Rethinking China’s Diplomatic and Economic Strategy | Digest: January 2026

International Relations | Chinese Economy | Society and Governance | Technology

Today’s digest is published in collaboration with Sinocism, the China newsletter most of us read before reading anything else. Many thanks to Bill for making this possible. — Thomas

---

International Relations

A noteworthy development in January’s foreign relations discourse is the emergence of more assertive calls to recalibrate China’s diplomatic posture, against a backdrop of overwhelmingly cautious reactions to the Maduro operation. The position taken by the hawkish Jin Canrong is particularly striking: moving beyond his earlier restraint on Venezuela, he warns that China will struggle to compete with the United States for influence among small or middle powers through economic engagement alone, absent credible security guarantees.

Jin’s proposal is unusual. While many other commentators similarly interpret declining cohesion among Western states as an opportunity for China to assume greater global responsibility, what such responsibility would entail remains vague in their formulations. Enthusiasm for engaging US allies is muted, and Europe-focused commentaries are often openly scornful of the continent’s continued dependence on the illusory “paradise” of security guarantees from an unpredictable—and potentially coercive—partner. Only Feng Yujun and the liberal scholar Xu Jilin depart from this prevailing mood, with Xu offering an affirmative reading of Mark Carney’s Davos “middle powers declaration” as signalling the rise of a strategically significant “second world”.

Most scholars argue that China is better served by attracting partners through a posture of defending globalism, rather than mirroring any Monroeist drift towards spheres of influence, and they generally reject any direct analogy between Venezuela and Taiwan. One notable outlier is the tub-thumping scholar Zhang Weiwei, who suggests that Trump’s Monroeism creates an opening for China to “act decisively” on Taiwan should an opportune moment arise—an argument the retired scholar Xiao Gongqin explicitly cautions against as a dangerous misreading of the strategic environment. A recent Qiushi analysis of the US National Security document by Ni Feng of CASS offers an authoritative framing closer to Xiao’s position, portraying the appearance of American retreat as a “smokescreen” for a continued war of attrition against China.

Chinese Economy

Economics analyses are dominated by the dual issues of “strong supply; weak demand” (供强需弱), officially recognised at December’s Central Economic Work Conference. Responses to this signalling fall into two main camps, proposing either large-scale macroeconomic rebalancing or more technical fixes.

Advocates of macroeconomic rebalancing call for reallocating state investment from manufacturing towards domestic consumption in order to strengthen demand, partially compensating for the limited scope for further export-led growth in an already high-surplus economy. This view is expressed by several influential economists who have advised the government, including Peking University’s Lu Feng and Huang Yiping, as well as CICC’s Peng Wensheng who likens the supply–demand imbalance to pre-Depression Fordist America.

However, although such rebalancing through “internal circulation” seems intuitive, it remains unclear how the 15th Five Year Plan’s emphasis on building a high-tech “complete industrial system” can be effectively anchored in household consumption—a tension that only Huang acknowledges explicitly in his discussion of services.

By contrast, the camp favouring technical fixes does not view a reallocation of resources from the supply to the demand side as the core solution. Renmin University’s Di Dongsheng attributes deflation and unemployment primarily to an economy-wide liquidity shortfall rather than overinvestment, and proposes lifting restrictions on the PBoC’s purchase of government bonds to enable fiscal expansion. Tsinghua’s Li Daokui advocates production-quota trading and faster overseas expansion to curb destructive price wars among Chinese manufacturers, alongside steering investment towards more profitable manufacturing. On the trade front, Xu Mingqi argues that, rather than changing the approach to investment, reducing institutional barriers to imports should be the main focus in addressing the surplus.

Society and Governance

Other scholars interpret deflation and unemployment through a social lens, focusing on structural failings in the education system and the gig economy. The Macau-based historian Wang Di argues for education reform on the scale of the Late-Qing’s abolition of the civil service exams, contending that the current system primarily serves an elite 20%. Peking University’s Zhang Dandan emphasises the need to institutionalise social protections to prevent the estimated 80% of delivery drivers who earn little on irregular hours from sliding into permanent precarity.

On local government, scholars observe a clear trend towards the increased centralisation of local administrative functions. Lü Dewen relates this shift to political missteps such as the ban on coal heating in Hebei, while Nie Huihua suggests that technology and artificial intelligence may drive a potentially constructive “flattening” of bureaucratic hierarchies.

Technology

On semiconductors and AI, discussion has centred on policy responses to Meta’s acquisition of Manus, as well as China’s broader posture towards foreign chip supply. Gu Wenjun, of chip research consultancy ICwise, highlights a tension between the drive for export substitution in chips and the need to preserve access to advanced hardware as the material foundation of competitiveness in AI.

— James Farquharson

In Brief

1. Global Order and Chinese Diplomacy:

   1. Jin Canrong on the strategic necessity of transitioning from trade diplomacy to active security partnerships.

   2. Zhao Hai on the post-American order and China’s proactive defence of multilateralism beyond strict non-interference.

   3. Huang Jing on countering American Monroeism through supply-chain retaliation and proactive conflict mediation.

   4. Feng Yujun on China’s unique capacity, if it so chooses, to cooperate with middle powers on stabilising the international order.

   5. Xu Jilin on the decisive role of middle powers within a reviving “Three Worlds” global framework.

   6. Zheng Yongnian on China’s inheritance of the Western-led order and not “eating in separate kitchens”.

   7. Wang Wen on Chinese economic involvement in Latin America as a structural barrier to American expulsion.

2. US–China:

   1. Yan Xuetong on the enduring logic of the bilateral rivalry and the limitations of Trump-era deal-making.

   2. Ni Feng on the NSS’s “smokescreen” of disengagement and the shift towards a cost-efficient war of attrition against China.

   3. Wu Xinbo on a turning point towards long-term peaceful coexistence and interest-based engagement.

   4. Ding Yifan, Jin Canrong & Di Dongsheng on China’s economic resilience and the shift to strategic stalemate.

   5. Diao Daming on Trump’s likely emphasis post-midterms on stage-managed legacy construction.

3. Europe:

   1. Zheng Ge on the erosion of the rules-based system and Europe’s helplessness against transactional power.

   2. Meng Weizhan on how the ideological constraints of liberalism prevent Europe from coexisting with non-liberal powers.

   3. Li Guanjie on how misalignment within the “special relationship” stems from Britain’s reliance on multilateral frameworks for influence.

   4. Song Luzheng on the potential for improved China-Europe relations in the event of far-right electoral victories.

   5. Dong Yifan on why the furore over Greenland will weaken transatlantic right-wing alliances.

4. East Asia:

   1. Xiao Gongqin on the risks involved in misreading Trump’s Monroeism tendencies as a green light for taking Taiwan.

   2. Zhang Weiwei on how a US retreat from hegemony and Japanese militarism create ripe opportunities for reunification.

   3. Wang Junsheng on how the US alliance and North Korea place a ceiling on improvements in China-South Korea relations.

5. Chinese Economy:

   1. Huang Yiping on the urgent necessity to boost consumption and the services industry.

   2. Peng Wensheng on the advantages of economies of scale in manufacturing coexisting with the need to boost consumption.

   3. Lu Feng on overcoming structural growth inhibitors by reallocating public investment towards consumption.

   4. Di Dongsheng on centralising fiscal responsibilities and amending central bank legislation to combat deflation and unemployment.

   5. Li Daokui on rationalising manufacturing production through market-led capacity quotas and expansion overseas.

   6. Xu Mingqi on managing trade surpluses through import expansion rather than restricting exports.

   7. Zhao Jian on the inherent volatility of state-backed stock market rallies focused on strategic sectors.

6. Governance and Society:

   1. Wang Di on the economic costs of the Gaokao.

   2. Zhang Dandan on the long-term trend of establishing platform-subsidised social security models for delivery workers.

   3. Nie Huihua on the impact of digital monitoring and AI on central-local administrative hierarchies.

   4. Lü Dewen on Hebei coal burning, and how rigid top-down accountability harms rational policy implementation.

7. Technology:

   1. Gu Wenjun on i) capitalising on China’s legacy chip boom to secure domestic supply chains; ii) maintaining domestic chip investment to prevent widening gaps in AI development.

   2. Dai Mingjie on retaining AI unicorns through venture capital reform and technological innovation special zones.

---

---

1. Global Order and Chinese Diplomacy

---

Jin Canrong (金灿荣): China’s persistent prioritisation of trade diplomacy over substantive security partnerships increasingly jeopardises its relationships with small and middle powers, which remain vulnerable to American coercion without Chinese support. This strategic deficiency prevents the cultivation of “true friends” among countries who may be “seeking outside help” [寻求外援] against US power, because these smaller states will inevitably succumb to Washington out of sheer existential necessity. Consequently, while still avoiding “open alliances” [公开结盟], a tactical pivot is required away from restrained pragmatism and towards a more active role—a “hybrid of the Kingly Way and the Way of the Hegemon” [王霸杂之]. – Professor, School of International Studies, Renmin University of China (Personal Account, 16 January)

Zhao Hai (赵海): The Davos Forum marks the definitive end of the post-Cold War, US-centred hegemonic order and the arrival of a post-American-hegemony era [后美国霸权时代], as transatlantic unity fractures under Trump-era unilateralism and systemic uncertainty. This transition intensifies the strategic question for China: how to act amid disorder rather than whether to engage. As parallel US-led mechanisms hollow out the UN system, China may need to move beyond a purely defensive multilateralism and assume a more proactive role in upholding the UN’s centrality and the authority of international law [国际法权威]. This entails recalibrating policy tools beyond strict non-interference [不干涉原则] and a recalibration within China’s domestic understanding of international responsibility, while sustaining economic competitiveness as the foundation of influence. – Director, Department of International Politics, National Institute for Global Strategy, Chinese Academy of Social Sciences (Guancha, 27 January)

Huang Jing (黄靖): The capture of Maduro constitutes a political disaster for Washington, undermining European moral authority on Ukraine and alienating the Global South through a perceived return to imperialism. As Beijing carries out a transition towards “being more proactive” [更有作为] in diplomatic relations, its response to Trump’s Monroeism should involve: (1) countering regional expulsion from South America via supply-chain retaliation; (2) promoting the “Community with a Shared Future for Mankind” as a stable alternative to the American “law of the jungle”; and (3) stabilising the Asia-Pacific through active conflict mediation and sanctions against US defence firms supplying arms to Taiwan. – Professor, Institute for American and Pacific Studies, Shanghai International Studies University (Guancha, 10 January)
N.B.: Huang Jing has American citizenship but is fully based in China.

Feng Yujun (冯玉军): With the US and Russia now acting as the principal subverters of the international system, China must recognise its role not merely as a passive object but as a critical “independent variable” [自变量] capable of stabilising the fracturing order. As American soft power wanes and the Global South remains structurally incoherent, traditional middle powers are increasingly “huddling together for warmth” [抱团取暖] to hedge against volatility. To navigate this landscape, Beijing should reassess high-risk alignments—specifically with Russia—while actively strengthening cooperation with the EU, Japan and other stable middle powers on the basis of universal values. – Professor, Department of History, Peking University (《海外看世界》, 30 January)

Xu Jilin (许纪霖): Mark Carney’s Davos address represents a striking “Middle Power Declaration”, highlighting the rise of a new “Second World” comprising Canada and European NATO states, positioned between a US-aligned “First World” and a “Third World” composed of China, the BRICS, and the Global South. This revived “Three Worlds” framework suggests that WTO-centred globalisation is giving way to a plural order of overlapping trade blocs, supply chains and strategic spheres. In this emerging alignment, the support of middle powers will be decisive: whoever secures cooperation with the “Second World” will gain the upper hand in global competition. – Professor, Department of History, East China Normal University (Personal Account, 22 January)

Zheng Yongnian (郑永年): Against a trend towards spheres of influence, China remains resistant to establishing a “separate kitchen” and opts to “inherit” the Western-led global order by upholding globalism and free trade. Latin America’s right wing, while historically close to the US, is unlikely to seek a sharp reduction in ties with China due to their commercial interests; meanwhile the US is unlikely to risk provoking a more muscular Chinese posture in East Asia in response to China being expelled from Latin America. China does not use the BRI as a geopolitical instrument for expelling American interests from recipient countries, but as a “livelihood-oriented” project anchored in a non-exclusionary “Tianxia” philosophy. – Founding Director, Institute for International Affairs, The Chinese University of Hong Kong, Shenzhen (South China Morning Post, 12 January)

Wang Wen (王文): The notion that a new Monroe Doctrine could push China out of Latin America is simplistic, and underestimates the depth of Chinese economic and financial involvement in countries such as Chile, Peru and Brazil. Although overall American investment in South America remains larger, Chinese capital is concentrated in infrastructure, energy, and mining—sectors essential for job creation and long-term regional stability—meaning China’s market now safeguards entire export sectors. This is not something that the US can replace, and China will respond to threats to its investments with economic and financial escalation. – Dean, Chongyang Institute for Financial Studies, Renmin University of China (The Diplomat, 17 January)

---

2. US-China

---

Yan Xuetong (阎学通): Claims that the US–China trade war has entered a “truce” [休战] are misleading, as Trump’s second term confirms that competition, not stabilisation, remains the defining logic: comprehensive tariffs have been paused, but targeted economic, technological and corporate measures are intensifying amid counter-globalisation pressures [逆全球化]. High-level visits may reduce the risk of war by reinforcing crisis-management understandings, but they will not end rivalry or produce deep cooperation, while the much-invoked “G2” is best understood as a bipolar order [两极格局] rather than any form of joint global leadership or cooperative governance. Trump’s deal-making approach—disregarding treaties and prioritising personal legacy—makes bilateral agreements unlikely to yield meaningful results during his tenure. – Dean, Institute of International Relations, Tsinghua University (Phoenix, 15 January)

Ni Feng (倪峰): The latest US National Security Strategy marks a significant adjustment in priorities but not in purpose. For China, it should be read as a tactical retreat designed to sustain long-term pressure on Beijing rather than reduce hostility. Strategic emphasis shifts from comprehensive global leadership to the defence of ranked “core national interests” [核心国家利益], yet beneath this rhetoric of “America First” and strategic contraction lies a calculated smokescreen: a move towards a cost-efficient “hybrid strategy” [混合战略] that preserves US hegemony by conserving resources, externalising costs, and waging a protracted war of attrition [消耗战] against China, while abandoning liberal internationalism without relinquishing power politics. – Director, Institute of American Studies, Chinese Academy of Social Sciences (Qiushi, 16 January)

Wu Xinbo (吴心伯): Sino–US relations are entering a new historical turning point after a decade of intensified strategic rivalry, as the contest shifts towards more controlled interaction within a framework of long-term peaceful coexistence [长期和平共处]. A growing strand of US strategic thinking now recognises the limits of pressure and containment, making acceptance of China’s sustained rise—and global leadership in certain domains—unavoidable, while prioritising conflict avoidance, especially over Taiwan, as a core priority. Future cooperation is set to persist on a narrower, interest-based footing, with pragmatic engagement and people-to-people exchanges [人文交流] remaining essential to long-term stability and resilience. – Director, Centre for American Studies, and Dean, Institute of International Studies, Fudan University (World Affairs, 15 January)

Ding Yifan (丁一凡), Jin Canrong (金灿荣) and Di Dongsheng (翟东升): The 2025 tariff war is proof that China now possesses the economic resilience, strategic depth and policy coherence to withstand sustained US pressure. While the three scholars share the view that the Trump administration misjudged its own leverage and China’s vulnerabilities, each emphasises a different dimension: Ding highlights structural economic factors, US fiscal and industrial weakness as well as Beijing’s successful trade diversification; Jin focuses on the long arc of Sino-American rivalry and the shift from strategic defence to strategic stalemate [战略相持]; Di stresses China’s “fight first, then talk” [先斗后谈] approach and the geopolitical logic of markets, strategic partners and long-term planning. – Development Research Centre of the State Council; Renmin University of China (Guancha, 3 January)

Diao Daming (刁大明): Trump’s second term is increasingly defined by a drive for personal historical legacy, with policy choices oriented less towards restoring American greatness than towards securing himself an enduring place in US history. He reframes MAGA through an idealised vision of the late nineteenth-century McKinley era, treating strategic restraint and territorial symbolism as a preferred order—an interpretation now codified in the recently released National Defence and Security Strategies, which signal a recalibration of foreign-strategy logic. Even ostensibly aggressive moves remain tightly managed: the Venezuela operation adopted a “minimally invasive” approach [微创手术式], balancing shock effects against domestic war aversion within the MAGA base and prioritising legacy construction while limiting long-term political risk. – Deputy Dean, School of International Studies, Renmin University of China (Phoenix, 25 January)

---

3. Europe

---

Zheng Ge (郑戈): Under Trump 2.0, Europeans have lost their “paradise” [乐园]—the rules-based legal order on which they relied to balance America, affirm their identity and maintain security. As “Trumpism” reclaims the “hammer” [锤子] for naked transactional use, Europe finds itself in an “extremely humiliating yet helpless position” [极度屈辱却又无可奈何的境地], able only to watch as Trump gradually levers Greenland away. For China, the lesson is sobering: no nation can harbour illusions that merely becoming a “rule-abiding star pupil” [规则优等生] will secure safety and respect—without commensurate hard power, rules alone will not protect you. – Professor, KoGuan Law School, Shanghai Jiao Tong University (Personal Account, 18 January)

Meng Weizhan (孟维瞻): Fukuyama’s prescription for Europe to stand firm against Trump confronts two fundamental difficulties: first, Trumpism is itself a product of liberal values pushed to their extreme [物极必反]; second, confrontation is not feasible in reality. Europe’s recent foreign policy has fallen into a pattern of striking out in all directions yet losing ground everywhere, leaving it poorly positioned for confrontation. Whereas the US under Trump has adopted a more pragmatic and flexible diplomatic posture, Europe remains trapped in an ideological, nineteenth-century mindset—presuming itself the centre of world civilisation and unable to coexist with differently minded powers. – Associate Professor, Institute for Advanced Study in the Social Sciences, Fudan University (Guancha, 23 January)

Li Guanjie (李冠杰): Keir Starmer’s steadfast commitment to a rules-based international order and the prioritisation of NATO reflects a strategic assessment that British global influence is best projected through collective multilateral frameworks, yet this stance has precipitated a profound “misalignment” [错位] within the Anglo-American “special relationship”. Consequently, Westminster is constrained to a delicate balancing act, attempting to mitigate the impact of Trump’s “big stick” [大棒] diplomacy to ensure it lands only as a “gentle tap” [轻轻敲击], while simultaneously asserting its strategic red lines. – Research Fellow, British Studies Centre, Shanghai Academy of Global Governance and Area Studies, Shanghai International Studies University (Global Times, 29 January)

Song Luzheng (宋鲁郑): The far right’s pragmatism, domestic focus, and antipathy to “values”-driven diplomacy mean that a far-right victory in Europe is one of the strongest possibilities for improving relations with China. Current relations have deteriorated beyond even US–China friction, with Europe going further than Washington on Taiwan and economic “decoupling”, partly reflecting Europe’s belief that, unlike Russia or the US, China challenges the EU’s interests, values, and influence on a global scale. On France–China relations: France’s current circumstances leave no room for Gaullism to operate, with France “kidnapped” [绑架] by EU unity and lacking leverage. – Research Fellow, China Institute, Fudan University (Guancha, 2 January)

Dong Yifan (董一凡): US–Europe tensions over issues such as Greenland have prompted Europe’s far-right to lower the volume of its former “mutual admiration” [惺惺相惜] with US conservatives, as “America First” and “Europe First” narratives come into direct conflict. Yet conflict between Europe’s far-right and the traditional establishment is unlikely to ease simply because Europe faces shared external challenges. The far-right will face greater difficulties in acquiring political resources and attaining governing positions, and some far-right forces already in power are likely to face major electoral challenges as uncertainty grows. – Associate Research Fellow, Academy of Country and Area Studies, Beijing Language and Culture University (Global Times, 22 January)

---

4. East Asia

---

Xiao Gongqin (萧功秦): Trump’s Monroeist tendencies must not be misread as a strategic opening for reunification by force, as his inherent capriciousness ensures that domestic and international pressures would trigger a severe reactionary shift in American policy. Given that bilateral relations have reached a precarious pre-war state lacking only a bloodshed incident to ignite direct conflict, Beijing must avoid a “war trap” [战争陷阱] vulnerable to American levers such as energy blockades, software termination and debt defaults. Consequently, political elites and intellectuals must exercise immense strategic patience and avoid escalatory triggers. – Retired professor, formerly of Department of History, Shanghai Normal University (和众生, 13 January)

Zhang Weiwei (张维为): The evident US retreat from sustaining global hegemony, underscored by Washington’s latest National Security Strategy, creates mature conditions to accelerate Taiwan reunification and “act decisively” [釜底抽薪] when the opportunity arises, thereby frustrating Japan’s “militarist revival” [军国主义复活]. To carry out this acceleration, a combination of military, economic and institutional measures should be employed, including normalising legal sanctions against Japanese politicians who visit the Yasukuni Shrine. In parallel, the collapse of a pro-independence regime [“台独”政权] and prosecution of its representatives would cause independence ideology to fade rapidly in Taiwan, akin to the post-collapse de-legitimisation of fascist regimes. – Director, China Institute, Fudan University (《这就是中国》Episode 316, 12 January)

Wang Junsheng (王俊生): President Lee Jae-myung’s state visit signals that bilateral relations are on a positive trajectory. However this does not alter China’s approach to the balance of power on the Korean peninsula, and sustained improvement remains contingent upon South Korea ensuring its alliance with the United States does not compromise China’s national interests. Common economic interests are concentrated in rare earth supply chain stability, high-tech AI collaboration and the silver economy within their respective ageing societies. Beijing’s stance on the Korean Peninsula is still based on the “double suspension” [双暂停] of North Korean missile tests and US–South Korean military exercises. – Researcher, National Institute of International Strategy, Chinese Academy of Social Sciences (《中國評論 》, 9 January)

---

5. Chinese Economy

---

Huang Yiping (黄益平): As China’s exports increasingly threaten other countries’ industries, they are less able to mask the domestic “strong supply, weak demand” imbalance. Consequently, a policy framework that exclusively prioritises “New Quality Productive Forces” while neglecting domestic absorption risks intensifying this macroeconomic distortion. Resolving this requires moving discussions on the supply-demand imbalance away from a manufacturing-centric framing and towards services, given manufacturing’s limited potential for powering domestic employment and demand; internationally, this necessitates a shift towards “high-level opening up” [高水平开放] and shared growth with economic partners. – Dean, National School of Development, Peking University (China Finance 40 Forum, 27 January)

Peng Wensheng (彭文生): Although economies of scale are fundamental to sectors such as green energy—which, unlike monopolistic fossil fuels, flourishes under full competition—industrial production in China exceeds the market’s capacity for consumption, paralleling the pre-Depression conditions of 1920s Fordist America. China’s “external circulation” [外循环] loop is already shifting away from investment and exports into Western countries and towards the Global South and Russia, while building a robust social security system provides a critical conduit for invigorating domestic demand, fortifying “internal circulation” [内循环]. Within China’s bank-centric financial system, private credit issuance remains stifled by systemic debt, necessitating a strategic pivot towards the provision of exogenous money through state-led fiscal expansion. – Chief Economist, China International Capital Corporation (CICC) Research Institute (Personal Account, 12 January)

Lu Feng (卢锋): Persistent structural imbalances within the Chinese economy, characterised by the officially recognised challenge of “strong supply and weak demand” [供强需弱], indicate that traditional fixes like expanding investment, introducing capacity quotas or relying on exports have reached a threshold of diminishing returns. Addressing this requires a strategic pivot: the government should aim to shift the equivalent of 3% of GDP from public investment—which accounted for 26.35% of GDP in 2023—directly to consumption by reallocating funds away from land development and infrastructure. Such a transition is essential to transform the current “inhibited growth” [抑制型增长] into a “mutually reinforcing” [相互促进] supply-demand loop, in which enhanced social security and resident income provide the demand needed to sustain ongoing technological and industrial advancement. – Emeritus Professor, National School of Development, Peking University (Peking University National School of Development, 15 January)

Di Dongsheng (翟东升): China’s economy presents a “paradox”, in which global industrial dominance coexists with domestic deflation and unemployment, driven by two restrictive “institutional shackles” [制度枷锁]. The first is the 1994 tax-sharing [分税制] reforms that forced local governments to rely on land finance (inflating housing prices and suppressing other forms of consumption), a situation the central government should amend by centralising public expenditure and social welfare responsibilities. The second is the People’s Bank of China Law, which prohibits the central bank from purchasing domestic sovereign debt and has instead constrained it to purchasing large quantities of US treasuries. This constraint should be fixed by updating legislation to permit domestic bond purchases by the central bank. – Professor and Associate Dean, School of International Studies, Renmin University of China (Thinking001, 18 January)

Li Daokui (李稻葵): China’s manufacturing is encountering bottlenecks in tepid domestic demand, structural overcapacity and sluggish conversion of frontier laboratory research to industrial application. Mitigating these pressures requires: (1) the abolition of restrictive consumption regulations (such as urban motorcycle bans and low-altitude airspace restrictions); (2) “orderly global expansion” [有序出海] of enterprises to alleviate domestic saturation; (3) a market-led capacity quota trading system—a form of “inverse industrial policy” [逆产业政策]—to rationalise mature sectors; and (4) steering investment resources towards high-risk future industries to bridge the existing research-application gap. – Director, Academic Centre for Chinese Economic Practice and Thinking, Tsinghua University (Tsinghua Institute for China Sustainable Urbansation, 15 January)

Xu Mingqi (徐明棋): China’s strategy for managing its $1 trillion trade surplus must prioritise expanding imports, rather than reducing exports through “disruptive” measures like currency appreciation, removing export tax rebates or imposing export tariffs. Strategic rebalancing entails: (1) lowering import tariffs and licensing restrictions for non-security-related goods; (2) supporting Chinese e-commerce platforms in constructing overseas warehouses to bypass the costs and barriers of foreign importers operating in China; (3) dismantling domestic monopolies in agricultural sectors; and (4) exploiting deflation in basic foodstuff prices to expand the intake of more varied imported goods, potentially also stimulating consumption and alleviating international frictions. – Senior Researcher, Shanghai Academy of Social Sciences (Guancha, 9 January)

Zhao Jian (赵建): In the absence of fundamental improvement in the property sector and legacy manufacturing, China’s stock market gains are likely to remain sporadic and concentrated in specific conceptual hotspots favoured by institutional and state-backed investors. This recent frenzy, reminiscent of the 2024 “924” rally, has seen “national team” [国家队] and major institutions staking positions in strategic areas like robotics and AI. However, official wariness of overheating and an inevitable sell-off as investors seek to lock in profits, means that this rally is likely to follow the prior pattern of frenzied gains followed by a sharp adjustment—with few gains for retail investors. – President, Xijing Research Institute (西经研究院, 13 January)

---

6. Governance and Society

---

Wang Di (王笛): As opportunities for China’s youth are increasingly constricted by an entrenched examination system centred on the Gaokao, China needs a radical institutional overhaul comparable in scale to the 1905 abolition of the Imperial Examination System. The Gaokao acts as a mechanism that relegates 80% of students to the role of “accompanying runners” [陪跑] for an elite 20%, fostering “overgrown children” [巨婴] who excel at testing but lack essential life skills and creative agency. In the era of generative artificial intelligence, such pedagogical models are rendered fundamentally obsolete, meaning that safeguarding future economic prospects requires a societal shift towards empowering independent thinking and the cultivation of self-worth beyond rigid, elite-defined metrics of success. – Chair Professor, Department of History, University of Macau (Scholar, 11 January)

Zhang Dandan (张丹丹): The symbolic signalling of the Meituan Pension Subsidy Scheme, which pivots towards a hybrid model of shared contribution responsibility between the platform and the worker, carries greater weight than the immediate financial disbursement itself. By establishing a partially platform-subsidised framework, the initiative points to a new social security model for workers in the gig economy. This institutional scaffolding serves to mitigate the profound social alienation [社会性疏离] prevalent among the roughly 80% of Meituan drivers who work irregular hours and who otherwise risk falling into a permanent cycle of precarious “gig survival” [零工生存]. – Professor and Deputy Dean, National School of Development, Peking University (Caixin, 2 January)

Nie Huihua (聂辉华): The central government is increasingly able to directly “pierce through” to the bottom tier of local administration using artificial intelligence and big data, transforming tech platforms into “quasi-government” [准政府] entities as critical tasks are outsourced. Digital monitoring now enables the centre to bypass local information asymmetry to ensure environmental compliance, while the rise of “self-media” [自媒体] subjects local incidents to immediate national scrutiny. Conceptually, this shift strengthens vertical administrative “lines” [条条] over horizontal “blocks” [块块] in the Chinese state’s traditional architecture. – Professor, School of Economics, Renmin University of China (New Economist, 23 January)

Lü Dewen (吕德文): The controversy over the ban on wood- or coal-burning heating in Hebei is revealing of a governance trend towards irrational local policy-making, driven by a rigid top-down accountability system marked by intense “downward responsibility pressure”. To avoid the political consequences of mistakes, local officials often adopt “crude” administrative methods that prioritise target fulfilment over public welfare (such as northern localities banning coal, and southern localities banning livestock rearing). As local government shifts from economically focused “production governance” [生产治理] to “life governance” [生活治理] concerned with citizens’ day-to-day lives, it is paramount that flexibility in implementation is maintained in order to mitigate the risk of conflict. – Professor, School of Sociology, Wuhan University (Guancha, 7 January)

---

7. Technology

---

Gu Wenjun (顾文军): As a chip shortage in China produces a seller’s market and foundries such as TSMC vacate mature production processes in favour of high-end chips, Chinese foundries are entering a significant new boom period in legacy chips. To ensure sustained profitability, production should be moderately concentrated among existing producers to prevent destructive price wars. Simultaneously, companies must transition from generic low-value silicon towards high-margin specialised products to capture unique market segments. For long-term supply chain security, China must commit to favouring domestic equipment for its infrastructure build-out, regardless of shifting sanctions regimes. – Chief Analyst, ICwise (Caixin, 20 January)

Gu Wenjun (顾文军): Although the emergence of AI has offered a rare opportunity to cultivate a new domestic ecosystem anchored in home-grown chips, explosive global investment has caused the gap between Chinese production and international benchmarks to widen [差距在加大], rather than shrink. Ensuring the existence of a domestic chip sector remains paramount for national security, and failure to maintain a relentless focus on improving hardware risks creating a technological disparity that eventually becomes so large as to be “insupportable” [无法承受之重] for the Chinese AI sector. Consequently, patient capital must remain anchored in equipment and fabrication to prevent the rapid ascent of artificial intelligence from being undermined by a fragile hardware foundation. – Chief Analyst, ICwise (Caixin, 28 January)

Dai Mingjie (戴明洁): Manus’s departure from China represents a commercially rational response to the constraints of US investment scrutiny and hardware restrictions, exacerbated by a domestic market characterised by “involutionary competition” [内卷式竞争], overregulation and poor monetisation potential. To retain AI unicorns, policy must pivot towards: (1) fostering a resilient, market-oriented venture capital system to substitute for restricted foreign investment; (2) providing public-access compute and datasets to lower operational overheads; and (3) establishing “tech innovation special zones” [科创特区] that would permit deregulated pilots, granting innovative firms the administrative flexibility needed for internationalised market exploration. – Researcher, Institute of Public Policy (IPP), South China University of Technology (IPP Review, 9 January)

SINIFICATION’S JANUARY POSTS IN REVIEW

---

---

---

N.B. Sinification features a broad spectrum of voices, ranging from conservative hawks and state propagandists to more moderate and liberal thinkers. Readers are encouraged to bear this diversity in mind when engaging with the content.