November Digest | Part 1 - Economics, AI and Society
Chinese Economy | Society and Governance | Young People | AI and Chipmaking
Today’s post offers a round-up of noteworthy analyses and commentaries from November.
Peng Wensheng on the new model for recycling trade surpluses through overseas expansion.
Luo Zhiheng on the shift of China’s export profile amid trade tensions and global industrial upgrading.
Zhang Jun on the vital importance of addressing deflation and low consumption during the next five years.
Liu Yuanchun on why low service-sector consumption, rather than low consumption overall, is the salient issue in China’s domestic economy.
Weng Yi on what the expanded benefit contribution for delivery drivers reveals about China’s emerging social security model.
Miao Yanliang on the window of opportunity for RMB exchange rate liberalisation offered by the dollar’s downward cycle.
Wang Yuzhu and Zhang Ziyi on the impracticality of safeguarding US dollar hegemony through stablecoin issuance.
Li Yang on the shift from bank deposits to capital markets as the main source of capital in the Chinese economy.
Zheng Yongnian on the need for a new urban model to improve liveability and prevent demographic decline.
Sun Ge on how community experiments in rural areas offer an alternative path for China’s future development.
Sun Liping on why global socio-economic trends will benefit the traditional left in the long term—despite recent right-wing populism.
Yao Yang on the need for moral, as well as institutional and legal, constraints on political leadership.
Lu Keling on why over-standardisation means that the elderly care sector struggles to retain workers.
Xu Jilin on the differences between the current Generation Z protests and political protest by previous generations.
Chen Zhiwen on the salutary drop in postgraduate enrolment this year.
Artificial Intelligence & Chipmaking:
Liu Qing on the decline of humanist values as AI simplifies its users’ experience of the world.
Xiao Qian on the global emergence of two US-led and China-led AI ecosystems.
Lu Wei on how institutions and narratives shape US-China AI competition across the globe.
Gu Wenjun on the potentially fatal capital drought faced by Chinese semiconductor SMEs.
1. Chinese Economy
Peng Wensheng (彭文生): In the context of geopolitical developments, China’s “dual circulation” (双循环) framework is being reconfigured. The old “closed loop” in external circulation was characterised by exporting consumer goods to the US and investing the surpluses in US treasuries. A new closed loop is now emerging, composed of exporting capital goods and intermediate goods to emerging economies and BRI countries, and then investing the surpluses in development loans and overseas direct investment as Chinese enterprises establish production in those countries. On the internal circulation side, weak domestic demand and excessive savings must be addressed in order to maintain the long-term sustainability of this model. – Head of Research Institute, China International Capital Corporation (中金公司, 17 November 2025)
Luo Zhiheng (罗志恒): China’s export resilience amid trade tensions is driven by a shift from exporting consumer goods to capital goods and intermediate goods such as machinery and parts, alongside a broader diversification towards emerging markets. Strong demand for machinery and transport equipment in industrialising economies in ASEAN, Latin America and Africa provides a powerful new growth anchor. At the same time, although labour-intensive consumer goods are vulnerable to tariffs and de-risking, the role of Chinese machinery and components embedded upstream in US/EU supply chains is more difficult to substitute, with their market share increasing even as finished goods are hit by trade tensions. – Head of Research Institute, Yuekai Securities (粤开证券, 9 November 2025)
Zhang Jun (张军): The goal of building a “modern industrial system” should not distract from the importance of boosting domestic demand, which has become the main growth constraint amid deflationary pressure. Unlocking domestic demand depends largely on reforming the low-wage, low-cost service sector and building unified systems for income, medical and housing security. In monetary policy, the central bank should lower interest rates to target higher inflation at 2% and the central government should take on more fiscal responsibilities from local government, reducing the debt drag on the economy. – Dean, School of Economics, Fudan University (万博新经济观察, 4 November 2025)
Liu Yuanchun (刘元春): China’s core challenge is not insufficient overall consumption but the low share of household consumption and weak service-sector spending, both far below international norms and rooted in structural factors. This is partly due to high government consumption and real estate investment crowding out other forms of consumption. This necessitates a shift from an investment-oriented to a service-oriented government, alongside stronger social protection and greater national diversion of state-owned enterprise profits away from re-investment and into society. – President, Shanghai University of Finance and Economics (中国宏观经济论坛, 7 November 2025)
Weng Yi (翁一): Expanding social-security and pension contributions for delivery riders reveals important trends in China’s emerging social security model under a “pilot first, then scale” (先试先行、稳步推广) framework. A low-threshold model built on the principles of universality and no locality restrictions aligns social security with the realities of mobile labour—allowing flexible work to function better as the “labour reservoir” (蓄水池) and “social stabiliser” (社会稳定器) of the Chinese economy. This model assigns the state a regulatory and coordinating role while requiring platforms to internalise worker protection into corporate strategy, aligning their commercial value with social value. – Senior Research Fellow, Digital Economy Think Tank (财新, 3 November 2025)
Miao Yanliang (缪延亮): Unlike in 2018 when they boosted the dollar, Trump’s economic policies have triggered an equity–bond–currency triple sell-off, eroding confidence in US Treasuries as safe assets and opening a strategic opportunity for RMB exchange-rate liberalisation. Past experience shows that RMB liberalisation attempts during dollar upcycles tended to fail, whereas reforms undertaken in dollar downcycles have generally succeeded. China may use the current opportunity to increase exchange rate flexibility and carry out domestic fiscal restructuring, increasing the RMB’s attractiveness as an international asset. – Chief Economist, CICC Research Department (中金点睛, 14 November 2025)
Wang Yuzhu (王玉柱) & Zhang Ziyi (张子奕): Although dollar stablecoins remedy earlier cryptocurrencies’ lack of collateral and high volatility, they are not a solution for boosting dollar hegemony. The centralisation of dollar stablecoins within US regulation erodes their “decentralised” advantages and will prompt other states to protect their monetary sovereignty by adopting stricter regulatory measures. Furthermore, with the credibility of dollar stablecoins ultimately tied to confidence in the Federal Reserve’s issuance backing, they do not alter the nature of the two weakening pillars of US dollar credibility: US industrial capacity and international demand for the dollar. – Researcher, Shanghai Institutes for International Studies (SIIS); Postdoctoral Researcher, East China Normal University and SIIS (《国际展望》, Issue 6)
Li Yang (李扬): China’s financial system is undergoing a long-term structural shift away from a banking-centred, interest-spread-driven model towards a capital-market-driven model built on asset management, equity financing and mergers and acquisitions. Interest-rate declines and successive cuts to the reserve requirement ratio have pushed funds from bank balance sheets into capital markets, activating a broader shift from short-term fund-raising to long-term financing. To consolidate this, more diversified financial infrastructure should be developed by increasing the range of financial products, rewarding shareholders through increased shareholder buybacks and dividends, and instituting a greater emphasis on corporate governance. – Chairman, National Institution for Finance and Development (新经济学家, 28th November 2025)
2. Society & Governance
Zheng Yongnian (郑永年): Overbuilt megacities—shaped by demolition-led renewal, hukou restrictions and exclusionary urban cultures—stifle everyday economic vitality and hasten demographic decline. This emphasis stems from a culture of cities dominated by the idea of the “fortified settlement” (城) over the “market” (市)—the two characters composing “city” (城市)—a pattern that undermines openness and long-term economic sustainability. The priority should be to develop “fertility-friendly cities” (宜育城市) through projects like the county-level urbanisation seen in Guangdong’s “One Billion Project” (百千万工程)—developing rural areas to create vibrant living spaces with lower economic pressure, and where households can raise children and build meaningful lives. – Director, Institute for International Affairs, Chinese University of Hong Kong (Shenzhen) (大湾区评论, 31 October 2025)
Sun Ge (孙歌): As a response to local elites (or “county Brahmins”) monopolising resources and opportunities, a new bottom-up model of development based on decentralised ideals and giving greater autonomy to the grassroots is emerging. The village of Longtan, Fujian, has developed diverse cultural and commercial activities under the auspices of artists and intellectuals, attracting new settlers, returning locals and digital nomads—fed-up with the constrained pathways and cut-throat competition of large urban spaces. The residents adopt a “multi-layered” (叠加式) approach to work, whereby people are not funnelled into specific professions but rather are able to work across multiple areas of interest and mould their communities into true public spaces. – Research Fellow (retired), Institute of Literature, Chinese Academy of Social Sciences (文化纵横, 4 November 2025)
Sun Liping (孙立平): Despite today’s global rightward shift, long-term structural forces point to a future inevitably dominated by the traditional left. The current rise of the right is a temporary corrective to three missteps of the left: naïve globalisation, the internalisation of civilisational conflict and identity politics. Looking ahead, technological change will widen wealth gaps and generate increasing numbers of people considered “useless” as wealth creation becomes detached from labour. These pressures will make expanded social welfare and social protection unavoidable. – Professor, School of Social Sciences, Tsinghua University (老孙荐读, 4 November 2025)
Yao Yang (姚洋): Rule of law alone is insufficient for effective governance because legal systems possess inherent incompleteness. This incompleteness creates structural gaps which institutional and legal designs—such as those espoused by the assumptions of Why Nations Fail—cannot fill, as shown by political challenges in the US. A fuller system requires complementary “rule by virtue” (德治) alongside “rule by law” (法治), establishing a merit-based system for official selection and a virtue-based system for constraining official conduct—akin to the “inwardly legalist and outwardly Confucian” (儒表法里) formula applied to studies of dynastic China. – Dean, Dishui Lake Advanced Finance Institute (上财滴水湖高金DAFI, 3rd November 2025)
Lu Keling (卢克玲): The expansion of China’s elderly care market is being hampered by severe labour shortages and high turnover as frontline workers are overburdened by programmatic care processes. Detailed, standardised procedures for tasks such as feeding bedridden older people increase workload, emotional strain and time pressure—even though they are designed to reduce risk and enhance “scientific care”. Meanwhile, the medicalisation of services demands that care workers master complex clinical knowledge and multiple skills, risking their alienation into mechanical “care tools” and turning older bodies into objects for implementing medical indicators. – Assistant Research Fellow, Institute of Public Policy (IPP), South China University of Technology (IPP评论 , 10 November 2025)
Insights and analysis on China’s global ascension: China’s reach extends from boardrooms to trade blocs, steering investment, innovation, and strategic alliances across the globe. Authored by Pulitzer Prize-winning journalist Andy Browne, Semafor China will bring sharp analysis on how Beijing’s power is reshaping the new world economy. Be among the first—subscribe for free.
3. Young People
Xu Jilin (许纪霖): Contemporary youth live within the concrete and immediate world, rather than among the abstract narratives favoured by older generations. As in the global “Generation Z” protests, younger people tend to avoid grand narratives such as “freedom” and “democracy” but become animated by specific, present issues arising from their lived experience. Many young Chinese are locked into a regimented schooling and work system that has drained enthusiasm and, superficially, led to a “lying flat” phenomenon. However, “while the body lies flat the heart does not” (身躺心不平) and whenever enabled to engage in “self-chosen” courses, internships and social research, they can exhibit strong motivation. This indicates that, rather than a lack of passion, the key problem could be limited autonomy. – Professor, Department of History, East China Normal University, (南风窗, 6 November 2025)
Chen Zhiwen (陈志文): China’s three-year fall in postgraduate entrance exam registrations reflects a broader return to rational decision-making after pandemic-era economic uncertainty fed a “postgraduate fever” (考研热). The current contraction stems from diminishing confidence in postgraduate study as a guaranteed employment pathway, the rising prominence of professional master’s programmes that sharpen investment–return calculations, and stricter academic quality control deterring those who are unsuited to careers in research. – Chief Editor, China Online Education (财新, 24 November 2025)
4. Artificial Intelligence & Chipmaking
Liu Qing (刘擎): AI is transforming human perception by providing effortless, high-intensity sensory experiences, eroding traditional humanistic values as a post-human value system emerges. The world is becoming flattened and compressed into labels that simplify the complexity of experience into easily consumable forms, while pushing youth into a “lightness of being” (淡人) in which they operate on “low power”, shield themselves from emotional entanglements, and seal off their feelings to avoid inner conflict. Instead of dominating humanity vioviolently, it is more likely that AI will make humanity its “pet”. – Zijiang Distinguished Professor, East China Normal University (學人, 8 November 2025)
Xiao Qian (肖茜): As a result of the contrasting US and Chinese approaches to AI ecosystem design and regulation, the global AI ecosystem is on track to undergo a schism. Whereas Washington’s AI plan relaxes domestic regulation, promotes “sovereign AI” led by a few tech giants and a full-stack export model designed to set global ecosystem standards, Beijing’s approach stresses an open-source and development-oriented approach that integrates AI across several domains and applications under an “AI+” model. This more inclusive model blends interoperability with autonomy, allowing Global South countries to develop their own capacity. – Vice Dean, Institute for AI International Governance, Tsinghua University (世界知识, 5th November 2025)
Lu Wei (卢伟): Sino-US competition over global AI ecosystems, aside from technical breakthroughs and investment gaps, is being shaped by narratives and institutions. Washington is using export controls and “small yard, high fence” coalitions to link standards to national security narratives and label the PRC’s participation in standard setting as ideological manipulation, thereby legitimising China’s exclusion. In contrast, Beijing’s leadership of the 2024 UN resolution on AI capacity building and AI standardisation initiatives, together with its expanding AI cooperation with the Global South, seeks to counter this ideological framing by promoting a “tech for good” (科技向善) vision of AI governance. – Director-General, Research Department of Techno-Economy, Development Research Centre of the State Council (《亚太安全与海洋研究》, Issue 5)
Gu Wenjun (顾文军): Small and medium-sized semiconductor equipment companies in China are facing a “life or death” moment as many smaller firms are expected to struggle for survival next year. Their challenges stem from entrenched dominance of global suppliers—which still rely on China for much of their market in spite of export controls—and national champions that dominate customer relations and state procurement opportunities, with the weaker bargaining positions of semiconductor SMEs leading to financing constraints. Meanwhile, capital markets overwhelmingly favour AI and compute over semiconductor manufacturing, which has higher capex costs and slower returns. – Chief Analyst, ICWise (财新, 11th November 2025)
SINIFICATION’S NOVEMBER POSTS IN REVIEW
The EU's "Rare Earth Anxiety" According to Zhao Junjie
The confidence on display in Zhao’s piece reflects Beijing’s broader reluctance to move an inch in negotiations with Brussels — a stance he crystallises in his concluding admonition that “European leaders would be well advised to think twice [三思而后行] and handle bilateral relations with China in a rational and prudent manner.” Though often unfair, if not misguided, Zhao’s commentary contains a few uncomfortable barbs — noting, for instance, that...
China's Strategy of Industrial Abundance: an Imperial Banquet, not Molecular Gastronomy
Echoing the previously covered analysis by public policy specialist Huang Ping (黄平) that China’s advantage in AI derives from its vast “systemic capacity” and pool of industrial demand, management theorist Sun Xi (孙喜) presents a lucid exposition here of how such an industrial system operates—theoretically and in practice. As an overall strategy, he argues that funnelling state funds into research-led frontal assaults on technology “chokeholds” is less effective than...
Briefing: Takaichi Sanae and China–Japan Relations
A small group of more sanguine commentators emphasise pluralism within Japan and argue that shifting power balances will eventually force the right wing to recognise that their hardline anti-China policies are unsustainable. Fringe nationalist voices spell out some alarming “policy options”. One argues that if Japan intervenes in a Taiwan war, China would be justified in bombing the Yasukuni Shrine, pre-empting Japan’s nuclear facilities and annihilating its navy. Another contends that...
N.B. Our newsletter 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.