Sinocism

Political discipline and fully implementing the decisions of the Party Center are especially important in the first year of the 15th Five-Year Plan, and the year in which personnel shifts ahead of the 2027 Party Congress will start to become more prominent. There will be no letup in the anti-corruption work in the finance sector, which was again named as a priority area: deepen the rectification of corruption in key areas such as finance, state-owned enterprises, energy, education, academic societies and associations, development zones, and bidding and tendering. Seriously investigate and punish problems such as government-business collusion, power providing protection for capital, and capital penetrating into the political sphere.

We are still waiting for the communique from the CCDI Plenum, and there is no clarification yet as to whether or not President Trump’s post yesterday threatening “any country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America” applies to China as well. It probably does not, as the Trump Administration has been cowed by the rare earths controls, and adding more tariffs back on China would violate the spirit of the US-China understanding in South Korea.

President Trump announced Monday afternoon that “"Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America.

Cambodia sent scam king Chen Zhi, chairman of the Prince Group, back to China. The US indicted Chen in October and announced it had seized nearly $15 Billion in Bitcoin from him. Chen is originally from Fujian and then acquired multiple other passports, and became a Cambodian citizen. Cambodia stripped him of his Cambodian citizenship last month. He must know far too much for the PRC or the Cambodians to allow him to fall into US custody. In the CCTV video of Chen’s return, he looks like he knows he is a dead man walking

This episode of Sharp China is outside the paywall.

In response to the US bullying acts, we launched a “combination punch” of 5 rounds of tariff and non-tariff countermeasures, forcing the US to take the initiative to propose negotiations with us.

Today’s top items:It is not yet clear how big of an impact this announcement and that threat will have on the Japanese economy. So far the Trump Administration has not issued any public statement about this announcement. The White House fact sheet on the latest US-China deal says this about rare earths: China will suspend the global implementation of the expansive new export controls on rare earths and related measures that it announced on October 9, 2025. China will issue general licenses valid for exports of rare earths, gallium, germanium, antimony, and graphite for the benefit of U.S. end users and their suppliers around the world. The general license means the de facto removal of controls China imposed since 2023. If these tightened controls on exports to Japan hit suppliers of US end users that might be a problem.

This looks to have been a massive PRC intelligence and analytical failure. PRC special envoy Qiu Xiaoqi met with Maduro in Caracas just hours before the raid, and may have still been in country when it occurred. And as with Syria, the value of any sort of partnership with China does not extend to political security; The PRC is not very reliant on Venezuelan oil as the country accounts for a low single digit percentage of PRC oil imports, and if the US rebuilds the oil industry and increases output China can still buy it if they want to; As best as I can glean, outstanding PRC loans to Venezuela are in the $10-20B USD range; not nothing and the PRC will absolutely push Maduro’s successor to honor them, but not that material; The propaganda value of the US flouting international law in such a high profile way against a Global South country may be priceless, and the action fits perfectly with how the PRC talks about the US as a hegemon, imperialist and destabilizing force in the world. This graphic from Xinhua is a good example, though strangely the PRC never issued anything like this when Russia invaded Ukraine

Yang Zhibin, Commander of the Eastern Theater Command, and Han Shengyan, Commander of the Central Theater Command. Both come from the PLA Air Force (PLAAF), and Han was the commander of the September 3 military parade. This promotion ceremony comes very late in the year, perhaps it took Xi and CMC vice chair Zhang Shengmin even longer than usual to vet the candidates, given the ongoing PLA purges, and the call last week for tips about procurement issues in the PLAAF?

The PLA’s official procurement web site has posted a notice asking for “reports on violations related to the procurement of materials and services organized by Air Force units (including projects organized by tendering agencies). This includes, but is not limited to, the formulation of requirements, procurement reviews, contract performance, penalties for suppliers, selection of tendering agencies, and online procurement.”

Currently, the new round of scientific and technological revolution and industrial transformation is accelerating breakthroughs; artificial intelligence technology is iterating rapidly, producing a major and far-reaching impact on China’s social structure, social relationships, social behavior, and social psychology.

Show Notes:

The Wall Street Journal reports that the PRC is now demanding state-owned firm Cosco get a controlling stake in the consortium that has been negotiating to buy dozens of ports from Hong Kong firm CK Hutchison, including the two facilities on either side of the Panama Canal that President Trump insisted be removed from the control of the Hong Kong firm. Trump had touted the deal, and now the Chinese side may be blowing it up unless they get their way. I wonder why they think they can push Trump so hard and re-trade this deal.

The lead article in the latest issue of Qiushi titled “Expanding Domestic Demand is a Strategic Move 扩大内需是战略之举” is a “compilation of excerpts from General Secretary Xi Jinping’s important discourses regarding “expanding domestic demand is a strategic move” between October 2015 and October 2025. I have posted a full translation here. The timing just days after the CEWC, which had as the first key task for 2026 “persist in domestic demand as the driver and build a strong domestic market”, is of course not coincidental. But it does raise some questions about the gap between rhetoric and action, as the first quoted excerpt, from 2015, seems to identify some issues that a decade later still persist

The Central Economic Work Conference concluded Thursday. I have posted a full translation of the readout here. There were no surprises as it mostly flshed out what we saw from the Monday Politburo meeting readout, and no indications of more aggressive stimulus measures or a shift in the currency policy, but it is an important an interesting document. All members of the Politburo Standing Committee attended, Xi gave a speech and Li Qiang summed up the meeting. The politics may be at least as interesting as the readout. Politburo member Ma Xingrui was not shown in the CCTV report of the meeting, which per protocol shows the Politburo members and other officials in attendance. Ma was also missing from the CCTV report of the November Politburo study session, so the rumors that he is under investigation look more likely to be correct. This X account also noted that Xu Xueqiang, head of the Equipment Development Department of the Central Military Commission (CMC), and Wang Renhua, Secretary of the Political and Legal Affairs Commission of the CMC, were absent. So the purges continue…

At the end of its ten-day mission to China, the IMF released a report raising its estimates for 2025 and 2026 GDP growth to 5.0% and 4.5%. More interestingly, the group wrote that:Despite resilient growth, imbalances remain significant amid weak domestic demand and deflationary pressures. Low inflation relative to trading partners has led to real exchange rate depreciation, contributing to strong exports and rising current account surplus.Goldman Sachs was more direct in recent report, writing in a note that the RMB is “25% below its fair value”. It seems highly unlikely the PRC would allow that kind of appreciation in the near to medium term, but everyone will be looking for any shift in language in the forthcoming CEWC readout that indicates a recognition of the problem as well as signs they may push further with a gradual appreciation.

On today’s show Andrew and Bill begin with the news that the US is greenlighting the sale of Nvidia’s H200 chips to the PRC market. Topics include: Dubious claims in Trump’s Truth Social post announcing the news, searching for arguments in support of this policy change, the 25% of China revenue Nvidia will pay to the U.S. government, and waiting for Beijing’s response, including how many U.S. chips Chinese companies will be allowed to buy. From there: The U.S. halts plans to sanction the MSS and its contractors, Japan seeks more support from the U.S., and the dynamics of “stability” come into focus. At the end: The December Politburo meeting, Emmanuel Macron’s visit to China, an email about the West’s willingness to build, and ‘Zootopia 2’ becomes a sensation in China.

Facing the so-called “reciprocal tariff” storm unilaterally set off by the United States, China fought back quickly and fired multiple arrows at once, launching a “combination punch” of countermeasures in multiple fields to respond effectively. Over the year, President Xi Jinping held four phone calls with President Trump and met in Busan, reaching a series of important consensuses. Chinese and U.S. economic and trade teams held talks successively in Geneva, London, Stockholm, Madrid, and Kuala Lumpur, facing differences directly and engaging in equal dialogue, achieving a series of substantive progress.

We should have a bit more clarity later this week when we get the readout from the CEWC, and I think we should expect that whatever comes out of the CEWC is broadly consistent with the policy trajectory set at the recent Fourth Plenum. The leadership seems to believe that some of the more acute problems the system was facing in the summer of 2024 have been effectively addressed by the more aggressive policy response that began in September 2024. The placement of the task about resolving risks in the last spot this year, as opposed to the fifth spot last year may indicate confidence in progress in managing those risks.

Xi really has done a good job navigating the first year of the Trump Administration, and there are more things he can probably get from Trump between now and a likely April visit to Beijing. As I asked in a Sinocism chat earlier today, what would the ramifications be of Trump acceding to Xi’s desire that the US explicitly state that it opposes Taiwan independence, which is something I hear is under consideration and could be part of the April visit package? If the Trump Administration does agree to make that change, what should it ask for in return, and how would it try to spin the shift as really no big deal?