likely more banal.
The staff in these organizations are committed to the missions and purposes of their organizations. They want to promote global monetary cooperation. They want to nurture global health and reduce suffering. They want to foster international trade. They want international financial stability and they want to help countries manage economic development.
They believe deeply in multilateralism, not just as an approach, but as an overarching ideology.
To achieve these higher goals, they are convinced that they need to have access to the People’s Republic of China and they need to engage with its government. But their fervent belief in the ideology of multilateralism makes them ripe for a Faustian Bargain because the Chinese Communist Party holds that access hostage for a price.
The price of access is perpetuating the Party’s lies.
Of course, the Party doesn’t make these demands so bluntly. It asks these organizations to “tell China’s story well.” The Party calls on individuals to be a friend of China and to not amplify so-called anti-China narratives. To point out that Chinese leaders have refused to follow the IMF’s advice for decades, is to espouse an anti-China narrative. To point out that Chinese leaders are falsifying data or withholding it, is to espouse an anti-China narrative.
So the staff of an organization like the IMF stays silent and amplifies the Party’s falsehoods.
But lies have costs and consequences.
“Every lie we tell incurs a debt to the truth. Sooner or later that debt is paid.”
– Professor Valery Legasov (played by Jared Harris) in the HBO Mini-series Chernobyl
Whether we like it or not, we live in a globally connected economy. When the second largest economy, and the world’s largest manufacturer, lies about its economic situation, we all suffer. Investors, workers, businesses, shareholders, policymakers and consumers, need accurate information to make decisions. When they can’t get accurate information or when it is purposefully withheld or manipulated, everyone makes bad and harmful decisions.
That’s how markets work and it is how we get market failures.
When an institution like the IMF willfully falls victim to “authority bias” (aka abets the Party’s lies), the rest of the world is worse off.
All of this points to the fundamental incompatibility of the PRC’s political and economic system within a broader global system built on transparency, checks and balances, and the rule of law. It also calls into question the entire three-decade long experiment with post-cold war multilateralism, an ideology that is under considerable stress.
If we want to protect an international system of open trade and economic activity, then we either need the PRC’s leaders to come clean (and make some fundamental political reforms) or we need to disentangle ourselves from China, so that we are less impacted by their pathologies.
[NOTE: I did not use the word “decouple” or “derisk,” as those two terms have become compromised in needless partisan and transatlantic linguistic battles… I recommend we shift to another “d” word, “disentangle” to describe what open, market-based economies should pursue vis-à-vis China].
So, to return to my earlier appeal, I would encourage young social science researchers to investigate how international institutions get captured by authoritarian regimes. To what degree does the ideology of multilateralism play a part, to what degree do post-colonial and anti-colonial narratives shape the thinking of the staff in these institutions. What are the incentives and disincentives that drive the staff in these institutions? Why do these organizations make Faustian Bargains for the sake of their work? What are the costs and benefits of these decisions?
It seems to me that there are plenty of case studies out there and these institutions could benefit greatly by some objective and vigorous research into how they operate.
To quote John 8:32 and the motto of countless universities: “The truth will set you free.”
***
For the new year, I’ve decided to activate the contribution option for this Substack.
I’m going to continue to make this newsletter available to anyone who is interested, but if you want to support this work, I would appreciate a monthly or annual contribution.
As always, thanks for reading!
Matt
MUST READ
1. U.S. Treasury says it was hacked by China-backed actors
Pranshu Verma and Ellen Nakashima, Washington Post, December 31, 2024
The department told lawmakers that the breach gained access to government workstations and unclassified documents.
The U.S. Treasury Department said Monday that it was hacked by a Chinese state-sponsored actor who gained access to government workstations and unclassified documents, according to a letter reviewed by The Washington Post.
The department was notified Dec. 8 by a third-party software provider, BeyondTrust, that a hacker had gained access to a security key, which allowed the intruder to override certain security protocols and access some Treasury Department office workstations and unclassified documents stored on them, according to the letter notifying the Senate Banking Committee leadership of the breach.
The Treasury Department labeled the breach a “major incident,” in line with department policy that, according to the letter, categorizes nation-state intrusions as “major.” Once Treasury was alerted to the issue, it contacted the Cybersecurity and Infrastructure Security Agency (CISA), and it has taken the BeyondTrust service offline, according to a Treasury spokesperson. There is no evidence the hacker still has access to Treasury systems, the spokesperson said.
COMMENT – Ugh!
I’ve lost count of the number of major cyber-attacks/breaches by “China state-sponsored Advanced Persistent Threat actors” in 2024.
It is as if the PRC has no concern about retaliation.
U.S. Department of the Treasury, December 30, 2024
Dear Chairman Brown and Ranking Member Scott:
In accordance with the requirements of the Federal Information Security Modernization Act of 2014 (FISMA) and criteria provided in Office of Management and Budget (OMB) Memorandum 24-04, this letter provides notice that the Department of the Treasury (Treasury) has determined that a major incident occurred.
On December 8, 2024, Treasury was notified by a third-party software service provider, BeyondTrust, that a threat actor had gained access to a key used by the vendor to secure a cloud-based service used to remotely provide technical support for Treasury Departmental Offices (DO) end users. With access to the stolen key, the threat actor was able override the service’s security, remotely access certain Treasury DO user workstations, and access certain unclassified documents maintained by those users.
Treasury has been working with the Cybersecurity and Infrastructure Security Agency (CISA), the Federal Bureau of Investigation (FBI), the Intelligence Community, and third-party forensic investigators to fully characterize the incident and determine its overall impact. CISA was engaged immediately upon Treasury’s knowledge of the attack, and the remaining governing bodies were contacted as soon as the scope of the attack became evident. Based on available indicators, the incident has been attributed to a China state-sponsored Advanced Persistent Threat (APT) actor.
The compromised BeyondTrust service has been taken offline and at this time there is no evidence indicating the threat actor has continued access to Treasury information. The investments we have made using discretionary appropriations provided under the Cybersecurity Enhancement Account (CEA) have helped ensure we have strong incident processes and access to detailed logs to support our incident response efforts.
In accordance with Treasury policy, intrusions attributable to an APT are considered a major cybersecurity incident. More details will be made available in our 30-day supplemental report to this notification, which we are required to provide under FISMA and OMB guidance.
If you have any questions, please direct your staff to contact Treasury’s Office of Legislative Affairs at 202-622-1900 or legaffairs@treasury.gov.
COMMENT – December 8 was the date that the Treasury Department “was notified.”
Remember that date, we will return to it shortly.
Also, take special notice of the “was notified/had gained” sentence at the start of the second paragraph of this letter. It is a textbook example of passive language.
This grammatical construction places the recipient of the action (the Treasury Department) before the verb, thus shifting the focus away from the subject of the sentence (“a China state-sponsored Advanced Persistent Threat actor”), which isn’t made clear to the reader until the end of the next paragraph.
IMHO, a clearer sentence would look like this:
“On December 8, 2024, the Treasury learned that a China state-sponsored Advanced Persistent Threat actor gained access to Treasury Department user workstations by compromising a third-party software service provider.”
Am I being too harsh on the Assistant Secretary of Management for the Treasury Department? Perhaps, but I think it is important to be clear about responsibility when something embarrassing like this happens on your watch.
3. Treasury’s sanctions office hacked by Chinese government, officials say
Ellen Nakashima and Jeff Stein, Washington Post, January 1, 2025
A troubling series of breaches of U.S. firms and agencies could intensify friction between Washington and Beijing as Donald Trump takes office.
Chinese government hackers breached a highly sensitive office in the Treasury Department that administers economic sanctions against countries and groups of individuals — one of the most potent tools possessed by the United States to achieve national security aims, according to U.S. officials.
The targeting of the Office of Foreign Assets Control (OFAC) as well as the Office of the Treasury Secretary — developments not previously reported — reflects Beijing’s determination to acquire intelligence on its most significant rival in the global competition for power and influence, said the officials, who like others interviewed for this report spoke on the condition of anonymity because of the matter’s sensitivity.
A top area of interest for the Chinese government, current and former officials said, would be Chinese entities that the U.S. government may be considering designating for financial sanctions.
COMMENT – Slowly details are coming out on this one.
Both the Office of Foreign Assets Control (OFAC) and the Office of the Treasury Secretary were the targets of these breaches by PRC Government hackers. These would be the two places the PRC would need access to figure out how to circumvent financial sanctions on Russia… amazingly the PRC has been one step ahead of the Treasury since they began supporting Moscow’s illegal war in Ukraine.
Also, a lot seems to be made of that fact that the PRC didn’t gain access to classified systems at Treasury (which is great!) and that they only gained access to “unclassified” information. But given the way that Treasury is organized (its lack of secure spaces and cleared personnel) that should give us little comfort. Unfortunately, Treasury is a soft target with almost all of Treasury’s business being conducted on unclassified systems.
We are well past the time when the Treasury Department can take its security so lightly.
4. READOUT: Seventh Meeting of the Economic Working Group Between the United States and the People’s Republic of China
U.S. Department of the Treasury, December 16, 2024
The United States and the People’s Republic of China held the seventh meeting of the Economic Working Group in Johannesburg on the sidelines of the G20 Deputies Meeting on December 12, co-led by Jay Shambaugh, Under Secretary for International Affairs at the U.S. Treasury, and Liao Min, Vice Minister of Finance at China’s Ministry of Finance.
The two sides discussed macroeconomic developments in each country including the impact of China’s recently announced stimulus policy package. The two sides also shared views on areas of cooperation, including debt issues and how to support low-income countries facing liquidity challenges. The U.S. side expressed its continued concern with China’s nonmarket practices and industrial overcapacity and their impact on U.S. workers and firms. The United States also raised other issues of concern including the support of some Chinese firms to Russia’s defense industrial base.
The EWG provides a mechanism for communication between the world’s two largest economies and has served to stabilize the relationship by mitigating the risk of miscommunication or unintended escalation.
COMMENT – Do you notice anything interesting from this ‘Readout’ published by the Department of the Treasury in mid-December?
What jumped out at me was the date of the meeting by Under Secretary of the Treasury Jay Shambaugh: December 12.
Recall the date I asked you to remember earlier?
So, four days AFTER the Department of the Treasury “was notified” of yet another cyber-attack by the PRC, this time targeting the Treasury Department itself, the Under Secretary of the Treasury (the #3 political appointee in the Department) met with his PRC counterparts for the seventh Economic Working Group.
I’m left wondering: is there anything that the PRC could do that would persuade the Treasury Department NOT to pursue mindless engagement with their PRC counterparts?
It is rational to conclude that the Chinese Communist Party will continue to do these things so long as they don’t think the United States will impose a significant cost on their actions.
5. China’s Economy Is Burdened by Years of Excess. Here’s How Bad It Really Is.
Jason Douglas and Ming Li, Wall Street Journal, January 1, 2024
Over indebtedness, overbuilding and overcapacity are causing problems at home and abroad.
China’s go-go days are behind it as the world’s second-largest economy struggles with the bursting of the biggest real-estate bubble ever. Now, China’s goal of overtaking the U.S. as the world’s largest economy might take decades longer than Beijing expected—if it happens at all.
China’s economy today is burdened with excess: Millions of empty or unfinished apartment blocks, trillions of dollars in debt straining local governments and ballooning industrial production driving an export surge that is igniting trade tensions worldwide.
China still has strengths: It dominates global manufacturing and has commanding positions in new technologies, such as electric vehicles and renewable energy. Policymakers have proven adept at handling past crises, and are readying bold new stimulus to support the economy.
Nonetheless, the scale of the excesses plaguing China’s economy underscores the perilous position Beijing finds itself in as a new trade war looms.
Historic loss of wealth
China’s property meltdown has since 2021 destroyed around $18 trillion of Chinese household wealth, according to an estimate by Barclays, eclipsing the losses suffered by Americans in the financial crash of 2008-09. That hit, along with the trauma of Beijing’s heavy-handed response to the Covid-19 pandemic, helps explain why Chinese consumers aren’t spending freely.
China’s real estate crunch has vaporized trillions of dollars of household wealth tied up in property, equivalent to around $60,000 per household.
That is a larger loss than the fall in value in U.S. real estate from its pre-financial crisis peak to the beginning of a durable recovery some years later.
Include sinking stock markets and other assets, and the decline in U.S. household wealth during the crisis is still not as big as China’s current bust. In today’s dollars, U.S. households would have lost around $17 trillion.
The wealth destroyed in China’s real estate bust is greater than the value of all listed stocks in China…
…and is roughly the same as the country’s entire economic output in a year.
Destiny deferred
China’s rapid growth meant that for years forecasters expected China to overtake the U.S. as the world’s largest economy. As recently as 2019, some forecasters were expecting China’s GDP to eclipse the U.S.’s around 2030. Today, it is the U.S. powering the global economy and China that is battling stumbling growth. Few now expect China to catch up with the U.S. before midcentury, if it manages to at all.
COMMENT – This wasn’t the order these charts were in, but I think these tell an illuminating story.
Over the past 15 years, Beijing has pursued a massive industrial policy to become the world’s largest manufacturer and the broader goal to become the world’s largest economy.
To do so they went into enormous debt and as a relatively poor country, whose citizens lack the wealth (or safety net) to afford what the country produces, the PRC is now more dependent than ever on exports to fuel its economy. The PRC could pursue this model of economic growth given a liberal open trading system in which goods, talent, technology, and capital could flow freely across borders… in other words a liberal, market-based global economy.
But Beijing’s beggar-thy-neighbor approach to fueling its own growth spurred a backlash which caused countries around the world to erect barriers to the PRC’s massive manufacturing overcapacity.
This in turn is driving down the PRC’s economic growth.
Rather than change course and pursue structural economic changes (namely taking money away from the Party-State and letting Chinese citizens have more spending power… the course of action that Chinese economists concluded they should follow way back in the fall of 2013), Xi Jinping and his cadres of loyal followers are doubling down on the approach that got them into this mess.
Could China change course? Sure, absolutely. Nothing is inevitable.
But this is where the social science theory of ‘path dependency’ comes in and the experiences of the mid-1980s become critical.
To change course would require that the Chinese Communist Party not act like the Chinese Communist Party… which is highly unlikely given the enormous resources the Party has invested into “Party building” since Xi became the paramount leader in 2013. The Party, led by Xi, would have to shed much of its own ideological baggage and accept that the Party should not and cannot control the Chinese economy. This would be a rejection of ‘Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era,” the de facto state ideology (read Steve Tsang and Olivia Cheung’s The Political Thought of Xi Jinping for more detail).
Now some will say… but isn’t Xi hated by a lot of people and if he dropped dead tomorrow would anyone really espouse “Xi Jinping Thought”?
I think that’s right, Xi lacks the personal charisma that Mao and Deng had (as well as the revolutionary bona fides) and if Xi were to drop dead, no one would replace Mao’s portrait in Tiananmen with a smiling Xi.
But I suspect that the broader directionality of the Chinese Communist Party, its anti-liberalism, its hostility towards democracies, its iron grip over the Chinese economy, and its devotion to the “Great Rejuvenation of the Chinese Nation” would remain unchanged.
As Chen Jian argues in a Foreign Affairs piece this week titled, “The Man Who Almost Changed China: Hu Yaobang and the Unfinished Business of Reform and Opening,” the mid-1980s was the period when the Party could have chosen a different path and it was the period that paths diverged. Just a decade after Mao’s death and before the collapse of the Soviet Union, the PRC could have pursued the path of political reform.
But then Hu Yaobang was removed from power as hard-liners (including Deng) feared potential political changes. When Hu died in April 1989, students started mourning his death which turned into a protest, his successor Zhao Ziyang was removed in a coup after he seemed to signal accommodation with the students, and those students were massacred on June 4th. Just a few months after that, the fall of the Berlin Wall, the collapse of communist states in Eastern Europe, and the disintegration of the Soviet Union pushed the Chinese Communist Party down the path that got them to where they are today.
Xi Jinping is a product of that path… not a revolutionary.
To avoid the fate of the Communist Party of the Soviet Union (CPSU), the CCP believes it *needs* a leader like Xi. It should come as no surprise then that in his first address to the Central Committee after becoming General Secretary (exactly 12 years ago today), Xi spent significant time dwelling on the mistakes made by Soviet leaders in abandoning their ideology, on the need to fortify the Party ideologically, and the refusal to countenance political reform.
This is one of the main reasons why the Party gets apoplectic when folks discuss how the Chinese people could select different leaders or organize their political system differently… the Party knows down deep that IF the Chinese people had the choice, they would likely abandon the Party in a heartbeat… hence why the Party must expend enormous resources to prevent that from happening and why they cannot give up control of the Chinese economy.
While Chinese economists can see the problems facing the PRC clear as day… they cannot address them because the problems aren’t economic, they are political. They aren’t cyclical problems, they are structural ones.
So, I think the Party’s approach to their economy (as well as their anti-liberalism and hostility for democracies) is baked in for the foreseeable future.
We would be wise to adapt our policies to account for these conditions.
6. How China’s Antitrust Tactics Undermine U.S. Tech Leadership
Ruby Scanlon, Foreign Policy, December 19, 2024
U.S. firms are caught in China’s regulatory crossfire, with billions at stake.
Less than a week after Washington ratcheted up its chip export controls, Beijing responded with a pointed escalation on Dec. 9: an antitrust probe into Nvidia, the United States’ leading chipmaker and a linchpin in artificial intelligence hardware. The investigation threatens to impose steep fines and disrupt Nvidia’s operations in China. By the end of the day that China announced the probe, Nvidia’s shares had fallen 4 percent. Far from a routine regulatory action, this move underscores China’s growing reliance on its competition authorities in the intensifying U.S.-China tech war. As the incoming Trump administration confronts this escalating rivalry, countering Beijing’s weaponization of antitrust should be a priority.
Antitrust law in the United States is guided by two foundational principles: protecting consumer welfare and promoting competition. China has a much different approach. While American antitrust doctrine is rooted in a strong rule-of-law tradition, China’s approach is driven by geopolitics. Under the pretense of fostering market competition, Beijing has increasingly weaponized antitrust policy to retaliate against U.S. trade actions. This trend has become particularly evident in response to U.S. semiconductor restrictions. Although China’s ability to counter these measures is constrained by its dependence on U.S. chip-making technology, Beijing has turned to its antitrust regulators as a means of striking back.
For the United States, the stakes could not be higher. Semiconductors are the foundation of modern technology, from frontier AI systems to advanced weaponry. If Chinese regulatory actions unfairly hinder American firms, the consequences for U.S. technology leadership could be severe. When deals fall through in China, they often collapse entirely, preventing American firms from conducting business as usual and undermining their growth and global competitiveness.
While the United States has countered other nefarious Chinese trade practices like IP theft and forced technology transfers, it largely overlooks China’s weaponization of antitrust, risking both U.S. tech leadership and the stability of global semiconductor supply chains. China’s weaponized enforcement in the semiconductor industry operates through two primary means: obstructing foreign mergers and acquisitions, and imposing conditions on U.S. firms that compel collaboration with Chinese companies. Left unchecked, both tactics threaten U.S. national and economic security.
Chinese regulators increasingly delay or block high-profile mergers and acquisitions involving U.S. and allied firms, often under the murky pretext of protecting market competition.
For example, Qualcomm, a leading U.S.-based semiconductor company, made a $44 billion bid to acquire the Netherlands’ NXP Semiconductors. This acquisition, which would have significantly expanded Qualcomm’s global portfolio in automotive and Internet-of-Things technologies, faced protracted delays from China’s State Administration for Market Regulation. Specific information on approvals are not typically made public, but deals are approved when they are deemed not to substantially minimize market competition. Despite gaining approval from regulators in eight other jurisdictions, including the United States and European Union, Qualcomm ultimately abandoned the deal due to delayed approvals from Beijing—a move widely interpreted by trade experts as retaliation for the Trump administration’s 2018 tariffs on Chinese goods. As a result, Qualcomm was obligated to pay NXP $2 billion as termination compensation. Beijing’s failure to approve was particularly symbolic given Qualcomm’s 5G leadership and as the United States was actively working to block Huawei’s global 5G expansion.
In a similar case in 2018, Chinese regulators dragged their feet on U.S.-based investment firm Bain Capital’s $18 billion acquisition of Toshiba Memory. At the time, Toshiba was the world’s second-largest producer of NAND flash memory, a type of chip used to enhance data storage. Though the deal eventually closed, the prolonged review and placement of approval status “at risk” raised questions about Beijing’s decision-making. Unlike Qualcomm’s blocked bid for NXP, this approval might have reflected Toshiba’s importance to Japan’s semiconductor industry, making it politically advantageous for China to avoid antagonizing a key trade partner like Japan.
Similar to Qualcomm’s circumstances, these delays occurred during a highly contentious trade environment, driven by escalating tit-for-tat tariffs and heightened scrutiny of cross-border investments. Beijing’s regulatory actions underscore its readiness to wield antitrust processes as leverage to disadvantage U.S. companies, exposing the retaliatory nature of its decision-making when broader geopolitical stakes are involved.
More recently, Intel was forced to abandon its $5.4 billion acquisition of Israeli chipmaker Tower Semiconductor after Chinese authorities failed to approve the deal within the agreed timeframe. This was a particularly bitter pill for Intel, which invests heavily in China and operates multiple facilities in the country. The deal’s collapse not only disrupted Intel’s plans to expand its foundry business but also sent a clear message that no company is immune from Beijing’s regulatory reach.
China’s antitrust authorities also wield behavioral remedies during merger reviews to compel foreign companies to act in ways that benefit Chinese firms. These remedies often go far beyond the norms seen in other jurisdictions, such as the United States or the EU.
Consider the case of II-VI, a U.S.-based optoelectronics manufacturer, which sought to acquire laser supplier Coherent in 2022. II-VI and Coherent had to agree to several stringent conditions to secure approval from Chinese authorities, such as maintaining existing supply contracts with Chinese customers, continuing to source critical components from Chinese suppliers, and capping prices within the Chinese market.
Such conditions may appear benign on the surface, but they serve a calculated purpose. By forcing U.S. firms to guarantee supply chains and market access for Chinese companies, Beijing insulates its domestic industry from potential trade disruptions. In a broader sense, these remedies undermine the autonomy of foreign firms and create dependencies that could be exploited in future trade disputes.
The Biden administration has made significant strides in countering China’s ambitions in the semiconductor industry through the CHIPS and Science Act, tightened export controls, and friendshoring with semiconductor-producing allies. U.S. antitrust policy, however, is not one of the United States’ tools. Unlike China, U.S. antitrust enforcement operates independent of politics, guided by a standard judicial process that prioritizes economic welfare over national preferences. Investigations into mergers or market practices are grounded in established economic models that consider consumer welfare, market concentration data, and competitive dynamics—not geopolitics. Antitrust veteran Gail Slater, President-elect Donald Trump’s nominee to head the Justice Department’s Antitrust Division, is unlikely to diverge from this time-honored approach to enforcement.
This contrast creates a critical vulnerability. While President Joe Biden has acted decisively to shield the United States from other unfair Chinese trade practices, it has not addressed Beijing’s misuse of antitrust regulations. To effectively counter China’s regulatory tactics, the United States must adopt a multipronged strategy that integrates domestic reforms with robust international collaboration.
A larger team with better resources would enable a more proactive response to Beijing’s tactics and provide affected companies with timely guidance and the support needed to navigate increasingly complex regulatory environments. The Justice Department’s Antitrust Division should expand its capacity for detailed monitoring and deeper analysis of Chinese antitrust actions that disproportionately target U.S. and foreign firms. As of 2023, the Antitrust Division’s had just one staff member dedicated to China.
Multilateral platforms like the G-7 and the Organization for Economic Cooperation and Development could also be tools for the United States to establish and promote global norms for antitrust enforcement. By highlighting China’s deviations from established norms, the United States can build international consensus against the use of competition law as a geopolitical weapon. Collaborating with allies who have faced similar weaponization of antitrust policies, such as the EU and Japan, can provide a united front to address shared challenges. These forums should also explore mechanisms for collective responses to regulatory overreach, such as coordinated diplomatic pressure or joint trade policies.
Finally, to reduce vulnerabilities from future Chinese regulatory disruptions, the United States must fast-track efforts to diversify supply chains in critical sectors like semiconductors. Initiatives should focus on continuing to strengthen production at home and in allied markets such as Japan, South Korea, and Taiwan, while investing in emerging hubs like Vietnam, India, and Mexico. Emerging markets are hungry for a piece of the semiconductor manufacturing supply chain. The United States should leverage its strategic investing authorities, like the Defense Department’s Office of Strategic Capital and the U.S. International Development Finance Corporation, to support financing of necessary infrastructure and labor upskilling for semiconductor production.
By obstructing foreign mergers and imposing punitive remedies, Chinese regulators are not merely enforcing competition law—they are bending global technology markets to Beijing’s interests. If the United States fails to address this threat, it risks not just losing ground in the technology race, but ceding control over the rules that govern it. To protect its innovation edge, Washington must see antitrust as a key lever in geostrategic competition—and act accordingly.
COMMENT – The PRC’s tactics seem to align with the Lina Khan approach, which probably explains why the U.S. has done so little to counter these harmful tactics.
In my conversations with Lina and her team, they seem completely oblivious to the wider global economy and geopolitical rivalry. They seemed to be solely focused on one perspective: big American companies are bad and should be cut down to size by every means possible.
7. WHO implores China to share data, access to learn about Covid-19’s origins
Laura Zhou, South China Morning Post, December 31, 2024
‘Without transparency, sharing and cooperation, the world cannot adequately prevent and prepare for future epidemics and pandemics.’
The World Health Organization is urging Beijing to share information that will shed light on the origins of Covid-19, five years after the virus first surfaced and reshaped the global geopolitical landscape.
At least 7.1 million people, including 1.2 million in the US, have died from the virus, according to the WHO, which began publicising data reported by its 194 member states on December 31, 2019 – the day the health committee in Wuhan released its first statement on the cases of “viral pneumonia”.
“We continue to call on China to share data and access so we can understand the origins of Covid-19,” the WHO, which is a United Nation agency, said on Monday.
COMMENT – “Implores”
This should outrage everyone.
8. After the Fall: China’s Economy in 2025
Dan Rosen, Logan Wright, Jeremy Smith, Matt Mingey, and Rogan Quinn, Rhodium Group, December 31, 2024
China’s 2024 claim that GDP growth was on track to meet high targets was impossible to reconcile with increasingly frantic efforts to prop up a flagging economy all year long. Collapsing property construction slowed growth to a crawl in 2022 and 2023, and in 2024 the spillover from real estate sidelined local government investment and consumption as well.
By our estimates, China’s GDP growth in 2024 improved modestly to around 2.4% to 2.8%, well below than official claims of nearly 5%. If it stimulates domestic demand with some urgency and ramps up debt, we think China could get to 3-4.5% growth in 2025, reaching the high end of that range only if everything falls in Beijing’s favor. But that is the very top of—or above—the potential growth ceiling until Beijing fixes long-festering structural problems.
COMMENT – It’s always worth reading analysis from Rhodium Group and this one is particularly helpful.
I covered it in detail in the introduction of this issue, but it bears repeating: unfortunately, international organizations like the IMF continue to take the Chinese Communist Party at its word and report false statistics, which means Beijing can continue its ruse.
9. Taiwan president wants exchanges with China, sees lack of goodwill
Reuters, January 1, 2025
Taiwan President Lai Ching-te said on Wednesday that he welcomed equal, dignified, healthy and orderly exchanges with China, but wondered whether there was goodwill from Beijing given what he said was their blocking of simple things like tourism.
Lai, who took office in May, has regularly offered talks with China but been rebuffed. China views democratically governed Taiwan as its own territory and detests Lai as a "separatist". He says only Taiwan's people can decide their future.
COMMENT – The Chinese Communist Party continues to wage a global disinformation campaign that Taiwan’s leaders are the one who refuse to talk to the PRC. They perpetuate this falsehood by harping that Taiwan still doesn’t let massive tour groups (hand-picked by the Chinese Communist Party) to conduct tours of Taiwan.
The real issue is that since January 2016 (with the election of President Lai’s predecessor) the PRC has cut off all communication with the island (aside from hosting opposition party leaders in the PRC). The PRC has a responsibility to open a dialogue with the elected leaders of Taiwan and to attempt to resolve their differences through good faith negotiation.
Instead, the PRC has used economic coercion, political interference, cyber-attacks, and military threats to intimidate Taiwan.
10. The Photos That Exposed Biden’s Lies
Eli Lake, The Free Press, December 31, 2024
Like so much else about the Biden presidency, the claim that he never met his son’s business partners was built on a series of falsehoods.
Sometimes a picture is worth a thousand lies.
Such is the case with the belated release of official photos of a 2013 visit to China by then-Vice President Joe Biden, accompanied by—whaddya know!—his son Hunter. In several photos, Hunter is shown meeting with China’s leader, Xi Jinping, and in another he’s seen shaking hands with China’s then-vice president, Li Yuanchao. In other pictures, Hunter’s dad shakes hands with Jonathan Li, the CEO of a Chinese firm seeking to acquire energy companies across the world. Shortly after the trip, the Chinese government approved the license to create Li’s company, BHR Partners, in which Hunter would eventually acquire a 10 percent stake.
BHR Partners is primarily funded by Chinese nationals and entities, including the country’s primary investment bank. Between 2013 and 2019, it invested $2.5 billion in energy and other ventures across the world, according to an investigation by The Wall Street Journal. Hunter held on to his 10 percent stake in BHR through at least 2017. He said he eventually relinquished his stake to the entertainment lawyer Kevin Morris, perhaps as a means to repay the millions of dollars in loans Morris had made to Hunter over the years.
The details of this buckraking scheme were unearthed thanks to the Republican-led House Committee on Oversight and Accountability and the dogged reporting of the New York Post, which broke the first stories on Hunter Biden’s abandoned laptop in the run-up to the 2020 election.
It was in 2019, during former president Donald Trump’s first impeachment inquiry, that Hunter’s business in China first became a national story. At the time, Congressional Democrats were probing Trump’s efforts to get Ukraine to investigate Hunter’s lobbying on behalf of a Ukrainian energy company. Trump then floated the notion that Hunter was not only corrupted by Ukrainian interests, but Chinese interests as well. In response, Joe Biden flatly denied ever meeting with his son’s many business associates or even speaking with Hunter about these matters. He’s repeatedly made that statement ever since.
In March 2024, when confronted on the White House lawn about the House impeachment committee’s findings into his interactions with Biden family business associates, Biden said, “I did not interact with their partners.”
Really?
The House Oversight Committee has documented 16 separate times that Biden lied about his knowledge or involvement with his family’s influence peddling. These deceptions began when Biden was running for the Democratic nomination in his party’s primary. “I’ve never spoken to my son about his overseas business dealings,” he said two months before the election—a line he repeated throughout the presidential campaign. Once Biden was president, his White House continued to promote this fiction.
If this were just a case of a president and his aides trying to wriggle out of a scandal, it would be one thing. But the peculiar dynamics of the Trump era made the Democrats, the FBI, and the legacy press coconspirators in the cover-up.
This all starts, of course, with Hunter’s abandoned laptop at a Wilmington computer repair shop. That laptop was like a skeleton key, unlocking a series of Biden family secrets, from Hunter’s addiction to crack cocaine to the emails and texts between Hunter and his father on the very business arrangements the president was insisting he never spoke about with his son.
When the New York Post first reported on the laptop three weeks before the 2020 election, social media companies, the mainstream media, and the Biden campaign all insisted the story was fake. Fifty-one former senior U.S. intelligence officials signed a letter claiming the Post story had “all the classic earmarks of a Russian information operation.” When Trump debated Biden before the election, Biden referred to that letter and claimed the laptop story was “garbage.”
It wasn’t.
In fact, the FBI had verified the contents of the laptop a year earlier. Yet in an act of shocking deception, the bureau told social media companies that Russians were planning to interfere with the 2020 election by planting false stories or hacked or forged materials. When asked by the social media companies whether the FBI knew if the laptop was authentic, the bureau offered no comment, according to 2023 testimony from a senior member of the FBI’s foreign influence task force.
The successful laptop cover-up fed Biden’s hubris when he was president. Sure, conservative outlets like the New York Post and House Republicans would dig into the matter. But these were not considered “legitimate” sources by bastions of the legacy press like The New York Times or The Washington Post.
This summer, after the Justice Department presented Hunter’s laptop as evidence in a felony trial against him, The Washington Post’s Philip Bump still made the case that the media did nothing wrong in 2020. “It is politically useful for the right and for Trump to suggest that the Hunter Biden trial revealed something novel and incriminating about the traditional media,” Bump wrote. “It didn’t, but readers of this article probably don’t need to be convinced of that.”
With coverage like that, Biden never faced much pressure from the press or members of his own party to explain his past denials even as they were being discredited by the drip, drip, drip of more damning evidence.
Nor did Biden have to worry about these embarrassing photos from China being released by the National Archives. Like the FBI in 2020, the organization was also willing to play politics to help him. The Trump-aligned America First Legal Foundation had initially sued the National Archives and Records Administration in 2022 for the photos. After objections from former president Barack Obama and Biden himself, the archives delayed the release until after the 2024 election, when the scandal was likely to be overtaken by events. As, indeed, it has been.
In some ways this final sordid chapter of the drama captures the broader scandal in miniature. The evidence that Biden’s son monetized the family’s name was always there. But too many of Washington’s elites believed that acknowledging this scandalous behavior would lead to the election of Trump, first in 2020 and then later in 2024. So they ignored Biden’s obvious lies. And in so doing they made a better argument for the endemic corruption of the Washington swamp than Trump himself ever could.
COMMENT – I had my suspicions that then-Vice President Biden was involved in helping his son Hunter win foreign business deals, but had taken the President at his word when he repeatedly denied ever meeting Hunter’s business partners or discussing business matters with him.
To learn now that the National Archives and Records Administration (NARA) fought since 2022 against the release of photographs that showed this was a lie is very disappointing.
I’m reminded of Executive Order 12356, National Security Information (signed April 2, 1982)… which can be found (conveniently) on NARA’s own website:
Section 1.6 of the Executive Order defines limitations on classification:
In no case shall information be classified in order to conceal violations of law, inefficiency, or administrative error; TO PREVENT EMBARRASSMENT TO A PERSON, organization, or agency; (emphasis mine)
Perhaps you think that’s just an old Reagan Administration EO and didn’t really apply to the Obama Administration when these photos were taken.
Gee, I wonder what Executive Order 13526, Classified National Security Information (signed by President Obama on December 29, 2009) says about this issue:
Sec. 1.7. Classification Prohibitions and Limitations.
(a) In no case shall information be classified, continue to be maintained as classified, or fail to be declassified in order to:
(1) conceal violations of law, inefficiency, or administrative error;
(2) prevent embarrassment to a person, organization, or agency;
Conveniently, you can also find EO 13526 on the NARA website.
All of this means that as soon as the request for these photos came in back in 2022 to the National Archives, they should have been released immediately.
By withholding the release of the photos until AFTER the November 2024 presidential election suggests that the National Archives was concealing them “to prevent embarrassment to a person.”
Some of you out there have to take an annual course on derivative classification and the legal requirements for classifying/declassifying information within the U.S. Government… concealing information behind security classifications to prevent embarrassment is expressly forbidden… if you want to take the 1.5 hour online course, you can do so here at the DoD’s Center for the Development of Security Excellence.
Or you could go to NARA’s own website to find its regulations and guidelines on security classification… as well as an incredibly exciting video course by NARA’s Information Security Oversight Office (ISOO) on derivative classification which National Archives employees have to take every year.
At minute 8:43, the instructor covers slide #11:
It looks to me that the entire staff of the National Archives needs to do some remedial training… just saying.
If you happen to keep watching the NARA course you get to minute 39:55 where the instructor discusses “sanctions” (both administrative and criminal) with slide #56:
Note bullet b(2) on the slide…
“Officers and employees of the United States Government”… “shall be subject to appropriate sanctions if they knowingly, willfully, or negligently”… “classify or continue the classification of information in violation of this order or any implementing directive.”
Those sanctions include: “reprimand, suspension without pay, removal, termination of classification authority, loss or denial of access to classified information, or other sanctions in accordance with applicable law or agency regulation.”
Seems pretty cut and dry to me.
Some will complain I’m being “partisan” in my amplification of this article. Perhaps, but I think this whole sordid affair does much to undermine faith in a number of institutions and I think it helps explain why we are in such a difficult political situation.
I suspect that Vice President Biden knew at the time that his actions weren’t appropriate (if he had asked his ethics lawyer, I suspect that lawyer would have advised against meeting Hunter’s business partners), but it was the coverup that made everything much worse.
Integrity is an easy thing to lose.
Authoritarianism
11. China military in disarray over Xi's monopoly on power
Katsuji Nakazawa, Nikkei Asia, December 26, 2024
12. Xi Jinping has much to worry about in 2025
The Economist, December 31, 2024
A struggling economy, rising social tensions and Donald Trump will test China’s leader.
Soon after he took power in 2012, Xi Jinping urged caution about China’s prospects. “The further our cause advances,” he told fellow leaders, “the more new situations and problems will arise, the more risks and challenges we will face and the more unforeseen events we will encounter.”
As China’s economy flounders and social tensions increase—and with Donald Trump about to enter the White House—the coming year will be full of the kind of difficulties Mr Xi feared.
13. U.S.’s Channels with China Have Gone Dark with Trump’s Return
Lingling Wei, Wall Street Journal, December 28, 2024
During Trump’s first term, his team had little patience with formal communication frameworks preferred by Beijing.
For the past year and a half, senior Treasury officials have met with their Chinese counterparts almost once every other month. Whether an incoming Trump team will keep such channels of dialogue going is now up in the air.
President Biden and President-elect Donald Trump both advocate a tough stance on China, but have substantially different strategies on how to interact with Beijing.
Before Trump took office in early 2017, the two governments had over 90 official channels of communication. He and his team had little patience for such formalized communication, seeing them as a way for China’s leaders to suck the U.S. into endless discussions that yielded little meaningful change in policies seen as harmful to American workers and businesses. By the end of Trump’s first term, such channels had dwindled to virtually zero.
The Biden administration, in an effort to reset relations strained by the countries’ geopolitical rivalry and exacerbated by the Covid-19 pandemic, has re-established dialogue with Xi Jinping’s government in recent years, with some two dozen high-level channels covering topics from economic and financial matters to security and climate change.
Jay Shambaugh, Treasury’s undersecretary for international affairs who has held seven rounds of economic talks with Beijing, said such dialogues have enabled Washington to press Beijing on issues of deep concern to the U.S., such as China’s industrial overcapacity, even as the administration this year has raised tariffs on Chinese steel, electric vehicles and other products that have flooded world markets.
COMMENT – The de facto resurrection of the ‘Strategic Economic Dialogue’ by Yellen and Shambaugh has done little to nothing to advance U.S. interests… while it has thrown the PRC an economic lifeline when the PRC needed it most (had the U.S. Treasury held Beijing at arm’s length over the last two years and aggressively gone after the PRC’s support of Moscow, imagine how poorly the Chinese economy could be doing).
How has Beijing repaid this good faith effort by U.S. Treasury officials: they mounted a major hacking attack against the Treasury’s information systems, likely to figure out even better how they can circumvent Treasury’s actions against them.
Admittedly, Yellen and Shambaugh would never call it the ‘Strategic Economic Dialogue,’ but make no mistake, that is what their series of economic and financial working groups are. Its zombie engagement and an attempted return to the feckless days of holding meetings with the Chinese for the sake of holding a meeting… in their minds engagement is a self-justifying activity: engagement is good because engagement is good.
14. The Roots of “Revenge Against Society” Attacks in China
Peidong Sun, Foreign Affairs, December 25, 2024
15. U.S. Companies Vouched for China During Trump’s First Term. Not Anymore.
Stu Woo, Wall Street Journal, January 2, 2025
Executives are more pessimistic about opportunities and see risks in advocating Beijing’s cause.
During Donald Trump’s first term, U.S. companies argued that a trade war with China was bad for Americans.
Businesses including Apple, Nike and small retailers said raising tariffs on imports from China would raise prices for consumers. Farmers and other businesses that exported to China warned about retaliatory tariffs from Beijing.
Now, as Trump prepares for his second administration, American companies have largely gone silent about the importance of the U.S.-China relationship. That is because American businesses no longer see China as the land of opportunity.
The promise of China’s market has faded as its once-booming economy hits trouble. And Beijing and Washington have implemented policies that make it harder for American businesses to succeed in the land of 1.4 billion people.
“U.S. companies are more wary about doing business in China,” said Anja Manuel, the executive director of the Aspen Security Forum and a consultant for American companies doing business abroad. “You see that across all industries.”
In 2023, China trailed only Mexico and Canada as a buyer of U.S. products. American exports to China totaled $147.8 billion that year, according to the U.S. Census Bureau.
Still, that was down about 4% from the previous year. The U.S. trade deficit in goods with China—the figure that looms large in Trump’s mind—was $245 billion in the first 10 months of 2024, according to the Census Bureau.
While many U.S. companies still have big stakes in China, others have scaled back. The American Chamber of Commerce in China, which represents more than 800 mainly U.S. companies in the country, said its members have gone to other countries for new investments.
The big problem is China’s economy, the world’s second-biggest after the U.S. For decades, it grew at nearly 10% annually. It was on track to gain 5% in 2024, but economists say that target will be tougher to hit in 2025.
U.S. companies used to put up with the difficulties of doing business in China, including potential loss of intellectual property and pressure from state-owned companies, because of the growth potential.
Starbucks shows how that has changed. In 2016, then-chief executive Howard Schultz said China could become the coffee company’s biggest market. Since then, Starbucks has been undercut by local chains selling cups of joe for $2 or less, and has fallen behind domestic leader Luckin Coffee.
“The competitive environment is extreme,” said new Starbucks CEO Brian Niccol in October, adding that the company was looking at partnerships in China.
U.S. businesses in China face increased competition from both state-owned enterprises and private businesses benefiting from subsidies or policies, said Michael Hart, president of the American Chamber of Commerce in China.
In a push for self-sufficiency, the Chinese government is requiring state-owned companies to replace the American technology that had dominated its computer infrastructure, such as Microsoft and Oracle products, with domestic alternatives.
In August, IBM said it was shutting down its China research-and-development department, affecting more than 1,000 people, because of intensifying competition in China.
In 2007, the CEO of General Motors said transferring technology and expertise to China was worth it for access to the Chinese market. For much of the past decade, GM sold more vehicles in the Asian nation than in the U.S.
But in December, GM said it expected to take more than $5 billion in noncash charges in the fourth quarter because of weakness in its China business. The company said its market share in China has fallen from 13.7% in 2018 to 8.4% in 2023. Chinese brands now dominate. Besides innovating in electric vehicles, Chinese automakers such as BYD have benefited both from direct government subsidies as well as subsidies to consumers buying Chinese cars.
16. How China turns members of its diaspora into spies
The Economist, December 26, 2024
17. China’s hacking frenzy has reached the US Treasury
Ian Williams, The Spectator, December 31, 2024
When Chancellor of the Exchequer Rachel Reeves visits Beijing in January on a mission to improve ‘economic and financial cooperation’ she could well find her hosts surprisingly well informed about the global financial system and Donald Trump’s plans for it – thanks to China’s hyperactive and increasingly aggressive army of hackers.
The US Treasury on Monday revealed that it had become the victim of what it called a ‘major cybersecurity incident’, which it blamed on state-sponsored Chinese hackers who accessed workstations and viewed documents. The Treasury said the documents accessed were unclassified, that the infected workstations had been isolated and there was no evidence that the hacker was still inside the system. BeyondTrust, a software provider, spotted the hackers and said they gained access by stealing a security key. They did not say how many workstations were breached or precisely who they belonged to.
18. China steps up campaign for single people to date, marry and give birth
Eleanor Olcott, Nian Liu, and Wang Xueqiao, Financial Times, December 25, 2024
19. Xi says no one can stop China's 'reunification' with Taiwan
Reuters, December 31, 2024
No one can stop China's "reunification" with Taiwan, Chinese President Xi Jinping said in his New Year's speech on Tuesday, laying down a clear warning to what Beijing regards as pro-independence forces within and outside of the island of 23 million people.
In the past year, Beijing has stepped up military pressure near Taiwan, sending warships and planes almost daily into the waters and air space around the island in what Taiwanese officials view as a creeping invasion.
COMMENT – Let’s just take Xi Jinping seriously for a moment… set aside our own doubts about the rationality of using military force to annex Taiwan or whether it “makes sense” to mount an invasion.
Let’s pretend Xi actually intends to do what he says the PRC must do.
If that is the case, then foreign businesses and investors should trying to rapidly move their supply chain dependencies out of the PRC and reduce their investments in the PRC. In essence, investors and businesses should be trying to disentangle/decouple/derisk from China as quickly as possible.
Political leaders who don’t want to see a major war happen in Asia should be focused entirely on another ‘D’ word: deterrence. Countries should be making it crystal clear to Xi and his cadres that initiating a war of aggression would be a disaster and would be met with military escalation and a wider military conflict.
If these things don’t happen, I fear that Xi Jinping will conclude that the cost of initiating a war of aggression to annex Taiwan is bearable.
20. Beijing Pushes to Use China-Made Chips in Its EVs
Liza Lin and Raffaele Huang, Wall Street Journal, December 31, 2024
U.S. objects to rival’s push for self-sufficiency in $80 billion business and opens trade probe.
China isn’t satisfied with becoming the world’s dominant maker of electric vehicles. It wants the chips inside to be Chinese-made too.
Not long ago, almost all the chips in Chinese cars relied on manufacturing by the likes of Texas Instruments and Germany’s Infineon. Today, the use of homemade chips has risen to around 15%, say people involved in the industry, and it is poised to rise further.
Last week, the U.S. opened an investigation into China’s production of chips made with mature technology that are often used in areas such as autos and defense. U.S. Trade Representative Katherine Tai said there was evidence China used “extensive anticompetitive and non-market means” to achieve self-sufficiency, and the Commerce Department has said subsidized low-cost Chinese chip makers might flood the global market and drive down prices.
Beijing is making little secret of its industrial policy, reasoning that controlling the brains inside the world’s most important consumer product is too important to be left to market forces. It is setting targets for homegrown chips and supporting domestic chip makers through state semiconductor funds including a $47 billion one started in May.
Foreign companies in the car-chip business, which has annual revenue of more than $80 billion, face a choice of producing more in China or losing sales. Many are choosing the former, upending the lean and efficient global supply chain for chips.
“If the world wants to decouple, you can do China for China and non-China for non-China,” said Texas Instruments’ chief executive, Haviv Ilan, at a December investor briefing. “If the world stays open, and I hope it will, you can continue to have this diverse supply chain.”
21. China defends COVID-19 data-sharing as WHO seeks more access
Reuters, December 31, 2024
22. Former state media journalist flees China amid police harassment
Wang Yun, Radio Free Asia, December 26, 2024
23. Businesses Preparing for Another Year of Geopolitical Tumult
Richard Vanderford, Wall Street Journal, January 2, 2025
Geopolitical concerns still rank high among the anxieties plaguing executives as a new year begins.
Businesses are bracing for another year of geopolitical uncertainty, with large question marks looming over President-elect Donald Trump’s foreign policy strategy and broader global tumult, despite some executives’ optimism about the year ahead.
Geopolitical concerns remain top of mind amid general global uncertainty and, in particular, a continued reordering of the U.S.-China relationship.
Multiple governments around the world saw turmoil in a single week, Goldman Sachs Chief Financial Officer Denis Coleman told attendees at a conference last month, citing France, Syria and South Korea. “To say that there is geopolitical instability in the world would be a gross understatement,” he said.
The costs of doing business globally have come to a 10-year peak as deglobalization and so-called friend-shoring gain momentum, according to an analysis released in November by Verisk Maplecroft, a consulting firm.
“In recent years, businesses have been blindsided by a cascade of disruptions—the pandemic, renewed conflicts in Europe and the Middle East, surging populism, intense competition for green minerals and escalating protectionism—which have forced a fundamental reset of longstanding strategies,” said Reema Bhattacharya, Verisk Maplecroft’s head of Asia research.
“The old playbook, focused on market size, costs and efficiency, has been upended. Now, geopolitics is the driving force,” Bhattacharya said.
The evolving U.S.-China relationship has seen a number of businesses caught in the crossfire, including TikTok, now facing an imminent ban stateside, and e-commerce giants such as Shein and Temu, which have been frequent targets for U.S. officials.
China for its part has ratcheted up pressure on U.S. diligence and audit firms, targeted chip giant Nvidia with an antimonopoly investigation and launched a probe into Calvin Klein owner PVH.
Big worries
Household-name companies aren’t the only ones feeling the geopolitical pressure. Nearly two-thirds of about 900 executives surveyed by consulting firm McKinsey & Co. for a report released last month flagged geopolitical instability as a top risk to global growth. Forty-nine percent said changes in trade policy were a major risk.
The U.S.-China relationship dominates corporate concerns, in part because toughness on China is a rare area of bipartisan consensus in Washington.
24. China Blocks Investigation of Bulker Suspected of Baltic Subsea Attack
The Maritime Executive, December 22, 2024
Chinese government officials have refused to let a Swedish prosecutor board a Chinese bulker that was accused of sabotaging subsea cables in the Baltic, according to the Financial Times. The vessel and crew have now departed the region, and they are under way for Egypt - leaving just one last opportunity to apprehend them in NATO member states' waters.
On Nov. 17-18, two subsea cables suddenly broke off the coast of Sweden. AIS data shows that the bulker Yi Peng 3 was maneuvering oddly at the sites where the cables were severed. In addition, one of its anchors is badly twisted, and the damaged cable sites showed clear signs of anchor-dragging on the bottom.
Yi Peng 3 was intercepted by Danish forces as she entered the Great Belt, but she was not halted while transiting Danish waters. Instead, she was allowed to exit the Great Belt and anchored just outside of Danish territorial seas, in the Kattegat. There she remained for a month, guarded by Danish and German vessels - safe from a law-enforcement boarding because she was in international waters.
Sweden - which is leading the investigation - petitioned the Yi Peng 3's flag state for permission to board and inspect the vessel. The flag state, China, said that it would cooperate and then negotiated over the terms of investigators' access for weeks. In the end, Chinese authorities sent their own team to conduct an investigation and allowed European representatives to participate as observers only. Sweden's public prosecutor on the case, Henrik Söderman, was disallowed by Chinese officials and could not board to perform his duties, according to the Financial Times.
"It is remarkable that the ship leaves without the prosecutor being given the opportunity to inspect the vessel and question the crew within the framework of a Swedish criminal investigation," Swedish foreign minister Maria Malmer Stenergard told the FT.
The Yi Peng 3 affair is the second suspected subsea infrastructure attack involving a Chinese vessel in the Baltic in two years, and Lithuanian foreign affairs minister Kestutis Budrys suggested that it is time to take action.
"Building security starts with mitigating weaknesses," said Budrys. "China's unwillingness to cooperate on the undersea incident investigations in the Baltic Sea cannot be allowed to set a precedent in Europe - or anywhere else. If the 'what's mine is mine' mentality becomes a new global norm, it will have to be countered by new navigation rules in EU waters to address vulnerabilities."
As of Sunday, Yi Peng 3 was under way in the North Sea and headed south for the English Channel, putting her on a course to pass through the Strait of Dover - the last point on her route that will put her in jurisdictional reach of Sweden's NATO allies. For the remainder of her declared voyage to Egypt, she will be able to use international waters to transit onwards.
COMMENT – Last week, I highlighted the reporting by the Wall Street Journal that presented the PRC as cooperative with the investigation and which perpetuated the narrative that it was all the Russians’ fault and that the PRC Government was blameless.
This helps dispel those myths.
25. China’s United Front takes Taiwanese youth on Xinjiang trips
Ha Syut and Ray Chung, Radio Free Asia, December 27, 2024
26. AUDIO – Navigating the India-China bilateral
Lt Gen S.L. Narasimham, Gateway House, January 2, 2025
On December 18, India’s National Security Advisor Ajit Doval and Chinese Foreign Minister Wang Yi met in Beijing. This came two months after Prime Minister Modi’s bilateral meet with President Xi on the sidelines of the BRICS Summit in Russia. Lt Gen S L Narasimhan, Adjunct Distinguished Fellow, National Security and China Studies, discusses recent developments in India-China ties and how New Delhi can manage its complex relationship with Beijing.
27. China Hits Dozens of U.S. Companies with Trade Controls
Alexandra Stevenson, New York Times, January 2, 2025
The move was the latest escalation in the back and forth between Beijing and Washington over products considered vital to national security.
China on Thursday singled out dozens of companies from the United States, including Raytheon, Boeing and Lockheed Martin, in a series of punitive trade measures that could ratchet up tensions between the two superpowers.
With weeks to go before President-elect Donald J. Trump takes the office with a promise to impose new tariffs and sanctions on China, Beijing is once again showing it is ready to strike back.
China’s Ministry of Commerce said it added 28 companies to an export control list to “safeguard national security and interests.” It also banned the export of so-called dual-use items, which have both civilian and military applications, to those companies. And it placed 10 companies on what it calls an “unreliable entities list” related to the sale of arms to Taiwan, preventing them from doing any business in China and prohibiting their executives from entering or living in the country.
Chinese authorities have taken similar — albeit narrower — actions in the past on these companies, most of which have a limited presence within China, said Andrew Gilholm, a China expert at the consulting firm Control Risks.
28. China’s firms are taking flight, worrying its rulers
The Economist, December 29, 2024
Environmental Harms
29. China pushes ahead with huge — and controversial — dam in Tibet
Christian Shepherd, Washington Post, December 26, 2024
30. Health burdens related to emission sources and cross-provincial air pollution in China
Weiyang Hu, Bo Zheng, Daven K. Henze et al, Nature, December 19, 2024
31. The Dark Side of Electric Vehicles: A Hidden Pollution Problem
SciTechDaily, December 29, 2024
32. TWEET OF THE WEEK – Every once in a while you find a gem of a comment hidden in a NYT article about climate (and the comment should really be the headline).
Tweets from Zach Weinbe, X(Twitter), January 4, 2025
COMMENT – Never have truer words been tweeted.
What is driving the increased impacts of CO2 in the atmosphere is NOT the declining emissions from Europe and the United States (and especially NOT the emissions of the U.S. and Europe in the 19th and 20th centuries… #TheOceanIsaCarbonSink)… it is the vastly increasing emissions by the PRC, full stop.
Foreign Interference and Coercion
33. Why mainland China’s Taiwan integration experiment in Fujian is starting to fizzle
Amber Wang, South China Morning Post, January 2, 2025
Beijing invests billions into luring Taiwanese to Fujian’s Pingtan county, but it has yet to translate into political loyalty.
Fujian province has become a test bed for mainland China’s push for economic, social and political integration with Taiwan. In this story – the first in a four-part on-the-ground series – Amber Wang details the 15-year integration drive in Fujian’s Pingtan county, which appears to be losing steam as the mainland economy falters, military tensions grow and Beijing struggles to turn cross-strait business ties into political loyalty.
For Allen Xue, a Taiwanese woman, the allure of moving just across the Taiwan Strait to the coastal county of Pingtan on the mainland was hard to resist.
Earlier this year, she settled into a compound specifically tailored for Taiwanese and bought it at a price far below market value.
COMMENT – The Chinese Communist Party has such a hard time with this because they simply do not understand the motivations of the Taiwanese people. The Party views people as subjects to be manipulated and ruled… not as individual citizens that should be taken seriously.
34. Who is the politician at the center of the latest Chinese influence scandal?
Rebecca Ellis and Hannah Fry, Los Angeles Times, December 21, 2024
An Arcadia City Council member is the fiancée of a man charged by federal prosecutors this week with acting as an illegal agent for the Chinese government by attempting to influence local politicians, according to court records and interviews.
The personal relationship between Eileen Wang, elected two years ago to the council of the San Gabriel Valley suburb, and Yaoning “Mike” Sun deepens questions around what Wang knew about an alleged plot to push pro-China policies, particularly regarding Taiwan.
In the criminal complaint against Sun, prosecutors referred to a local politician, “Individual 1,” alleging that Sun and his Chinese government contacts were cultivating the politician in hopes that she would rise in politics and help them strengthen China’s influence in California.
Two sources familiar with the investigation identified Wang as Individual 1. The complaint described Sun as Individual 1’s campaign manager and business partner and said the address Sun had registered with the DMV was a home owned by Individual 1.
Prosecutors have not charged Wang with a crime. A source familiar with the case, who spoke to The Times on the condition of anonymity, said there was no evidence at this time that Wang knew of the alleged Chinese government activities. Wang did not respond to repeated requests for comment.
The complaint described extensive interactions between Sun and John Chen, also known as Chen Jun, who was sentenced to federal prison last month for acting as an illegal Chinese agent and plotting against Falun Gong, a spiritual practice banned in China. The two discussed sending detailed information about Individual 1, including her connections to other U.S. politicians, to Chinese government officials, according to messages federal investigators found on Chen’s phone and described in the complaint.
According to the complaint, Sun’s LinkedIn listed him as head of U.S. News Center, a media site he runs with Wang.
Court records also reveal close ties between Wang and Sun. The two are registered on several business filings together, including for the American Southwest Chamber of Commerce, an association intended to “promote communication of American southwest people of China,” according to incorporation filings.
Michelle Wu, who worked for the chamber of commerce, sued both Wang and Sun for defamation last year. Wu alleged in the lawsuit that the two had unjustly accused her of stealing money from the group, which she denied.
As part of that lawsuit, Wang stated in a court document that she was engaged to Sun. Wu said in an interview that the couple had been together since about 2018.
The charges against Sun sent shock waves through the San Gabriel Valley’s large Chinese community, where both Sun and Wang have established high profiles in recent years — Wang through elected office and Sun for organizing community events.
“He has a big name in the Chinese community,” said Daniel Deng, an attorney in Rosemead who represents many Chinese clients. “He’s been very active in Southern California for a long time.”
Residents said Sun threw and promoted numerous events in the community, including a Lunar New Year festival in the San Gabriel Valley. He was considered quiet and not especially active politically. One resident said the allegations that he was working with Chinese government officials went off “like a bomb in the community.”
Deng said he saw Sun and Wang in the lobby of the Sheraton in San Gabriel on Wednesday evening, leaving the Miss Asia International 2024 Pageant with another Arcadia City Council member. He said he got to know them when Wang ran for office.
“My friends this morning, they said, ‘Mike got arrested!’” Deng said Thursday. “I said, ‘This is not possible. I saw them last night.’”
Speaking with The Times last month for a story about Asian American voters, Wang said she moved to Southern California from China 30 years ago. Her mother was a Chinese medicine and acupuncture doctor and her father was a physician in Sichuan province before working at USC, she said.
The complaint alleged that Chen directed Sun to prepare an update to the Chinese government on Individual 1’s election. Sun responded with a short biography of the politician, noting that she immigrated to the U.S. from Chengdu — a city in Sichuan — in 1995.
Wang, a mother of two, said she has been rooted in Arcadia for the last 18 years. Two people who know her said that before she entered politics, she was mainly known for running an after-school program in Arcadia called Little Stanford Academy.
Wang said she did five rounds of door-knocking in her district during her 2022 campaign and decided to switch from the Republican to the Democratic Party, swayed by housing policies espoused by the left that voters seemed to need, such as rental assistance.
Wang beat Sheng Chang, a longtime council member, for a seat on the council in the majority-Asian city. She said she became the Arcadia City Council’s first female member from China, as well as its first Asian American Democrat. After the Nov. 5 election, the council became all Asian American — possibly a first in California, according to council members.
“I talked with my district — I realized people needed me,” Wang told The Times last month. “I needed to do something for them.”
U.S. Atty. Martin Estrada has painted the case as part of a pattern of the Chinese government seeking to influence local officials who are not yet on the national stage — but could be soon.
According to the complaint, Chen asked Sun to prepare a report on Wang’s election for Chinese government officials and referred to the council member as a “new political star.”
This year, U.S. Rep. Judy Chu (D-Monterey Park) honored Wang as one of the “2024 Congressional Women of the Year.”
According to a press release, the award “is given to women nominated by people in their own cities and communities.” It’s unclear who nominated Wang.
In a statement issued Saturday, Chu cited Wang’s record of public service as the “first Asian American woman elected to the Arcadia City Council in 119 years. She was a leader in the community, helping to establish a new Health committee, supporting new affordable housing projects and implementing crossroads pallets at street intersections.”
“When we honored her, the entire city council and the leaders of the Arcadia community came out to support her,” the statement said. “I do not personally know Mike Sun, nor does my husband. We have seen him accompany her to events, but we have never engaged in a conversation with him.”
“Maybe they perceive Eileen to be their future star,” said Joaquin Lim, who served for 17 years on the Walnut City Council, noting that the Chinese government has little to gain from a politician who never moves up from the local level.
“That’s one of the angles — an anticipation of this person running for higher office,” he said.
Lim said he wasn’t surprised to hear about the indictment, noting a flood of headlines recently about the People’s Republic of China trying to curry favor with local politicians across the world. In September, prosecutors charged a former aide to the New York governor with using her position to benefit the Chinese government and block access for officials from Taiwan, which China considers part of its own territory.
“This is not just happening in America. It’s happening in England. It’s happening in Australia, it’s happening in Canada,” Lim said. “When I read about Eileen, I said, ‘OK, well, I’m just surprised, in this case it’s the San Gabriel Valley.’”
San Gabriel Mayor John Wu was elected around the same time as Eileen Wang. He said he has seen her at events in the region — including for groups that have strong ties to Taiwan — and has never had any suspicions about her. He finds it hard to believe she would be caught up in any of this.
“In my view, there’s no need for any foreign government to interfere with local politicians or elections,” Wu said. “Local governments are focused on community and decisions like determining which road we should pave and how we allocate a budget.”
But Wu is concerned that the situation could unfairly cast suspicion on local Chinese American politicians.
“That could jeopardize the whole effort that Chinese American elected officials have been doing for years to serve the community,” he said. “It could cause a whole generation’s efforts to disappear.”
COMMENT – Some will reject these accusations claiming that law enforcement is racist or falling victim to anti-Asian hate, but the reality is that the Chinese-American community deserves political leaders who are better than this.
Political leaders are fully aware that the Chinese Communist Party seeks to manipulate and subvert political activity in the United States to further its own interests. And that the CCP appeals to members of the Chinese diaspora to achieve its goals.
It should fall on political parties in the United States to do better self-policing.
35. California to Beijing: The Hidden Path Linking 2 PLA Vets, a U.S. Star Candidate, and China’s President Xi
Sam Cooper, The Bureau, December 20, 2024
The Bureau’s analysis reveals a consistent playbook deployed from New York and Boston to California and Canadian networks.
36. How an FBI Sting Stopped a Russian Smuggler but Not His Hong Kong Supply Route
Austin Ramzy, Wall Street Journal, January 2, 2025
It took the promise of access to contraband, an FBI front company and help from Fiji, but they got their man: U.S. investigators, in a tricky sting operation, picked off a supplier of parts Moscow needs for its war in Ukraine.
The smuggler, Maxim Marchenko, was sentenced in July by a New York court to three years in prison for his role in procuring military-grade electronics for Russia.
The Americans missed their ultimate goal, however: More than seven months after Marchenko’s arrest, his network was still in business, continuing to feed Russian companies with ties to its military, according to research and a review of trade and procurement data by C4ADS, a Washington-based global security nonprofit.
The prosecution of Marchenko cast light on the extent of U.S. efforts to enforce sanctions that were imposed after Russia invaded Ukraine nearly three years ago. It also showed how difficult it is to stanch the flow of equipment to Russia through China, which the U.S. accuses of helping Moscow sustain the military production it needs to continue the war.
The Biden administration has imposed Russia-related sanctions on more than 300 people and entities in China, including at least 75 in Hong Kong, freezing assets and restricting their ability to do business. But the trade continues to flow, aided by entities such as Marchenko’s companies in Hong Kong, a shipping hub where the leadership readily denounces Western sanctions.
Between August 2023 and December 2023, Hong Kong companies shipped to Russia more than $750 million worth of microchips and other goods that Moscow needs in its military campaign, according to a July report by the Committee for Freedom in Hong Kong Foundation, a Washington-based rights group.
Russia, with its domestic war supplies dwindling, relies on foreign help for its offensive in Ukraine—most recently in an alliance with North Korea, which has given Moscow thousands of troops and boosted arms shipments.
Hong Kong’s role as a transshipment point for Russia-bound goods is backed by Chinese policy: Beijing rejects what it calls unilateral sanctions imposed by the U.S., in part because those restrictions often target Chinese entities and officials, a group that includes Hong Kong’s leader, Chief Executive John Lee. Hong Kong closely follows Beijing’s lead.
“Wheeling and dealing is in Hong Kong’s DNA,” said Joseph Webster, a senior fellow at the Atlantic Council who researches China-Russia ties. “Beijing is certainly aware of the trade conducted via Hong Kong, but they are doing virtually nothing to stop it.”
A route to Russia
Marchenko, who hails from Moscow and is now 53 years old, worked in Hong Kong for more than a decade, running mostly electronics-trading businesses out of a small office in the crowded Sham Shui Po district.
“Good fortune to my home,” reads a red Chinese card still hanging from what was his office door in a commercial building near a famed Hong Kong electronics market.
Marchenko’s social-media accounts show an interest in thrash metal—he visited the Philippines to see the band Slayer—and drinking beer in Hong Kong pubs. He posted little that could be construed as political except for an occasional dad joke: “If USA is so great then why did someone create a USB?”
Among his companies was one he started with his wife, Diana Izutkina, importing caviar, cheese and candy from Eastern Europe to Hong Kong.
Izutkina called Hong Kong an ideal environment for doing business. “Everything is done to ensure the ease of starting a company,” she said in a 2019 interview with Russian state television.
The item that put Marchenko on the FBI’s radar was a small digital display manufactured by eMagin, a company based in New York. The microdisplays use organic light-emitting diodes for very thin and compact devices. They can be used in military equipment including aircraft helmets, targeting screens, thermal scopes and night-vision goggles.
The company, eMagin, isn’t named in court documents but is the only such manufacturer listed in Dutchess County, the location of the company identified in the documents. The company didn’t respond to requests for comment. A spokesman for the U.S. Attorney’s Office in New York’s Southern District, which handled the prosecution, declined to comment on the case.
Months before the Russian invasion of Ukraine in February 2022, Marchenko used one of his companies in Hong Kong—Neway Technologies—to deliver to a Russian electronics company more than $250,000 worth of displays from the New York company, according to an indictment in the U.S. case. He stated the devices were for use in rescue kits by a Russian state civil-defense organization.
After the invasion, the U.S. imposed unprecedented sanctions on a large number of companies and individuals, while the Justice Department launched an interagency program, Task Force KleptoCapture, to enforce sanctions and break up procurement networks such as Marchenko’s.
After February 2022, eMagin told its staff to no longer send devices to Russia or companies that would transfer them to Russia, prosecutors said.
Marchenko then used another of his companies, Alice Components, to continue the trade. In July 2022, the company attempted to order 2,000 displays from eMagin for more than $1 million, saying they would be used for medical equipment in Asia.
An eMagin representative told Marchenko’s company that, for “compliance-related reasons,” it couldn’t fulfill its order, refunding its money, according to the indictment—and directing Alice Components to a distributor.
The distributor was in fact a front run by the FBI. From them, Alice Components ordered 2,450 displays at a price of $1.6 million.
Between December 2022 and February 2023, Marchenko used two companies in Hong Kong to pay the distributor nearly $1.3 million. But the FBI front told Marchenko that the shipment had been held up over concerns that the goods would go to Russia. Scrambling to find a way to acquire the displays, Marchenko suggested sending them in batches with a listed value under $2,500, so that there would be no need to report their final destination.
37. Philippines wrestles with how to face down China while policing 7,000 islands
Kathrin Hille, Financial Times, December 31, 2024
38. UBC criticized for renting room to Hong Kong government for recruitment exam
Paul Johnson, Global News Canada, December 26, 2024
Human rights activists are angry with the University of British Columbia for renting out one of its classrooms to the Government of Hong Kong for a recruitment exam earlier this month.
In a Dec. 22 letter to UBC President and Vice-Chancellor Dr. Benoit-Antoine Bacon, Chinese Canadian Concern Group on the Chinese Communist Party’s Human Rights Violations wrote to express its disapproval of the university allowing the Hong Kong Economic and Trade Office to use a room at the Robson Square campus to conduct an exam related to its 2020 National Security Law (NSL) on Dec. 7.
“Successful candidates for this examination are required to swear allegiance to the Hong Kong and, by extension, Beijing governments,” the letter from spokesperson Gabriel Yiu reads.
“Allowing this recruitment activity on UBC’s campus raises serious national security concerns for Canada, especially in the context of potential conflicts between the two governments. Such actions could pave the way for the infiltration of foreign authoritarian influence into our society.”
39. The rise and rise of Maye Musk: China’s love affair with Elon Musk’s mother
Amy Hawkins, The Guardian, December 25, 2024
COMMENT – Elon Musk is a major national security vulnerability for the United States.
Human Rights and Religious Persecution
40. Three Years After the Uyghur Tribunal Verdict: Where Do We Go from There
Ruth Ingram, Bitter Winter, December 26, 2024
41. Why Hui Muslims Protested the Arrest of Imam Ma Yuwei
Ma Guangyao, Bitter Winter, December 27, 2024
A popular imam was arrested for resisting direct government control. This time, Hui Muslims decided to publicly protest.
Protests in Yunnan this month after the arrest of a well-known Hui imam confirmed that the Chinese government is now cracking down on Muslim Hui communities not strictly aligned with the government-controlled China Islamic Association. It also confirmed that Hui Muslims, which were accustomed for decades to a certain limited religious liberty, are not tolerating this state of affairs and are willing to protest publicly.
This month, on December 15 and 16, groups of Hui Muslims assembled in front of the Yuxi Municipal Government in Yunnan Province for two consecutive days to demonstrate against the arrest of an imam by Chinese authorities.
Ma Yuwei serves as the imam of Yuxi Daying Mosque, where he has devoted many years to educating the community on the Quran. He is held in high esteem for his dedication. However, as governmental oversight of religious activities has increased in recent years, he has faced surveillance and threats.
The government determined that the Daying Mosque, where he was employed, was an unauthorized site for religious activities. In May of this year, the Religious Affairs Departments of Yuxi City and Hongta District convened a meeting to caution Ma Yuwei against engaging in unauthorized religious activities and issued an order to cease the Quran study class.
To ensure his safety, Ma Yuwei and his family have remained secluded within the mosque for the past six months, avoiding any public appearances. Reportedly Ma Yuwei has been followed and investigated by unidentified individuals for nearly a year. For safety, he and his father have stayed in the mosque for months, seldom going outside.
At lunchtime on December 15, plainclothes police forcibly took Ma Yuwei from Shuxiang Chuanchuanxiang restaurant in Nie’er Square, Yuxi. Reportedly, the police did not show any arrest warrant or other identification documents during the arrest, and mentioned as the only reason for the arrest was that Ma Yuwei “preached the Quran.”
His brother in Shadian narrowly escaped arrest due to local residents’ strong resistance. Ma Yuwei’s father, Ma Chongguang, and his mother were apprehended at separate locations.
The arrests led to the response from the local Muslim community, who gathered at the city government to request Ma Yuwei’s release.
Beginning early on the morning of the 16th, a significant number of military and police vehicles were deployed from Kunming and the surrounding areas of Yuxi to the protest site. Communication jammers were installed, highways leading to Yuxi were blocked, and Hui Muslims were subjected to questioning, until the protest subsided.
COMMENT – This should come as no surprise: Chinese people are like people all over the world… they don’t like it when the politically powerful tell them what to believe and think.
They want to be treated like citizens, not like subjects.
They want their government to be accountable, they want their political leaders to represent their views and beliefs.
42. How the UN Cybercrime Convention 2023 can pose a threat to human rights defenders and exiled journalists
Global Voices, December 30, 2024
43. VIDEO - China Beyond Borders: Transnational Repression Everywhere
Radio Free Asia, December 11, 2024
COMMENT – This is a fascinating video series that should be required viewing by university administrators.
44. ESG funds found to have $1.4bn exposure to Xinjiang labour camps
Chloe Leung, Financial Times, December 26, 2024
COMMENT – Perhaps the least surprising piece of news this week.
45. Brazil yanks temp work visas for China's BYD after trafficking claims
Lisandra Paraguassu, Reuters, December 28, 2024
46. China's Dahua Technology to exit projects in Xinjiang
Reuters, December 23, 2024
Industrial Policies and Economic Espionage
47. Uncertainties cloud China's 2025 IPO prospects
Echo Wong, Nikkei Asia, January 2, 2024
Record-low fundraising deals expected for 2024 due to policy-tightening measures.
The outlook of China's onshore initial public offerings remains uncertain for this year following a record-low in fundraising deals in 2024.
For the full year, Chinese mainland stock markets were expected to raise 68 billion yuan ($9.32 billion) through 101 IPOs, according to Deloitte China. This is a 68% drop in value from 2023 and far less than the range of between 267 billion yuan and 317 billion yuan estimated by the financial services provider in December 2023.
48. China's key C919 passenger jet to start regular flights beyond mainland
Kenji Kawase, Nikkei Asia, December 31, 2024
49. Laos fertilizer exports to China boom amid Russian sanctions
Kosuke Inoue, Nikkei Asia, December 25, 2024
50. Japan targets affluent Chinese with new tourist visa
Tamayo Muto, Nikkei Asia, December 25, 2024
51. China housing rents slump to 4-year low amid oversupply
Noriyuki Doi, Nikkei Asia, December 26, 2024
52. How Europe crashed its car industry
Helen Thompson, UnHerd, January 1, 2025
The Mirafiori car plant is the last surviving automobile factory in Turin, the historical engine of the Italian car industry. At Mirafiori’s post-war peak, Fiat manufactured one million vehicles a year, employing 60 000 people. For much of this past year, so few cars have been produced for Stellantis at the plant that one worker recently remarked that “Mirafiori has already been closed. It’s just that it reopens sometimes.”
It has been a terrible few months for most of the world’s once-leading automobile companies. In September, Volkswagen gave notice of plans to shut at least three of its 10 German factories and cut wages by 10%, breaching a 1994 agreement to protect jobs in its home country until at least 2029, prompting rolling two- and four-hour strikes. As production ground to a halt again at Mirafiori in November, Stellantis made public that the Vauxhall plant at Luton would close in April 2025, cancelling the company’s prior plan to produce Vivaro electric vans there. In the same month, Ford indicated it would cut 3,800 jobs in Europe by 2027, while Nissan announced 9,000 job losses and a 20% cut in worldwide production. A senior official at Nissan is reported to have said that the Japanese company has “12 or 14 months to survive”.
Beyond Germany, the crisis in the European automobile sector has been long in the making. Employment at Vauxhall Luton peaked in the Sixties, and the plant ceased producing cars in 2002, as did Ford Dagenham. Fiat’s five-storey Lingotto factory, which began mass auto production in Italy in 1923, closed in 1982. Today, the building serves as a leisure complex, hosting the largest roof garden in Europe. In 2011, Fiat threatened to close down the Mirafiori plant too unless workers voted for a restructuring plan. When, three years later, Fiat merged with Chrysler, it acquired a company that had been propped up with US federal government money since the 2008 crash. The subsequent union of Fiat Chrysler Automotive with Peugeot in 2021 to form Stellantis saw more than 10,000 job losses in Italy.
But the crisis also constitutes a more short-term failure around electric vehicles (EVs). It was only four years ago that Fiat Chrysler Automotive made a €700 million investment in producing an electric Fiat 500 at Mirafiori. Nissan’s Leaf was the best-selling EV of the 2010s, but since 2020 sales globally have slumped. Demand for Volkswagen’s ID 5 in the European EV market crashed by 28% in the first half of 2024 compared with the same period in 2023.
When, in 2019-20, European governments legislated for Net Zero 2050, they envisaged a rather different future. Of the 101.7 million barrels of oil the International Energy Agency (IEA) reports that the world consumed per day in 2023, more than 60 million was used for road transportation. Consequently, any serious move away from fossil fuels always required the automobile industry to be making and selling EVs at scale. It is scarcely surprising that Norway is the only European country that has made sustained progress in de-carbonising road transport because its hydrocarbon wealth provides the fiscal leeway to make EVs affordable for a reasonable proportion of citizens. In Sweden, where EV penetration was also comparatively high, growth slowed notably in 2024 after it had ended the purchase-incentives regime in late 2022.
By itself, the sluggish demand in much of Europe for EVs would constitute a big problem for an automobile sector required to stop selling ICE cars no later than 2035, and 2030 in the UK. But China’s astonishing rise over the past three years as an EV manufacturer means that even the slow electrification of road transportation in Europe is accelerating European de-industrialisation, rather than serving, as so many European politicians hoped, as an agent of re-industrialisation. China has by far the largest domestic EV market in the world. On the IEA’s figures, of the 25% increase in global EV sales in the first half of 2024 compared to the first half of 2023, nearly 80% came from China. By contrast, sales in Germany during the same period fell. Chinese producers are now ascendant in their own country, with the Shenzhen-headquartered company BYD alone taking 30% of the market. Meanwhile, Chinese exports have grown astonishingly rapidly, rising 1,600% from 2019 to mid-2024.
China’s productive success cannot be explained simply by the labour cost advantages of late industrial development. Tesla aside, Chinese cars are technologically superior because the Chinese government systematically worked for them to be. As an industrial strategy for high-tech manufacturing, Made in China 2025 and the Five-Year Plan for 2021-25 have been highly successful. The Chinese state financially supports not just domestic EV firms but all parts of the supply chain from metal mining and processing to battery production. In comparison, European political efforts were financially paltry and much more fragmented, leaving its manufacturers dependent on Chinese-dominated supply chains. Escaping this dependency is extremely difficult, not least since China’s 2020 Dual Circulation strategy was in part a project to entrench permanently Chinese firms into the high-value parts of supply chains and force foreign reliance on them. These companies also benefit from the Chinese state prioritising energy security and price over any political preference for one energy source over another substitutable for it. With coal still providing around 60% of China’s electricity and constituting more than 50% of the country’s overall energy consumption, China’s industrial energy costs are significantly lower than those in Europe, most of which is much more dependent on natural gas.
More than a coherent economic strategy to advance the existing European car industry, the tariffs on Chinese manufacturers provisionally imposed by the European Commission in July 2024, and made permanent in October, are a desperate political response to the crisis. When, in May 2024, the Biden Administration placed 100% tariffs on Chinese EVs entering the American market, Chinese manufacturers had barely any EV market share and no Chinese EV manufacturer has an operational plant for exports in either Mexico or Canada to access the United States-Mexico-Canada Agreement. The EU, by contrast, is already China’s largest export market, while BYD will begin producing EVs in Hungary in the second half of 2025 and Turkey — equivalent to the EU’s Single Market for export purposes via the country’s long-standing customs union with the EU — by the end of 2026.
For the German car industry and its present government, then, European protectionism is a strategic defeat, risking retaliatory action in the world’s largest car market in which until very recently German companies thrived. Even, as the China EV shock intensified, Volkswagen made more than half of its profits in 2023 in China. Quite simply, if Volkswagen cannot even try to compete in the Chinese market, it cannot remain a global auto player. In this sense, the European car crisis is a symptom of the much bigger story of historical European relative decline driven by the rise in Asian living standards under late industrialisation.
Ironically, the UK government has thus far adopted the free-trade-leaning approach the Scholz government would have done if Germany were not in the EU without the UK having domestically-owned manufacturers who compete in the Chinese market. But this openness to more Chinese exports is a nightmare for British-based car firms wishing to sell in the domestic market, especially when they already cannot meet the EV sales required under the Zero Emissions Vehicle (ZEV) mandate that subjects all companies selling in the UK to probably the most demanding regulatory framework anywhere in the world for ending ICE sales. The week before Stellantis announced the closure of Vauxhall Luton, representatives from the major car manufacturers met with then transport secretary Louise Haigh and business secretary Jonathan Reynolds pleading for more latitude. Finding none on offer, Nissan blasted the Government’s inertia. As the job losses at Luton materialised, Reynolds retreated, promising an urgent consultation on the toughening of the targets due to take effect in January. Since in 2025 the cheapest Chinese EVs yet – one from Leapmotor in which Stellantis has a 20% stake and the other BYD — will arrive in the UK market, it is hard to see how Keir Starmer’s government can possibly retain both the ZEV and openness to China without wrecking what remains of the British car industry. If one single dread consumes the Labour Cabinet, it must be the closure of Nissan’s Sunderland plant even as it was little more than a year ago that Nissan announced it would build three EV models at the north-east site, supported by £2 billion of support for investment from Rishi Sunak’s government.
Over in Italy, Giorgia Meloni never suffered from the illusion that Net Zero in general and EVs in particular would open a path to re-industrialisation for European economies. Immediately after taking office, Meloni stridently opposed the EU’s proposed ban on new ICE sales from 2035. Having found too few allies to stop the EU Council adopting the regulation in March 2023, she has continued to denounce the policy as “self-destructive” and promised Italian voters she will make Brussels “correct these choices”. With the likely arrival of the Christian Democrat Friedrich Merz in the Chancellery after the German general election on 23 February, she will find a powerful ally. Meloni has also been an arch pragmatist about the Chinese threat. Although she supported the Commission’s tariffs, she travelled to Beijing in July 2024 to reset relations after taking Italy out of the Belt and Road seven months earlier. At the top of her agenda is procuring Chinese investment in the Italian car industry, with negotiations in progress with the state-owned Chinese manufacturer Dongfeng Motor for a plant in Turin.
The production and consumption of cars have long marked decisive junctures in Western political history. When in 1908, Henry Ford made mass ownership of cars affordable with the Model T, he imagined he was saving American democracy from the perils of a bitter class divide around the automobile. When, in March 1943, workers at the Mirafiori plant in Turin walked out on strike, they began a labour revolt across the north of Italy that domestically undid Mussolini’s regime four months before the Allied landings in Sicily. Symbolically, cars represented historical progress conceived as individual and democratic freedom. For much of the 20th century, the commercial competition between car companies represented an epoch of competing Western visions of modernity. Inspired by Ford but not wishing to be American, Fiat offered the Lingotto factory on its opening in 1923 as the height of Italian avant-garde industrial modernism. Because the perception of national economic success required a large and competitive auto industry, car workers knew they could inflict such political pain that they had to be feared.
But this psycho-material history began in a geopolitical world where China was stuck in its century of humiliation. China’s emergence as a manufacturing superpower leaves nothing of that old world untouched. Without its rapid economic development over the past 30 years, driving carbon emissions and accelerating oil demand after conventional oil production stagnated from 2005, the energy transition would have seemed less of an imperative.
By committing to end the energy-basis for western Europe’s early historical experience of industrial modernity without a viable strategy for realising a different future, European governments only accelerated the long forces of de-industrialisation. Now, China has claimed the most potent symbol of the energy transition for its own project of modernity. As the meaning of this change begins to be comprehended, democratic politics in Europe will necessarily enter a new era of tumult.
COMMENT – Worth reflecting on in Berlin, Rome, Brussels, Paris and London.
53. China's failed airspace auction highlights local financial woes
Kohei Fujimura, Nikkei Asia, January 1, 2025
Property slump spurs interest in tapping 'low altitude economy'.
A short-lived attempt by a Chinese county to sell rights to access local airspace underscores the challenge China's regional governments face in supplementing their plunging income from land-use rights.
54. China’s Finance, Property Firm Workforces Shrink for First Time
Bloomberg, December 26, 2024
55. China Imposes Series of Measures to Counter US Export Restrictions
Lester Ross, Kenneth Zhou, and Neena Shenai, WilmerHale, December 26, 2024
56. Temu’s Takeover Is Now Complete
Zeyi Yang, Wired, December 26, 2024
57. A “Global Economic Reordering:” US-China Competition and Bitcoin as Tool of US Statecraft
Matthew Pines, Bitcoin Policy Institute, December 23, 2024
58. Private equity investors trapped in China as top firms fail to find exit deals
Kaye Wiggins and Thomas Hale, Financial Times, December 24, 2024
59. China plans record $411 billion special treasury bond issuance next year
Reuters, December 24, 2024
60. The ‘Invisible Wall’ Amplifying China’s Population Doom Loop
Liyan Qi, Wall Street Journal, December 24, 2024
61. China-born biologist Wang Cunyu returns from decades in US to head advanced institute
Dannie Peng, South China Morning Post, December 23, 2024
62. World Bank lifts China growth forecast but calls for deeper reforms
Edward White, Financial Times, December 26, 2024
63. Why Taiwan’s Foxconn, an iPhone Supplier, Is Investing in Texas and Thailand
Meaghan Tobin and John Liu, New York Times, December 26, 2024
64. China extends EU brandy anti-dumping investigation by three months
Reuters, December 25, 2024
65. ‘Phase 2 China shock is coming’: historian Adam Tooze on Europe, America and manufacturing
Finbarr Bermingham, South China Morning Post, December 30, 2024
66. Xi Jinping, China’s Leader, Nods to Economic Challenges
Daisuke Wakabayashi and Claire Fu, New York Times, December 31, 2024
67. Australia, wary of China, prepares workforce to build nuclear subs
Michael E. Miller, Washington Post, January 1, 2025
Cyber & Information Technology
68. The Obstacles to China’s AI Power
Sam Bresnick, Foreign Affairs, December 31, 2024
69. China is catching up with America in quantum technology
The Economist, December 31, 2024
But its state-heavy innovation model comes with risks.
In a small shop in the eastern Chinese city of Hefei, one of the rarest pieces of technology in the world is on display. The quantum computer in the showroom of Origin, a Chinese startup, looks ready to be plucked from the shelf and fired up. Only 20 such devices are produced globally each year. It is unclear what in the showroom is for sale, but none of it is supposed to be seen by foreigners. During your correspondent’s visit, which was agreed on in advance, the company panicked at the sight of a foreigner, abruptly cancelled interviews and notified the police.
70. Trump asks Supreme Court to pause TikTok ban, while Biden says app poses ‘grave’ threat
John Fritze, CNN, December 27, 2024
71. Is your air fryer spying on you?! New report states that it could be...
Bethan Girdler-Maslen, Yahoo, November 11, 2024
72. Don’t Look Now, but China’s AI Is Catching Up Fast
Raffaele Huang and Tracy Qu, Wall Street Journal, December 24, 2024
73. Huawei’s new flagship smartphones use South Korean memory chips, not Chinese ones
Che Pan, South China Morning Post, December 26, 2024
74. Beijing Pushes to Use China-Made Chips in Its EVs
Liza Lin and Raffaele Huang, Wall Street Journal, December 31, 2024
75. Tech war in 2024: China catches up fast in AI race, but US chip curbs cast shadow
Ben Jiang, South China Morning Post, December 28, 2024
76. Putin orders Russian government and top bank to develop AI cooperation with China
Reuters, January 1, 2025
Military and Security Threats
77. Chip Wars in a Trump 2.0 World
Foreign Policy, December 12, 2024
78. The Return of Total War
Mara Karlin, Foreign Affairs, October 22, 2024
79. China Rapidly Builds Up Weapons and Psychological Warfare Operations
Chuck Devore, The Federalist, December 27, 2024
China’s military buildup and cognitive warfare strategy are clear indications of its intent to defeat the U.S. and its allies by any means necessary.
The People’s Republic of China (PRC) is undertaking an unprecedented military buildup aimed at challenging America and its allies, particularly in the Indo-Pacific. And, like Nazi Germany’s buildup in the 1930s, the militarization program ordered by the Chinese Communist Party isn’t simply a great power buildup — it’s a weapon in service of a deadly ideology.
The 2024 Department of Defense China Military Power Report and recent analysis by Bill Gertz in the Washington Times reveal this buildup as part of a broader strategy by the Chinese Communist Party (CCP) to position itself as a global superpower. Meanwhile, the U.S., having spent $5.4 trillion on the global war on terror and attendant, futile nation-building, has left itself strategically vulnerable by diverting critical resources while underestimating the threat from China.
Missile Expansion and Strategic Modernization
China has rapidly expanded the People’s Liberation Army Rocket Force (PLARF) arsenal, adding, that we know of, some:
50 new intercontinental ballistic missiles (ICBMs) capable of striking the continental U.S., for a cumulative total of 400.
300 medium-range ballistic missiles and 100 long-range cruise missiles.
More than 600 operational nuclear warheads, projected to surpass 1,000 by 2030.
Hypersonic missiles like the DF-27, capable of evading U.S. missile defenses and targeting Guam, Hawaii, and Alaska.
China’s navy, already the largest in the world with 370 ships and submarines, is expected to grow to 435 by 2030.
Cognitive Warfare and Psychological Operations
Beyond its conventional forces, China’s adoption of “cognitive warfare” poses a significant threat. This doctrine focuses on manipulating information to undermine adversaries’ decision-making processes. Cognitive warfare features tactics right out of a sci-fi film, all enabled by powerful AI tools. For instance, deepfakes to mislead military and political leaders during crises and psychological warfare to demoralize U.S. troops and polarize society — the latter including efforts to erode trust in U.S. leadership among regional allies via tool such as TikTok.
PLA researchers are also developing advanced voice synthesis tools for low-cost, high-impact disinformation campaigns. These operations reflect a strategy designed to win conflicts without direct confrontation, targeting the minds of adversaries rather than their forces — Sun Tzu would approve.
Questionable Timelines and Strategic Deception
The CCP’s stated military objectives include readiness for action against Taiwan by 2027, achieving strategic dominance by 2035, and fielding a world-class military by 2049, the 100th anniversary of the CCP’s victory over the Nationalists in China’s civil war. However, these timelines should be treated with skepticism. They are likely deliberate deceptions aimed at lulling adversaries into complacency or disguising China’s actual state of readiness. The pace of China’s missile expansion and cognitive warfare preparations suggests that Beijing’s capabilities likely exceed what is required for these projected milestones.
Unfortunately, the DoD’s China report featured a special section on corruption in China’s military that was seized upon by those who have consistently downplayed the China threat.
America’s Fiscal Crisis and the Need for Budget Reform
While China accelerates its military growth, even as it faces what appears to be a weakening economy, the dire state of American finances threatens our national security. The federal deficit and ballooning national debt place immense pressure on defense spending. To effectively counter China’s ambitions, the U.S. must rebuild its fleet, modernize its nuclear arsenal, expand missile defenses, and restore maritime lift capability. However, this cannot be achieved without serious budget reform and strategic cuts within the Pentagon itself. These necessary actions will likely face strong opposition from some in Congress who seek to defend the status quo.
In short order, President-elect Donald Trump’s national security team must start to rebuild the Navy with more surface combatants, submarines, and support vessels to counter China’s maritime dominance. America’s aging nuclear arsenal requires upgrades to ensure credible deterrence against China’s rapidly growing stockpile of advanced warheads and delivery systems.
Lessons learned from Israel and Ukraine show that we must also invest in next-generation missile defense systems to protect the homeland and key assets in the Indo-Pacific. And, lastly, we must invest in strategic sealift capacity to ensure rapid deployment and sustainment of forces during a conflict. This will require a decade of focused effort to rebuild America’s shipbuilding industry, including training tens of thousands of highly skilled workers.
80. Technological Developments in China’s Military Forces: Insights From the 2024 Zhuhai Airshow
Ori Sela and Yacov Bengo, INSS, December 24, 2024
81. Chinese National Indicted for Supplying Fentanyl Pill Presses to U.S.
Sam Cooper, The Bureau, December 24, 2024
82. China Stuns with Heavy Stealth Tactical Jet’s Sudden Appearance
Thomas Newdick and Tyler Rogoway, The Warzone, December 26, 2024
83. China, Syria, and the Middle East—A Current Perspective
Ori Sela, INSS, December 26, 2024
84. Behind Closed Doors: The Spy-World Scientists Who Argued Covid Was a Lab Leak
Michael R. Gordon and Warren P. Strobel, Wall Street Journal, December 26, 2024
85. China launches biggest amphibious assault ship in projection of military power
Kathrin Hille, Financial Times, December 27, 2024
86. Fear That China Rules the Waves Jolts U.S. to Pursue Maritime Revival
Daniel Michaels, Wall Street Journal, December 29, 2024
87. Russia trained officers for attacks on Japan and South Korea
Chris Cook and Max Seddon, Financial Times, December 31, 2024
One Belt, One Road Strategy
88. Mapping China’s global port network: on the backfoot in 2024, but still well entrenched
Clark Banach and Jacob Gunter, MERICS, November 7, 2024
89. China’s faith in Djibouti is paying off, but could Red Sea crisis muddy the waters?
Enoch Wong, South China Morning Post, December 28, 2024
90. Post-Assad Syria: What It Means for China
Scott N. Romaniuk & László Csicsmann, Geopolitical Monitor, December 23, 2024
Opinion Pieces
91. Why Japan is wary of teaming up with China to decarbonize Asia
Toru Takahashi, Nikkei Asia, December 29, 2024
92. Xi May Be Facing a No Good, Very Bad 2025
Minxin Pei, Bloomberg, December 25, 2024
93. Interview with Matt Pottinger
Octavian Manea, Small Wars Journal, December 20, 2024
94. I’ve watched Range Rovers roll into Russia. Sanctions are not working
Ed Conway, Times of London, December 29, 2024
95. Goodbye to Small Yard, High Fence
Geoffrey Gertz, New York Times, December 31, 2024
96. How Europe Cripples Its Defenses
The Editorial Board, Wall Street Journal, December 29, 2024
97. What ‘Engagers’ Got Right About China
Holman W. Jenkins, Jr., Wall Street Journal, December 27, 2024
98. Where the Panama Canal Quarrel Is Heading
Akexander Gray, Wall Street Journal, January 1, 2025