The report enters an already charged debate. In Europe, the U.S., and other advanced economies, China’s industrial rise is often explained less by efficiency than by state support: subsidies and cheap credit, the argument goes, have allowed less productive Chinese firms to undercut more innovative competitors on price.

But a new study by Zhu He and Guo Kai of the China Finance 40 Forum (CF40) challenges that premise. Based on annual reports from more than 5,300 non-financial A-share listed companies between 2018 and 2025, it finds that China’s emerging industries are not especially debt-dependent, do not rely mainly on long-term bank credit, and receive only a minority share of government subsidies. Much of the new borrowing, instead, has flowed to old-economy sectors such as construction, utilities, and transport.

With the authors’ authorisation, we are pleased to present the report in full below.

ZHU He, Research Fellow at the CF40. With over ten years of experience in macroeconomic research, Zhu He specializes in tracking domestic and international macroeconomic trends and capital market dynamics. He provides unique insights into economic policy and asset allocation strategies and is a key contributor to CF40’s Macroeconomic Policy Quarterly Report, which has gained significant attention from the market and policymakers. He holds a PhD in Economics from the Chinese Academy of Social Sciences and a postdoctoral degree from Peking University.

GUO Kai, Executive President and Senior Fellow of the CF40. Before joining the CF40, he was an economist at the International Monetary Fund in Washington DC and then worked at the People’s Bank of China in various capacities, including leading positions in the Monetary Policy Department and the International Department. His main research areas include the Chinese economy and its macroeconomic policies as well as international finance. He is the author of three popular Chinese economics books and multiple academic papers in various English and Chinese journals. He holds a PhD degree in economics from Harvard University.

Founded in 2008, China Finance 40 Forum (CF40) is a leading independent think tank focused on policy research in macroeconomics and finance. Its core membership consists of 40 leading experts from government, financial institutions and academia around the age of 40. In 2021, the CF40 Institute was established to strengthen CF40’s research capacity. In 2024, the CF40 Institute introduced an original research product, CF40 Research, aimed at providing independent insights into China’s macroeconomy, policy trends, financial market dynamics, and global affairs. CF40 Research currently features English product series, including Policy Brief, Commentary, and Podcast.

Why the OECD’s Subsidy-Centric Narrative of China’s Emerging Industries Is Increasingly Flawed and Outdated

ZHU He, GUO Kai

^{CF40 Institute}

Abstract: In a recent report, the OECD contends that the rise of China’s emerging industries has rested largely on government subsidies—with lending from the state-owned banking system as a principal channel—and that these subsidies, more than any other factor, account for the international competitiveness of Chinese firms. We examine this contention using the 2018–2025 annual reports of more than 5,300 non-financial companies listed on China’s A-share market. Classifying firms by R&D intensity and profitability, we divide the sample into a “new economy” and an “old economy”; the former corresponds closely to what the OECD designates as China’s emerging industries, namely electric vehicles, batteries and solar, together with computing, semiconductors and related sectors.

We then assess each channel through which a subsidy-driven account would be expected to manifest: the industries to which new interest-bearing debt flows, the maturity structure of that debt, the extent to which internal funds cover firms’ capital expenditure, the balance between equity and debt in external financing, and the distribution of government subsidies. On each dimension, the evidence indicates that the proposition that China’s emerging industries depend on subsidies is both outdated and misguided. Relative to the old economy, the new economy carries less interest-bearing debt and of shorter maturity, generates more internal funds, and finances itself primarily through equity rather than borrowing—a profile inconsistent with reliance on subsidized credit. Government subsidies, for their part, peaked in 2022 and have declined since, and roughly two-thirds accrue to the old economy. While certain emerging-industry firms did rely substantially on subsidies in their early years, most exhibit only limited dependence on either subsidies or credit; notably, it was precisely during the period of most rapid expansion that subsidies contracted and their bearing on the new economy diminished. A separate analysis of 57 representative listed firms in the sector yields consistent results.

These findings imply that neither credit subsidies nor cash subsidies can account for the rapid expansion of China’s new economy in recent years. Three broader implications follow. First, that a conclusion so consequential should be drawn from so limited a sample is a practice that could materially undermine the credibility of a multilateral institution. Second, even the complete withdrawal of subsidies would leave the prospects and global competitiveness of China’s new economy little affected, since subsidies, to the most part, did not bring these industries into being. Third, global imbalances are a genuine and serious concern; on this question China retains considerable scope to expand domestic demand and to improve the efficiency of its domestic resource allocation.

On June 1, 2026, the OECD released a report titled OECD MAGIC Database of Industrial Subsidies. Its central argument is that Chinese firms receive far larger industrial subsidies than those in other economies, concentrated in emerging strategic industries such as solar, semiconductors and wind power.

According to this view, it is subsidies—not efficiency—that have driven the global expansion of Chinese firms. Yet these subsidies have not boosted productivity or profitability; rather, akin to industrial doping, they allow less efficient firms to undercut more innovative competitors on price.

In short, the report contends that China’s emerging industries have grown primarily on the back of strong government subsidies, with credit support from the banking system serving as an important channel. At the same time, several economies have shown signs of using such findings to justify tariffs on, and restrictions of, Chinese products.

The OECD database covers some 525 manufacturing firms worldwide, of which 147 are Chinese—a small sample. Within the OECD’s framework, these subsidies are delivered mainly in three forms: government grants, tax preferences, and loans extended by state-owned or policy banks at below-market rates.

The OECD estimates that over 2005–2024, subsidies amounted to 2.4 percentage points of the revenue of its Chinese sample firms, of which 1.6 percentage points—two-thirds—came from so-called preferential loans. Absent these preferential loans, Chinese firms would have received no more subsidy than manufacturers in other countries.

The OECD’s estimate of these preferential loans rests on a clear conceptual error. Its approach treats the LPR as the most preferential rate, adds a risk premium and other adjustments to derive a theoretical lending rate, and then measures the credit subsidy as the gap between the actual and the theoretical rate.

The flaw is that the LPR cannot serve as the most preferential lending rate, because in practice it functions closer to an average or median rate. According to the China Monetary Policy Report for the first quarter of 2026, in March 2026 some 48.8% of loans were priced below the LPR, 9.3% at the LPR, and 41.9% above it. Indeed, if one insisted on treating the LPR as a benchmark and inferring large subsidies, one would reach an absurd conclusion: that since 2023 China has likewise been heavily subsidizing households, because personal mortgage rates have stayed below the 5-year LPR and the gap has kept widening. Clearly this has nothing to do with any subsidy—the main reason mortgage rates fell is weaker housing demand, and the rate is a genuine response to changing fundamentals.

For the OECD’s narrative to hold, two necessary conditions must be met simultaneously. First, structurally, subsidies—whether in credit or cash form— must flow disproportionately to the emerging industries. If the main recipients lie elsewhere, the claim that subsidies nurtured the emerging industries collapses. Second, in terms of scale, subsidies would need to be large enough to meaningfully support the expansion of emerging industries. If these industries rely little on subsidies, then even the subsidies they receive cannot justify the argument that their growth is subsidy-driven. Both conditions are indispensable; if either fails, the entire narrative becomes difficult to sustain.

In a recent CF40 Policy Brief, we sorted more than 5,000 Chinese listed companies into “new economy” and “old economy” using R&D intensity, profitability and related dimensions, and documented how the new economy has grown rapidly across many fields in recent years and gradually overtaken the old economy. As Figure 2 makes clear, one defining feature of the new- economy industries is markedly lower reliance on debt: they generate more profit with less debt. (See CF40 Policy Brief The New Economy Rises as the Old Economy Recedes – Evidence from China’s Listed Companies)

The year 2025 offers a particularly representative illustration. In 2025, firms in the new economy, light-asset group added just 0.4 billion yuan of interest- bearing debt yet generated 37.9 billion yuan in incremental net profit. By contrast, firms in the old economy, heavy-asset group added 897.3 billion yuan of interest-bearing debt while their net profit fell by 149.0 billion yuan.

In short, if the new-economy industries were truly the beneficiaries of financial subsidies, they should display the double-high pattern of more debt and more profit—not the asymmetric combination of debt increments concentrated in the old economy and profit increments coming from the new economy.

In the OECD report, the emerging industries are defined as the rapidly rising sectors led by solar and semiconductors—precisely the new economy we examine. This Brief therefore continues the earlier analytical framework. Using annual-report data for more than 5,300 non-financial A-share listed companies over 2018–2025, it characterizes the differences between the new and old economy in financing patterns and reliance on government subsidies—across the industry flow of interest-bearing debt, debt maturity, the coverage of internal funds, the equity-versus-debt mix of external financing, and government subsidies—to argue comprehensively why China’s emerging industries run on subsidies is a mistaken narrative.

I. Industries Receiving the Most Interest-Bearing Debt Are Not Concentrated in the New Economy

We begin with the industry flow of new interest-bearing debt over 2018–2025. As Figure 3 shows, the distribution across industries is highly uneven. Of all new interest-bearing debt at A-share firms in 2018–2025, Construction & Decoration accounted for a cumulative 2.8 trillion yuan, Utilities 2.1 trillion yuan, and Transportation 512 billion yuan—these three industries together contributed 51.1% of A-shares’ new debt, yet none belongs to the subsidized new economy of the overseas debate (the three dark-blue industries in Figure 3).

As typical representatives of the emerging industries, the five industries of Electronics, Electrical Equipment, Pharma & Biotech, Computing and Machinery & Equipment together took on about 2.37 trillion yuan of new interest-bearing debt—just 22.3% of A-shares’ new debt—even though these five industries account for roughly 44% of A-share firms (the five light-blue industries in Figure 3). In other words, at the industry level the new economy did not accumulate excessive interest-bearing debt, and therefore cannot be said to have received large credit subsidies.

So where did the added debt actually go? The answer is clear: a substantial share of new interest-bearing debt is tied to infrastructure and power investment. We further split the old economy into infrastructure-type industries and the rest. The infrastructure-type group comprises three industries—Construction & Decoration, Utilities and Transportation—and within it we single out 16 representative central state- owned enterprises (SOEs).

As Figure 4 shows, over 2018–2025 the infrastructure-type industries were consistently the main source of new interest-bearing debt, and the 16 central SOEs were the core of that core. In 2025 these 16 firms accounted for 47% of all new interest-bearing debt that year. Over the eight years they contributed a cumulative 3.9 trillion yuan in new debt—36.7% of the total for all 5,300-plus sample firms (10.63 trillion yuan) and 2.6 times the combined new interest- bearing debt of the more than 3,189 new economy firms over the same period.

Among the construction SOEs, for example, China Railway Construction, China Railway and China Communications Construction each added roughly 500 billion yuan of interest-bearing debt over 2018–2025. These heavy borrowers are classic traditional infrastructure SOEs, and their expansion has little direct impact on the global competitiveness of emerging industries under discussion internationally.

II. The New Economy Has Shorter Debt Maturities, Lower Financing Needs, and Relies Mainly on Equity

If banks were subsidizing the new economy through long-term, low-cost funds, long-term borrowing should dominate. However, data show the opposite. Looking at debt maturity across the four groups, in 2025 short-term debt made up 54.2% of interest-bearing debt for the new economy, light-asset group, 46.7% for the new economy, heavy-asset group, 44.2% for the old economy, light-asset group, and 37.4% for the old economy, heavy-asset group.

The share of short-term debt declines steadily as one moves from the new economy to the old economy, and from light-asset firms to heavy-asset firms. In the two new-economy groups, the short-term debt share is 10–17 percentage points higher than in the old economy, heavy-asset group.

This difference reflects not higher risk in the new economy, but rather the distinct financing needs associated with different business models. Heavy-asset traditional sectors—infrastructure, power, property, coal—have long project horizons and need matching long-term funds; New economy firms rely primarily on operating cash flow and equity, have minimal need for external debt, and generally use the small amount of debt they do carry for working capital purposes; as a result, short-term financing naturally dominates their capital structure.

A few representative new economy firms illustrate the point directly. Sungrow, a leader in solar inverters and energy storage, saw revenue grow from 10.4 billion yuan to 89.2 billion yuan over 2018–2025 (about 8.6x), yet its interest-bearing debt stayed in the low tens of billions, and government subsidies were just 0.18% of its cumulative eight-year revenue.

Mindray, a leader in medical devices, grew revenue about 2.4x with almost no reliance on interest-bearing debt (near zero for years), and subsidies were only about 2% of net profit.

BYD, a leader in electric vehicles, saw interest-bearing debt rise from 59.2 billion yuan in 2018 to 110.5 billion yuan in 2025—up 51.3 billion yuan over eight years—while revenue grew from 130.1 billion yuan to 804.0 billion yuan (about 6.2x), with cumulative government subsidies just 0.55% of revenue; as net profit grew rapidly, subsidies fell as a share of net profit year after year.

These fastest-growing, most globally competitive new-economy firms are precisely the ones that relied little on either loans or subsidies. This runs directly counter to the narrative that emerging industries can only grow with the help of bank credit and government subsidies.

The financing-need angle helps further explain these differences. When a firm needs to raise capital expenditure, the funds come from two sources, internal financing and external financing. Internal financing refers to using the company’s own earnings to fund new investment, while external financing refers to funds raised from outside the company—including both direct and indirect financing—to support new investment.

We proxy internal financing by recurring surplus after dividends and interest, and compare it with capital expenditure; the focus is whether each group’s internal funds can cover its own capital spending, with the gap interpreted as a theoretical financing shortfall.

Figure 6 presents our calculations for the four groups. The relationship between internal funds and capital spending differs sharply across firm types. The clearest case is the new economy, light-asset group: its internal funds exceed its capital expenditure overall, meaning that in theory this group needs no external funds at all to cover its capital spending.

By contrast, the gaps between internal funds and capital expenditure are far larger for the new economy & heavy-asset group, the old economy & light-asset group and the old economy & heavy-asset group. Moreover, the old economy’s capital expenditure is markedly higher—nearly 20 trillion yuan cumulatively over eight years, more than three times that of the new economy groups— directly reflecting the old economy’s greater reliance on investment and hence on external financing.

The above is only a theoretical shortfall and does not mean the new economy, light-asset group truly needs no external financing. But in practice, when internal funds fall short of capital spending and external financing is required, the new and old economy choose very different routes: the new economy relies mainly on equity, the old economy mainly on debt.

As Figures 7 and 8 show, over 2019–2025 the new economy, light-asset group raised 2.0 trillion yuan in equity against only 640.2 billion yuan in new interest- bearing debt while equity was three times debt, or 75% of external financing.

The new economy, heavy-asset group raised 1.7 trillion yuan in equity and 1.1 trillion yuan in new interest-bearing debt, with equity at 60% of external financing.

The old economy is the reverse: equity makes up 47% of external financing for the old economy, light-asset group; and just 41% for the old economy, heavy-asset group, with more than half of external funds coming from debt. By equity share of external financing, the four groups form a continuous spectrum: new economy, light-asset group 75%; new economy, heavy-asset group 60%; old economy, light-asset group 47%; old economy, heavy-asset group 41%.

This too accords with the common understanding of the new economy: equity financing is a market-based capital-structure choice. It needs not be repaid and its risk is shared by investors, matching the new economy’s “high up-front investment, high future return” growth profile. That is a fundamentally different arrangement from “targeted financial subsidies.”

III. Subsidies Are Not Concentrated in the New Economy, Nor is the New Economy Dependent on Them

Since 2022, both the overall scale and the intensity of government subsidies have declined. Over 2018–2025, total government subsidies received by listed companies traced an inverted U, rising then falling. They peaked in 2022 at 227.2 billion yuan and then declined year after year. By 2025 they had fallen from that peak to 175.8 billion yuan, a 22.6% drop over four years, roughly back to the 2019 level.

Meanwhile, government subsidies were less than 0.5% of listed companies’ total revenue and fluctuated between 6.8% and 8.3% of net profit; in 2025 they were just 0.3% of total revenue and 7.14% of net profit—below the 7.56% average of 2022–2024 and among the lower readings of the past eight years.

By structure, about one-third of government subsidies go to the new economy and about two-thirds to the old economy. Within the old economy, the light-asset group has the largest amount and share, as it includes many traditional automakers and home-appliance firms.

Measured as a share of each group’s own net profit, subsidies are indeed higher for the new economy than for the old economy—meaning that although the absolute subsidy is small for the new economy, its effect on net profit is not negligible (see Table 2).

One objective fact must be acknowledged: in earlier years, some new-economy industries and firms did rely on subsidies to a notable extent. Take the new economy, heavy-asset group: in 2018, subsidies were as high as 35.6% of its net profit. The trajectories of two leading firms are especially telling.

At SMIC, the semiconductor leader, the 2018 subsidy (1.1 billion yuan) was more than three times that year’s net profit (0.4 billion yuan) and nearly 5% of revenue. At BYD, the EV leader, the 2018 subsidy was 58% of net profit and about 1.6% of revenue. In years when profits were still unsteady, subsidies were once a non-trivial line on the income statement.

In recent years, however, this has changed markedly: as these firms’ own profitability has improved, the relative importance of subsidies to new-economy firms has fallen rapidly. From 2018 to 2025, subsidies as a share of net profit fell sharply for the new-economy sectors—from 13.2% to 6.5% for the new economy, light-asset group, and from 35.6% to 17.3% for the new economy, heavy-asset group. The old economy, by contrast, grew more dependent on subsidies, especially its heavy-asset group, where subsidies rose from 4.2% to 7.3% of net profit.

Consider the same two firms. At SMIC, subsidies fell from more than 300% of net profit in 2018 to 22% in 2025, and from nearly 5% of revenue to 2.3%. The change at BYD is even starker: its subsidies barely grew over the eight years, staying around 2–3 billion yuan, but as net profit rose from 3.6 billion yuan to 33.8 billion yuan and revenue topped 800 billion yuan, subsidies fell from 58% of net profit to about 7%, and from 1.6% of revenue to 0.3%.

In other words, these firms expanded not by collecting ever-larger subsidies but mainly through their own internal profitability. Hence, even though some industries were relatively dependent on subsidies in the early stage of the emerging industries, after several years of development the new economy’s reliance on subsidies has fallen substantially.

We can also run a simple counterfactual: how much would each group’s profit margin (net profit/revenue) change if all government subsidies were stripped out? Subtracting subsidies from both the numerator and the denominator yields a subsidy-free margin; the gap between this and the actual margin is the margin attributable to subsidies.

As Figure 12 shows, after removing government subsidies, the margins of the new and old economy still diverge clearly: the old economy’s margin keeps declining, while the new economy’s margin tracks the business cycle closely.

IV. A Sub-Sample Analysis of 57 Representative Emerging- Industry Listed Companies

Finally, we select four representative emerging industries from the new economy group – electric vehicles, lithium batteries, solar, and semiconductors – which are also explicitly listed as emerging industries in the OECD report. Together, these industries comprise 57 A-share listed companies, which we examine as a separate sample. These 57 cover the leading A-share firms in the four industries, including the largest and most representative by revenue, listed in Table 3.

First, these 57 representative firms depend far less on debt than the old-economy sector, and because the old economy’s debt dependence keeps rising, the gap is still widening. We gauge a firm’s reliance on debt issuance with two ratios—interest-bearing debt/revenue and interest-bearing debt/net profit; the higher the ratio, the more outstanding debt is needed per unit of new revenue or net profit.

As Figure 13 shows, the 57 representative emerging-industry firms’ revenue- based debt dependence is markedly lower than the old economy’s. On the net- profit measure, the 57 firms’ debt-to-net-profit ratio was not noticeably different from the old economy’s over 2018–2020, but thereafter it fell sharply and steadily until rising again in 2024.

Given that the solar industry suffered sector-wide losses in both 2024 and 2025, we also computed a 41-firm sample excluding solar; the result is clearer still. As Figure 14 shows, the 41 firms and the two old-economy groups differ significantly not only in levels but in a gap that has widened since 2021—mainly because the old economy’s debt dependence keeps rising, while the 41 firms’ debt dependence has trended gradually lower and stayed low.

Second, the emerging industries’ reliance on government subsidies has kept falling, and markedly so. As Figure 15 shows, since 2021 these 57 representative emerging-industry firms have grown rapidly, with net profit and R&D investment both expanding sharply.

Over the same period government subsidies did not rise meaningfully; they peaked in 2023 and then fell for two straight years, and their effect on net profit declined even more sharply. Note that the 57 firms’ net profit plunged in 2024 and 2025, chiefly because sector-wide losses in solar dragged down the sample’s aggregate profit.

Excluding the 16 solar-related firms, the remaining 41 representative emerging- industry firms display this feature even more strongly (Figure 16). After 2021, R&D investment and net profit expanded substantially while the role of government subsidies kept weakening sharply. In particular, since 2023 these firms’ annual R&D investment has consistently exceeded their net profit— returning to the pattern of 2018–2020 when the industries were first emerging, except that the subsidies received in 2023–2025 are far less important than they were then.

Even in the case of the solar PV industry, its performance is difficult to explain through a framework of subsidies driving growth or subsidies sustaining survival. As the figure shows, after sustained expansion over 2018–2023, solar posted negative net profit in both 2024 and 2025. Yet in both expansion and loss-making periods, government subsidies were a small share of net profit and R&D investment, and there was no marked increase in subsidies during the loss-making years.

In 2025 the 16 listed solar firms posted net profit of -35.5 billion yuan, a worse loss than in 2024 (-28.7 billion yuan), yet the subsidies they received fell from 6.7 billion yuan to 4.9 billion yuan. Moreover, while solar R&D investment did dip during the losses, it stayed at a high level—which we see as the main reason the industry can keep advancing technologically and securing market competitiveness.

V. Concluding Observations

Our analysis shows that for both credit and cash subsidies, the main recipients are traditional sectors carrying long-horizon investment, not the emerging industries. The new economy has shorter debt maturities, sizable internal funds and equity-led external financing; government subsidies are less than half a percent of its revenue, and its reliance on them keeps falling.

In the early stage of the emerging industries, some firms did rely on subsidies to some extent, but most new economy industries depend little on either subsidies or credit. More importantly, during the recent phase of rapid expansion in the new economy, the scale of subsidies has been declining and their effect on the new economy ever smaller. Neither credit subsidies nor government subsidies, therefore, can explain why China’s new economy has expanded so rapidly in recent years. The narrative that China’s emerging industries are built on subsidies cannot hold water.

This conclusion carries at least three implications.

First, the OECD’s drawing of such a consequential and questionable conclusion from a small sample represents a pattern of conduct that could materially undermine the credibility of multilateral institutions. Global imbalances are a major issue closely watched by all countries, and clarifying their roots matters greatly. As a multilateral institution, the OECD on the one hand made an elementary error about China’s benchmark- rate system and yet concluded that firms obtained below-market financing. And on the other hand, on the basis of a small sample of 525 global firms (147 of them Chinese), reached the sweeping conclusion that China’s emerging industries grew primarily on subsidies and thereby gained global competitiveness.

This is far from serious research and falls well short of the objectivity and professionalism expected of the OECD. Should such findings become the basis for some countries’ protective policies, the report would have opened a Pandora’s box—inflicting real damage on the credibility of the multilateral system and leaving an already embattled set of international rules even more exposed to challenge and doubt.

Second, even if China were to eliminate all subsidies, the new economy’s prospects and global competitiveness would not be undermined, because they were never created by subsidies in the first place. From 2018 to 2025, the new economy’s reliance on subsidies fell sharply—from 13.2% to 6.5% for the new economy & light-asset group and from 35.6% to 17.3% for the new economy & heavy-asset group. It was precisely during this rapid retreat of subsidy intensity that the new economy expanded fastest.

In the subsidy-free counterfactual, the margin divergence between the new and old economy remains clear. This shows that the new economy’s growth rests on scale expansion, genuine gains in profitability, ample internal accumulation and market-based equity financing—not on a continued infusion of subsidies—so the marginal withdrawal of subsidies would not shake the foundations of that growth.

Third, global imbalances are a genuine global problem that deserves serious attention, and China still has ample room to expand domestic demand and improve its domestic resource allocation. Our analysis does not deny the importance of global imbalances, nor that China has much room to expand domestic demand.

From a resource-allocation perspective in particular, the heavy concentration of new interest-bearing debt in a few infrastructure and power SOEs partly reflects legitimate factors—long project horizons and large funding needs—but may also reflect inefficient capital allocation. China’s biggest resource-allocation challenge may not be excessive support for the new economy, but rather the continued flow of resources into low-return sectors. This may also help explain why Chinese firms are highly competitive at the micro level, while aggregate productivity growth remains relatively subdued.

The implication, contrary to the OECD’s, is that if China’s resource allocation were more market-based and more efficient, the global competitiveness of its new economy would be stronger, not weaker.

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This is partly why I found the following speech unexpectedly moving.

At the 2026 Overseas Young Chinese Forum (OYCF) Annual Meeting, co-hosted by University of California Irvine’s Long U.S.–China Institute in Southern California on May 23, 2026, Susan Mai Easterbrook Cole — the great-granddaughter of General Joseph Stilwell — delivered remarks reflecting on her family’s multi-generational relationship with China and on the wartime legacy of the China-Burma-India Theater.

To Chinese readers, Stilwell is hardly an obscure historical figure. For many generations in China, especially those who grew up before the reform era fully transformed public historical memory, Stilwell/“史迪威” represented a particular image of America: direct, principled, personally connected to China, and respectful toward ordinary Chinese people during one of the country’s most difficult historical moments.

Of course, historians can debate Stilwell’s politics, military strategy, or complicated relationship with Chiang Kai-shek. But what struck me reading this speech was something less geopolitical and more human: the persistence of historical memory at the family level across nearly a century.

Today, when discussions about China and the United States are increasingly dominated by tariffs, semiconductors, export controls, military signaling, and ideological rivalry, there are fewer and fewer spaces for narratives centered on mutual respect, lived experience, and people-to-people ties. Yet those dimensions of the relationship have not disappeared completely. Sometimes they survive quietly — in family stories, educational exchanges, archival projects, museum collaborations, and conversations like this one.

Cole’s remarks are not important because they offer some naïve optimism about bilateral relations. They are important because they remind us that even during periods of profound strategic distrust, historical memory and human relationships continue to exist beneath the level of statecraft.

That, in itself, may be worth preserving.

Below is the speech delivered at the 2026 OYCF Annual Meeting, as provided by UC Irvine’s Long U.S.–China Institute.

Susan Cole: “The Stilwell Legacy: Friendship, Respect, and the Enduring Power of Exchange”

Good afternoon distinguished leaders, scholars, students, and friends.

It is my honor to stand before you today at this annual meeting of the Overseas Young Chinese Forum. OYCF’s mission, to provide a platform for overseas Chinese scholars, professionals, and those interested in China’s development to exchange ideas and cultivate aspirations, is one that deeply resonates with both my family’s history and my own personal beliefs.

I am especially honored to be here not only as an individual, but as a representative of my family, and as the great granddaughter of General Joseph Warren Stilwell – a man whose life became permanently intertwined with China, its people, its history, and its future.

General Stilwell was an American military officer, but to describe him only in that way would miss what defined him most. He served during World War II as Chief of Staff to Generalissimo Chiang Kai shek and as Commander of U.S. Forces in the China Burma India Theater. His responsibilities were immense – militarily, diplomatically, and personally.

Yet what distinguished him was not rank or authority, but character.

He believed deeply in honor, integrity, humility, and service. He studied China long before the war, becoming fluent in Mandarin, lived in Chinese communities, and formed friendships that shaped his worldview. China was not, to him, an abstract ally. It was a place of people he respected, trusted, and believed in.Throughout his diaries, letters, and speeches, one theme appears again and again: his profound respect and admiration for the Chinese people.

He once wrote:

“I have faith in Chinese soldiers and Chinese people: fundamentally great… honest, frugal, industrious, cheerful, independent, tolerant, friendly, and courteous.”

This was not flattery. It was conviction.

At a time when many underestimated China, General Stilwell did not. He saw strength where others saw hardship. He saw perseverance where others saw limitations. And he believed that with fair treatment and good equipment, training, and leadership, Chinese soldiers could be second to none.

During some of the darkest moments of the war, after the loss of Burma in 1942 and amid constant shortages, his faith in the Chinese people never wavered. At one point he wrote:

“If I was not convinced that the Chinese people deserved a break, I would have thrown in my hand long ago.”

That sentence alone reveals why he was respected by those who knew him and served with him.

One of the most enduring symbols of this shared struggle is what is often called the Stilwell Road. It was a monumental undertaking built through mountains, jungles, and with extraordinary human effort.

The road was not merely an engineering achievement. It was a testament to cooperation, constructed by Chinese laborers, engineers, and soldiers working alongside Allied forces under unimaginable conditions.

My daughter and I were honored to visit the Stilwell Road last September and it was profound to walk where my great grandfather walked because for our whole family, the road symbolizes something larger:

What becomes possible when trust replaces doubt and when shared purpose overcomes adversity.

Every time we visit China and walk parts of that history – whether in museums, memorials, or conversations with old and new friends – we are reminded that the legacy of the road belongs not to one nation, but to all who labored, suffered, and persevered together.

General Stilwell judged people not by rank, nationality, or background, but by actions and integrity.

He believed leadership was about taking care of people, not commanding from a distance. At Ramgarh in India, he focused not only on training Chinese troops for battle, but also on ensuring they were equipped, fed, paid, and treated with dignity. He later established programs so wounded Chinese soldiers could learn skills for life after the war because he believed deeply in their future beyond conflict.

This was not strategy alone. This was humanity.

My sister, father, aunt, uncle and cousins grew up with stories not of glory, but of principle.

We heard about a man who believed courtesy mattered.

A man who learned languages because he wanted to understand people, not control them.

A man who believed humility was strength, and that service was the highest form of leadership.

Although I never met him, I feel his presence profoundly… through his writings, through the respect shown to him across China, and through the friendships our family has been privileged to build with the Chinese people over generations.

Our family has tried, in small ways, to honor that legacy – through scholarships supporting Chinese students, cultural exchanges, museum partnerships, family trips, and most importantly, people to people relationships that continue across five generations within the Stilwell family.

If my great grandfather were alive today, I believe he would strongly support the work of this forum and would be honored to know his name was associated with the Stilwell Fellowship that OYCF sponsors.

It represents exactly what he believed in: knowledge exchange, mutual understanding, long term thinking, and respect across cultures.

He believed that progress, whether military, social, or economic, comes not from dominance, but from learning, cooperation, and trust.

In the early 1930s, he observed that with the right leadership and opportunity, the Chinese people’s capacity for innovation and industry would be world shaping. History has proven him correct.

For the young scholars and professionals here today, the Stilwell legacy offers lessons that remain deeply relevant: Understand people, don’t see stereotypes; build trust through actions; learn the facts of history without being bound by history; believe in the power of exchange.

The future will be shaped not only by governments, but by individuals… by scholars, innovators, bridge builders, and those willing to engage sincerely across borders.

Each time I return to China, I am struck by two things.

First, the remarkable transformation—cities rising, technology advancing, ideas flourishing.

And second, something unchanged:
The warmth, kindness, and generosity of the Chinese people.

It is easy to see why my great grandfather admired the Chinese people so deeply. His respect was earned, and it has endured. He has left us an important legacy that has been passed down now through five generations.

It is my great honor to represent the Stilwell family here today.

But more than that, it is a responsibility to remember that legacy is not about the past alone. It is about what we choose to carry forward.

General Stilwell believed in dignity, courage, honesty, and friendship.
He believed in the Chinese people.
And he believed that cooperation, especially in the hardest times, was both possible and necessary.

May the work of OYCF continue to cultivate aspiration, wisdom, and understanding. And may the friendships formed here contribute, in lasting ways, to a more peaceful and connected world.

Thank you for allowing me to share this story—and for carrying forward the spirit of exchange that my great grandfather so deeply respected.

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Below is the Executive Summary and full report.

As China concluded the 14th Five-Year Plan period (2021-2025), comprehensively assessing human development progress, and how it can be sustained, is vital to informing future development priorities. As China transitions towards people-centered “high-quality development” as affirmed in the 15th Five Year Plan (2026-2030), the country faces multiple opportunities and challenges, including shifting growth drivers, demographic changes, regional imbalances, and growing environmental pressures.

To inform pathways towards sustainable development, this report applies a human development lens to assess progress. Within this broader framework, it uses the Human Development Index (HDI) and related indicators as practical tools for measurement and comparison.

Its value addition is twofold. First, it estimates HDI values not only at the national level, but also at the provincial, and prefectural levels for a more granular map of progress and challenges. Second, this report for the first time introduces estimates for the Planetary Pressures-adjusted Human Development Index (PHDI) at the provincial level, evaluating the balance between human development gains and environmental costs. Building on the country’s historical achievements, the report also examines key constraints and proposes policy recommendations for promoting sustainable human development.

China was one of the first countries to advance from low to high human development, and is rapidly approaching the threshold of very high human development. According to UNDP estimates, China’s HDI reached 0.797 in 2023, just shy of 0.800, the lower bound for very high human development.

Comparison of HDI three component indices for China and grouping averages (2023)

Economic growth and educational advancement have been the main drivers of China’s HDI growth over the past decade. Disposable income per capita also increased from RMB 12,500 to RMB 39,200, with real growth of about 1.4 times. This created the world’s largest middle-income group of over 400 million people. The average years of schooling for citizens aged 25 and above reached 8 years, and gross tertiary enrolment increased from 26.5 percent in 2010, to 60.2 percent. This marks a leap from higher education being accessible to a significant portion of the population, in the direction of universal access. Lats but not least, life expectancy rose steadily from 74.8 years in 2010, to 78.6 years in 2023, surpassing the average for upper-middle-income countries.

As a vast and populous developing country, China exhibits significant spatial disparities in human development levels. Building on the 2019 Special Edition of the China National Human Development Report, this report updates provincial and prefectural HDI estimates up to 2020, offering an updated detailed and granular picture of development outcomes. The findings indicate overall progress, with upward shifts in development categories and a trend towards narrowing disparities:

• At the provincial level, the vast majority of provinces have reached high levels of human development, and some municipalities, such as Beijing and Shanghai, have attained HDI levels comparable to those of developed countries.

Changes in provincial HDI groupings over time

• At the prefectural level, the number of cities reaching high or very high human development levels also increased significantly, showing a clear trend of diffusion from eastern to central and western regions, and from core cities to surrounding areas.

Prefectural-level HDI values across China, 2010 vs 2020

• Cities with very high human development now account for a population of 442 million, or 31.7 percent of the national total, while cities with high human development account for 916 million people, or 65.7 percent, reflecting a notable expansion in the inclusiveness of development outcomes.

• The Theil index of HDI among prefectures – used as a proxy measure of inequality, continues to decline, indicating a steady reduction in regional development gaps.

Amid the intertwined challenges of human development and environmental sustainability, this report also introduces the Planetary pressuresadjusted Human Development Index (PHDI) at the provincial level in China for the first time. The PHDI systematically quantifies the “deduction effect” of environmental costs on human development. By incorporating two key indicators—carbon emissions and material footprint per capita, the index adjusts HDI scores to reflect planetary pressures exerted by development. Key findings are as follows:

• Based on 2015 data, high material footprints are observed not only in developed coastal provinces, but also in western provinces, where infrastructure investment has grown rapidly.

• While regional policies have effectively improved development foundations, they have also led to rising pressures on resources and energy, with some regions incurring significant environmental costs.

• Unlike the east-west disparities highlighted by the HDI, the PHDI reveals a more evident north-south divide. Northern provinces have experienced faster growth in material footprint and carbon emissions, leading to widespread declines in their PHDI rankings. In some areas, the gap between HDI and PHDI rankings exceeds ten places.

• Global comparisons show that Beijing and Shanghai already outperform some high-income countries in resource efficiency, while northern provinces reliant on resource-intensive industries continue to incur a substantial “development discount.”

Following from the data analysis, the report identifies five structural challenges to sustainable human development in China:

• Slowing economic growth may constrain further improvements in human development. Tightened global conditions, weak domestic consumption, and mounting pressure to improve productivity all play a role generating a more subdued outlook than in the past.

• Educational attainment remains a key shortfall. Compared with developed countries, China still lags in average and expected years of schooling, as well as in public education spending.

• Regional disparities in human development remain relatively high. Absolute differences across regions persist, while intra-provincial gaps, especially within the western region, are also notable. Some eastern provinces are also showing increasing divergence across prefectures.

• Imbalances remain across different human development dimensions. Although significant progress has been made in health, education, and income, development across these areas is still uneven. In many cases, regional disparities are increasingly manifested as economic development gaps.

• Environmental pressures are structural, deeprooted, and long-term. Problems such as inefficient and extensive energy use, low resource efficiency, groundwater pollution and serious waste have yet to be fully resolved.

To address these challenges and accelerate advancement towards comprehensive very high human development, aligned with the Government’s vision of “high-quality” development and socio-economic and environment commitments, the report proposes five policy recommendations to advance sustainable human development:

• Anchor progress in healthy life expectancy and continue improving population-wide health outcomes. For example, by strengthening longterm care and health insurance systems.

• Expand years of schooling and enhance workers’ adaptive skills, such as promoting 12-years' compulsory education and universalizing higher education.

• Focus on improving income distribution and sustaining household income growth. For instance, by advancing direct taxation reforms and diversifying household income sources.

• Optimize regional development policies to reduce disparities in human development across regions, such as increasing transfer payments to areas depleted by outbound migration, along with resource-dependent regions.

• Foster a greener, more inclusive, and more sustainable environment. For example, by promoting the circular economy and strengthening ecological compensation, as well as carbon market mechanisms.

Access the full report on Google Drive

Monitoring China’s Human Development

4.65MB ∙ PDF file

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Acknowledgement

This report was a joint effort between the China Institute for Development Planning, the Institute for Circular Economy at Tsinghua University, and United Nations Development Programme (UNDP) China. We thank colleagues from both teams for their dedicated work. The expert group from Tsinghua University was led by Yongheng Yang, Director of the China Institute for Development Planning at Tsinghua University

and Bing Zhu, Director of the Institute for Circular Economy at Tsinghua University. Primary authors from the group include Pu Gong, Meng Jiang, and Siyao Zhu. The UNDP team includes Rong Shi, and Xinyi Qu, Kailai Zeng, Xiaomeng Kang, Daryl Lahm and Yichao Wen for research support.

The report has also benefitted from the valuable advice and suggestions of many experts and scholars. We would like to thank Yu Dong, Executive Vice Director of China Institute for Development Planning, Tsinghua University, and Professor Wenji Zhou of Renmin University of China, for their guidance on the report drafting. We also express our gratitude to Violante di Canossa (UNDP China), for her review and valuable feedback

as well as to colleagues in the UNDP Human Development Report Office, Yanchun Zhang and Som Kumar Shrestha and Philip Schellekens (UNDP RBAP). Lastly, we would like to thank Roddy Flagg and Grace Brown for their translation and editing work. This report also received support from the National Social Science Fund of China (23&ZD130, 24VRC043), the joint research project between the National Natural Science Foundation of China (NSFC) and the United Nations Environment Programme (UNEP) (4161101173), and the Tsinghua University Initiative Scientific Research Program (2023THZWYY01).

A newly published paper offers a more nuanced explanation. In “The Rise of China’s Electric Vehicle Industry: Strategic Alliances Between Local Governments and Private Capital,” published in the July issue of The China Journal in 2026, Fengming Lu and Xiao Ma argue that China’s EV boom was driven in large part by alliances between ambitious local governments and agile private firms, which repeatedly found ways around tight central regulations—a dynamic that produced both China’s spectacular EV successes and many of its costly failures.

Fengming Lu is a Lecturer (Assistant Professor) in the Department of Political and Social Change at the Coral Bell School of Asia Pacific Affairs, Australian National University. His research spans comparative politics and Chinese politics, with a particular focus on China’s political economy, industrial policy, local governance, and political selection.

Drawing on three decades of observation of China’s automotive sector, Fengming is currently working on a book project examining the rise of China’s EV industry. The project explores the interplay between central industrial policies, local governments’ developmental strategies, and global capital markets in shaping one of the most significant industrial transformations of the twenty-first century.

Xiao Ma is an associate professor of political science at the School of Government at Peking University. His research focuses on comparative political institutions, politics of development and Chinese politics. He is the author of Rethinking Political Meritocracy: An Attention-Based Approach (Cambridge University Press, 2026), and Localized Bargaining: The Political Economy of China’s High-Speed Railway Program (Oxford University Press, 2022). He received his Ph.D. in Political Science from the University of Washington.

With the authors’ permission, we are publishing a condensed excerpt from the paper below.

The Rise of China’s Electric Vehicle Industry: Strategic Alliances Between Local Governments and Private Capital (Excerpt)

Fengming Lu and Xiao Ma

ABSTRACT

This article challenges the prevailing view that China’s electric vehicle (EV) boom is primarily the result of top-down industrial policy. Drawing on the history of China’s automotive sector since the 1990s, it shows that stringent central regulations and entrenched state-owned enterprises (SOEs) excluded most localities from lucrative joint ventures. In response, local governments forged strategic alliances with private manufacturers, leveraging capital markets, policy loopholes, and post-2008 credit expansion to attract investment, upgrade industries, and diversify regional economies. These partnerships, initially in traditional automotive manufacturing, proved pivotal to China’s EV takeoff after 2015, enabling private firms to outcompete SOEs in innovation, responsiveness, and market expansion. Comparative cases in steel and pharmaceuticals illustrate the broader applicability of this dynamic. The study highlights the enduring adaptability of Chinese local governments and private capital in navigating central constraints, offering new insights into industrial policies, industrial upgrading, and local developmental states.

Since the mid-2010s, the Chinese automotive industry has undergone a profound transformation. Until then, the sector was dominated by joint ventures (JVs) formed between major foreign automakers and large Chinese state- owned enterprises (SOEs). Yet within a decade, China surprisingly emerged as the global leader in electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs), collectively known as new energy vehicles (NEVs) in China, and rapidly closed the technological gap with the West in internal combustion engine vehicles (ICEVs), surpassing Japan to become the world’s largest exporter of passenger vehicles in 2023. This transformation ended SOE dominance in the sector. The leading NEV pioneers, NIO, XPeng, and Li Auto (known collectively as wei xiao li 蔚小理), are all private firms, alongside more established private automakers such as BYD and Geely, and new entrants such as Seres, Xiaomi, and Leapmotor. Among the 10 best-selling NEV marques in 2024, only three (SAIC-GM-Wuling, Chang’an, and GAC Aion) were SOEs or SOE-foreign JVs.1

The dynamics cannot be explained solely by central-level industrial policy or by the actions of local governments in isolation but rather by how local governments have responded to the central automotive industrial policy, particularly its stringent regulatory framework and bias toward SOEs, and collaborated with emerging private capital. The article argues that China’s EV boom, and the proliferation of both spectacular successes and costly failures, a phenomenon unmatched in the United States, Europe, or Japan, cannot be understood as top-down policy alone but as the unintended product of a triangular dynamic among central industrial constraints, local fiscal competition, and private capital’s agility. As we later demonstrate, this framework also illuminates patterns in China’s industrial development beyond automobiles, from traditional sectors such as steel and pharmaceuticals to cutting-edge industries such as AI.

THE 1990s: EMERGENCE OF ALLIANCES UNDER RESTRICTIVE INDUSTRIAL POLICIES AND FRAGMENTED PRODUCTION

The partnership between local governments and private automakers originated in the 1990s, well before China’s transition toward NEVs. Before China’s accession to the WTO in 2001, the country’s automotive sector was characterized by three defining features: high import tariffs on vehicles, an industrial policy favoring large SOEs, and a fragmented production landscape. The first two were embedded in the automobile industrial policies of 1987 and 1994.

Through the (in)famous “three big and three small” (sanda sanxiao 三大三小) policy [under which the state would support only three big and three small designated passenger-car producers], the central government strictly limited new entrants into the passenger vehicle market.2 Only models listed in the National Automobile Catalog, particularly its sedan subcatalog regulated by the Ministry of Machinery Industry and the National Economic and Trade Commission, could be legally sold nationwide.3 Meanwhile, passenger vehicle imports faced tariffs of 80–220 percent in the 1990s, shielding the designated SOEs from foreign competition. In line with broader SOE reforms, the state encouraged large automotive SOEs to form business groups (企业集团) and cultivate “national champions.” Additional preferential measures, including tax deductions, low-interest loans, and favorable access to foreign currency, were reserved for SOEs with annual production capacities exceeding 300,000 vehicles.4

Ironically, the industrial policy’s combination of limited domestic supply, given that many of the “three big and three small” were still struggling to ramp up production and raise domestic content, and high import tariffs spurred local governments to develop their own automotive industries. While most cities were formally excluded from large-scale passenger vehicle manufacturing, many already hosted small-scale producers, a legacy of Mao’s intentional economic fragmentation that accelerated through the early decades of the reform. Three waves of decentralization, the Great Leap Forward, the Cultural Revolution, and the fiscal decentralization of the 1980s, had encouraged provinces and prefectures to establish their own modest automotive works. Although often economically inefficient, these facilities alleviated chronic vehicle shortages under the planned economy, and many survived into the 1990s. In 1996, China had 130 automotive companies producing a total of just 1.48 million vehicles, with most firms manufacturing only a few thousand or fewer units per year. 5Industrial policy aimed to eliminate this lack of economy of scale by favoring large SOEs.

Although many local governments initially gained modest revenues from auto motive production, they were soon blocked by the central government from upgrading their industries. The industrial policy also maintained a prohibitively high entry threshold, 1.5 billion yuan in initial investment, for new carmakers until the 2010s. Localities without mass-production capacity therefore sought to attract licensed SOEs, but these efforts usually failed. SOEs resisted relocating core processes because of political ties with their home bases, the limited size of China’s auto market at the time, and structural asymmetries in central-local relations. Motivated by the promise of lucrative tax revenues from large-scale production in a protected market, local governments, especially at the prefecture level, turned to local state corporatism. Some established their own market-oriented automakers, while others partnered with township and village enterprises (TVEs).6 As privatization deepened in the late 1990s and early 2000s, this alliance advanced further: Many firms diversified their ownership structures, while latecomer cities allied with unlicensed private automakers to upgrade capacity. Together, these strategies laid the foundations for the enduring alliance between local governments and private capital in China’s auto industry.

THE PERIOD 2001–15: STRENGTHENED ALLIANCES UNDER THE DOMINANCE OF JOINT VENTURES

By the early 2000s, collaboration between local governments and private capital had already reshaped China’s fragmented automotive landscape. Yet the central industrial policy framework that constrained local ambitions in the 1990s remained largely intact. WTO accession in 2001 opened China’s market to foreign competition, but in practice the most lucrative opportunities still flowed to JVs set up between a handful of large SOEs and global automotive giants.

In this environment, emerging private automakers proved more willing partners for cities that had failed to secure successful JVs. BYD, which began automotive design and manufacturing only in the early 2000s, exemplified this trend. During its expansion, BYD partnered with numerous cities (many in central and western China), including Xi’an, Changsha, Fuzhou (Jiangxi), Hefei, Zhengzhou, Taiyuan, Dalian, Jinan, and Changzhou, offering substantial manufacturing investments in exchange for favorable local terms, including access to land, labor, and logistical support. To deepen ties, BYD established a dedicated division for urban rail transit, aligning with many cities’ infrastructure ambitions.7

Large SOEs remained far less flexible. BAIC, Beijing’s regional SOE, was China’s top EV producer between 2013 and 2019, even outselling Tesla globally in 2017. Yet BAIC’s strategy was narrowly aligned with Beijing’s priorities, focusing solely on EVs (to help the Beijing municipal government curb air pollution), totally giving up development of hybrid vehicles and producing mainly taxis and time-sharing vehicles, limiting its expansion elsewhere.8

Meanwhile, China’s integration into global capital markets, especially Hong Kong and New York, created new financing channels. One of the most notable cases was Geely’s 2010 acquisition of Volvo Cars from Ford for over US$1 billion, 10 times Geely’s 2009 annual profit. Denied financing by major policy banks—namely, the Export-Import Bank of China and China Development Bank, and the Bank of China—Geely secured only US $200 million from China Construction Bank’s Zhejiang branch, raising the rest through the global capital market and Chinese local governments. The Zhejiang-based automaker raised US$350 million from Goldman Sachs via Hong Kong, 6 billion yuan in loans from the governments of Chengdu and Zhangjiakou, and 4 billion yuan in equity from Daqing and Shanghai’s Jiading District. In return, Chengdu, Zhangjiakou, and Daqing, all seeking to upgrade into advanced manufacturing, secured Volvo vehicle or engine plants. Jiading, long known as “China’s Motor City,” diversified beyond Shanghai-Volkswagen to host Volvo Cars China.9

The Volvo acquisition illustrates how, even before the EV transition, the local government–private capital nexus enabled Chinese automakers to leapfrog in ICEV technologies. Through China Euro Vehicle Technology AB (CEVT), Volvo Cars transferred decades of know-how in design, engine and transmission systems, advanced driver assistance, and platform development to Geely. These developments laid the groundwork for the even deeper local government–private automaker partnerships that would define China’s EV boom in the late 2010s and 2020s.

AFTER 2015: NEW ENTRANTS PROLIFERATED THROUGH ALLIANCES

The proliferation of Chinese EV startups after 2015, driven by the technological shift toward electric and connected vehicles, further intensified the linkages between local governments and private automakers. Inspired by Tesla’s early success with the Model S, numerous Chinese entrepreneurs sought to replicate its achievements at home, leveraging the country’s rapidly advancing information and communications technology (ICT) sector and its increasingly sophisticated capital markets. 10In June 2015, the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) lowered entry barriers for EV manufacturers.11 The result was a wave of“internet-companies-turned-car-manufacturers” (互联网造车), in which hundreds of entrepreneurs, many with minimal automotive backgrounds, entered the sector, often backed by venture capital (VC) investors. This surge of new entrants shifted bargaining power toward local governments, enabling them to negotiate more favorable terms. As one official from an eastern city recalled, he received visits from dozens of EV startups in 2016 alone, including nearly all leading private EV manufacturers of the 2020s.12 Nanjing, long subordinate in its relationships with SAIC and Chang’an-Mazda, aggressively pursued EV opportunities and attracted five startups between 2016 and 2025.13

Yet key policy barriers remained. While it was easier to obtain approval from the provincial-level Development and Reform Commission, the most formidable was the requirement for “dual qualifications” (Shuang zizhi 双资质) from both the NDRC (for investment project approval) and the MIIT (for market entry). By 2019, only 15 carmakers had received NDRC approval, and just 12 had secured both qualifications, out of roughly 100 Chinese firms seeking to develop and manufacture EVs.14

An unintended loophole in the central-level industrial policy favored existing ICEV manufacturers: Any firm already licensed to produce ICEVs could obtain EV qualifications through a streamlined process. While designed to privilege large SOEs, this also elevated the value of regional auto manufacturers’ ICEV licenses, whether successful or struggling, and created new opportunities for local governments to connect them with private EV startups. One prominent case was NIO’s early collaboration with Hefei, in which the startup “borrowed” production qualifications from JAC, a struggling regional SOE. Although controversial, the practice was tacitly accepted after EV100, a think tank of former automotive regulators and SOE executives, persuaded the MIIT to relax enforcement.15 Subsequently, more EV startups followed this pathway to expedite their EV development and manufacturing.16 The collaboration across EV startups, regional carmakers, and local governments proved to be critical for the dramatic emergence of Chinese EV startups. This allowed NIO to become the first Chinese EV startup to mass-produce vehicles, delivering tens of thousands of units in 2018, well ahead of many domestic competitors and US peers such as Lucid and Rivian.

Before 2019, many private EV startups resisted taking equity investments from local governments, fearing interference in strategic decision-making. This changed dramatically in 2019–20. Sluggish post-trade-war sales in 2019 were compounded by the COVID-19 outbreak, which froze sales and financing for many startups. Stock market turmoil in March 2020 further depressed publicly listed EV firms’ stock prices. Local governments, flush with credit from the post-2008 credit expansion and eager to anchor EV production, stepped in.17 After missing a 10-billion-yuan deal with Beijing’s Yizhuang Economic and Technological Development Zone, NIO accepted a 7-billion-yuan equity investment from Hefei at a historic low in its stock price.18 The investment more than doubled in value within months, and Hefei’s success in securing NIO was celebrated by Chinese business media as the “Hefei Model” (hefei moshi 合肥模式). The precedent spurred a wave of high-profile local government investments through local government financing vehicles (LGFVs) in 2020–21, until the burst of the property bubble put an end to it. Prominent cases include Guangdong Province and Guangzhou City’s 2-billion-yuan stake in XPeng, as they were aiming to diversify their automotive industry from JVs dominated by Japanese firms.19 Ningbo City also made a 10-billion-yuan investment into Zeekr, the startup project under Geely Group, as the eastern coastal city missed other EV startups in the past decade.20

As discussed earlier, giant automotive SOEs were the early leaders in China’s EV sector. But for most cities, collaboration with these firms has proven unrealistic. As in previous decades, major SOEs have been reluctant to transfer core development and manufacturing capabilities. The political salience of EV production has only reinforced this tendency, as EV development is now a key performance metric for both SOEs and the local governments in their headquarters’ cities. This makes them even less willing to disperse research, development, and production beyond their home bases. SAIC, for example, doubled down on EV development and manufacturing after Xi Jinping’s 2014 visit to the company, during which he stressed that “developing new energy vehicles is essential for China to evolve from an automobile power to an automobile powerhouse.”21 Yet throughout the 2010s, SAIC built no EV development or manufacturing facilities outside Shanghai, except in Ningde, Fujian. Ningde was an exceptional case for three reasons: It is home to Contemporary Amperex Technologies (CATL), the world’s largest power battery producer since 2017; Xi Jinping served there as prefectural Party secretary from 1988 to 1990, earning key promotions from his tenure; and Fujian’s governor from 2018 to 2020, Tang Dengjie, was a long-time senior SAIC executive eager to connect his former company with the province.22

Cities lacking such advantages had less bargaining power with the large SOEs. Changzhou, unable to persuade Dongfeng to produce competitive models until 2018, turned instead to BAIC, another major EV-making SOE. Attracted by Changzhou’s large battery manufacturing base, BAIC began building a plant in the city’s Wujin District in 2015. When production began in 2016, however, the main output was a two-seat city car, marginal in BAIC’s product lineup.23 In 2023, with an annual manufacturing capacity of 300,000 vehicles but weak sales, the BAIC plant shut down. Wujin’s partnership with Li Auto proved more fruitful. Li Auto began constructing its manufacturing base there in 2016 and, despite its Beijing headquarters, produced all of its main models in Changzhou until 2023.24 The company also helped attract key members of its supply chain, including its electric vehicle control system and electric power train manufacturer Inovance and its seat unit supplier Forvia, into Changzhou. By the end of 2024, 32 of Li Auto’s 100-plus suppliers were based in Changzhou, making it Jiangsu’s second-largest automotive supply hub after Suzhou, which has hosted major international tier-one suppliers since the 1990s.25

CONCLUSION

A key driver of China’s rapid growth in both the traditional automotive and EV sectors has been the alliance between local governments and private capital. These partnerships first emerged in the 1990s, when local governments, eager to develop automotive manufacturing, found themselves shut out by restrictive central-level industrial policies. Long-standing structural issues, such as the disparity in bargaining power and misaligned incentives, limited their ability to collaborate with established SOEs. In the 2000s and 2010s, while certain policy restrictions eased, core barriers remained, including JV quotas, manufacturing qualifications, and entrenched SOE favoritism. At the same time, the maturation of China’s capital markets, the proliferation of diverse shareholding structures, the rise of EV startups, and post-2008 credit expansion deepened local governments’ ties with private firms, leading to the proliferation of competitive EV makers and the emergence of new “motor cities” across China.

However, the close local-private alignment has also contributed to structural problems, most notably chronic overcapacity and cutthroat competition. Local investment sprees have produced excess manufacturing capacity in both EVs and ICEVs.26 When automotive startups fail, their close financial and political ties to local governments exacerbate municipal debt problems and slow market exit. These risks are heightened when local governments make strategic investment decisions without adequate due diligence or sector-specific expertise. One notorious example was the partnership between Rugao County in Nantong and Sailin, an EV spin-off from the US sports car maker Saleen. Without thoroughly assessing the firm’s investors, capabilities, or technology, the county invested 6.6 billion yuan in a company that produced almost no cars.27 This is not unique to China: In the United States before the 1930s, hundreds of automakers emerged in a wave of investment fever and overcapacity, although they were geographically concentrated around Detroit and far less dependent on local government backing.28 In China, by contrast, local governments play a pivotal role. Each locality tends to view industrial investment primarily through its own fiscal lens, often prioritizing short-term revenue and regional growth over broader national or global market dynamics. Reflecting these concerns, central leaders in 2025 explicitly warned local governments against blindly launching new EV projects.29

It is worth noting that the technological shift in the automotive sector, particularly the rise of electric and connected vehicles, partly contributed to the alliances between local governments and private capital. These changes created crucial windows of opportunity for weaker actors and new entrants, such as the “internet carmakers,” to enter and compete.30 Similar patterns appeared in other industries. In the EV charger market, which was once dominated by state monopolies (State Grid and China Southern Power Grid), private firms like TELD in Qingdao and StarCharge in Changzhou leveraged mobile connectivity and local government support to become leaders. China’s AI sector shows a comparable dynamic: DeepSeek, spun off from a hedge fund in Hangzhou, thrived under municipal protection even as hedge funds were criticized by some central leaders as financial speculators.

As private capital expanded and China’s capital markets deepened, local governments adapted quickly, forging alliances that frequently outmaneuvered central regulatory constraints. This partnership between local authorities and private capital not only reframes our understanding of China’s industrial development but also offers a powerful lens for anticipating the evolution of high-value manufacturing sectors. In dialogue with the comparative literature on local developmental states,31 this study also provides theoretical and process-tracing accounts of how such alliances are cultivated by local developmental states and how, in turn, they reinforce local developmental capacities.

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Only with the latest presidential meeting in Beijing does that pattern appear to have shifted, notes Jia Min, a special research fellow at the Shanghai Development Research Foundation. Washington, at least, has echoed the new formula—“a constructive relationship of strategic stability.”

Beijing’s explanation of the phrase also signals a subtle shift in its own language. Competition, long favoured by Washington as the defining frame, is now acknowledged more openly, though cast as bounded, manageable, and distinct from confrontation.

Jia is also cautious about the phrase “the East is rising and the West is declining.” It captured a specific moment when China’s governance model, social order, and ability to respond to external shocks appeared to show clear advantages, he explains. It was not, he stresses, a permanent verdict on Western decline. Nor does it match Beijing’s current official language, which now says that China’s national rejuvenation and America’s effort to “make America great again” can proceed in parallel, reinforce each other, and benefit the world.

First published on May 21, 2026, on 底线思维, a WeChat blog under Guancha.cn, Jia’s following interview ranges widely from Trump’s visit to China and the new formula of a “constructive relationship of strategic stability” to the limits of older concepts such as “G2” and “spheres of influence,” and the future of America’s alliance system.

美国正站在新的历史周期起点，注定是一个躁动时期

The United States is standing at the threshold of a new historical cycle—one that is bound to be restless

China–U.S. relations this year leave much room for imagination

Guancha.cn: Professor Jia, welcome. Trump has now ended his visit to China and returned to Washington, but the debate triggered by the presidential summit is still unfolding. Since the start of Trump’s second term, the international situation has changed significantly, and in many respects remains unclear. Taking Trump’s visit to China as a major event, we would like to ask you to review, analyse, and look ahead at some of the more structural questions.

To begin with, what is your overall impression of this China–U.S. presidential meeting? What were your expectations for it? Since the China–U.S. talks in Busan last October, the international community has been waiting for “the other shoe to drop.” Trump had repeatedly used terms such as “G2” and “grand bargain,” which led to widespread speculation.

Then, in March, the United States and Israel launched military strikes against Iran. The Strait of Hormuz was blockaded, and the United States found itself unable to disengage. Trump’s China visit was postponed, and when he finally came to Beijing, the visit lasted less than 48 hours. How should we read a meeting arranged at this particular moment? Was it transitional, transactional, or the decisive encounter many had been waiting for? At what level should it be understood?

Jia Min: Let me share a few personal impressions. I would use three phrases to describe the visit.

The first is “highly anticipated.” After the China–U.S. talks in Busan last October, Trump publicly said that he would visit Beijing in April 2026. That meant a presidential meeting in Beijing had already been put on the agenda. It was only natural that global media would follow the story closely.

But it was also clear that the past few months had been marked by repeated geopolitical crises. In January, the United States brazenly escorted Venezuelan President Nicolás Maduro to New York to stand trial. In late February, the United States and Israel brazenly launched airstrikes on Iran and eliminated its top leadership. These developments caused prolonged volatility in global energy and financial markets, and China’s national interests were deeply affected as well.

So there was real uncertainty over whether the meeting could take place as scheduled, and whether China and the United States could sit down and talk. Trump did later inform China that the visit would be postponed because of the war in Iran. After several rounds of communication, the two sides finally settled on mid-May. So the second phrase I would use is “full of twists and turns.”

The third phrase is “unexpected.” Once the itinerary was released, it became clear that Trump’s schedule was very tight. He arrived in Beijing on the evening of Wednesday, 13 May, spent all of Thursday there, and continued the conversation in a more informal setting on the morning of 15 May before leaving that afternoon. The whole visit lasted roughly 36 hours.

Given the number of difficult domestic and foreign-policy issues Trump was facing, some observers doubted whether such a short visit could produce effective and substantive interaction with the Chinese side. Yet despite the compact schedule, China did not downgrade the reception in any way. The protocol was solemn and high-level, and it exceeded the expectations of many observers.

For example, Vice President Han Zheng personally went to Beijing Capital International Airport to welcome President Trump. That was a very high level of protocol. In the past, this kind of reception would usually have been handled by officials at the foreign minister level, who hold the rank of deputy state leader. Watching the live broadcast at the time, many Chinese observers like me immediately noticed the significance of that arrangement.

On the morning of 14 May, a grand welcoming ceremony was held outside the East Gate of the Great Hall of the People. In the afternoon, the two presidents visited the Hall of Prayer for Good Harvests at the Temple of Heaven, a site that symbolises important ideas in Chinese civilisation: the unity of heaven and humanity, prayers for peace, and hopes for favourable weather and good harvests.

The event that drew the strongest reaction, and was most widely circulated and interpreted around the world, was of course the banquet on May 14. President Xi and President Trump each delivered remarks that were rich in meaning and warmly phrased. Observers were especially struck by some of the vivid details in Trump’s thank-you remarks. He mentioned, for example, that Benjamin Franklin, one of the Founding Fathers of the United States, was an admirer of Confucius and published the sayings of Confucius in his writings. He also referred to the figure of Confucius carved into the face of the United States Supreme Court. Confucius, representing morality and ethics, stands alongside Moses, representing faith and God, and Solon, representing the people and democracy. Together, Trump said, they form three important sources of American legal culture.

There was another detail. After delivering his thank-you remarks, Trump raised his glass and took a small sip of wine. It is well known that, for family and personal reasons, Trump has long observed a strict rule of not drinking alcohol. Yet in Beijing, he made a small exception. This gesture should not be underestimated. It showed his recognition of China’s hospitality, as well as gratitude and reciprocal goodwill. That natural expression of friendly body language left a deep impression on me.

The American business leaders who accompanied Trump also had the chance not only to meet and exchange greetings with President Xi, but later to be received by Premier Li Qiang. The atmosphere was cordial.

From information gathered through various channels, observers seemed to share one impression: China’s arrangements were thoughtful and well executed. They showed the bearing of a major Eastern power, while also paying close attention to the feelings of the U.S. side. As Professor Wu Xinbo, director of the Center for American Studies at Fudan University, who attended the banquet, remarked with emotion, it had been a long time since people had felt such a cordial and friendly atmosphere in China–U.S. relations. [Check out Prof. Wu’s translated remarks on The East is Read.]

Does this friendly interaction exist only in Beijing in May? I do not think so. China has already announced that President Xi has accepted President Trump’s invitation and will pay a state visit to the United States in late September. That will surely be a major display of American diplomatic protocol.

In the second half of the year, the two presidents are also expected to attend the APEC Economic Leaders’ Meeting, hosted by China, and the G20 Leaders’ Summit, hosted by the United States. There will therefore be many more opportunities for interaction, and more goodwill and surprises may be released gradually.

For China–U.S. relations this year, then, describing them as “leaving much room for imagination” would be both optimistic and forward-looking.

Guancha.cn: Before Trump began his visit, the whole world was speculating about what the two sides would discuss. The Taiwan question, trade and economic issues, Iran, the Russia–Ukraine conflict, AI, and other technology issues were all at the centre of attention. Different people had different expectations. Some thought the two sides would focus on managing differences across various issues, perhaps by setting up guardrails or signing purchase orders and other agreements.

But after reading through all the complicated information, one may feel that perhaps the better approach is to simplify the picture and focus on the larger frame. Apart from specific issues, China–U.S. relations also need to be understood at a higher level: first define the broad framework and set the direction, then deal with specific problems case by case.

This brings us to a point mentioned in both the Chinese and U.S. official announcements: the new description of China–U.S. relations as “a constructive relationship of strategic stability.” Is this China’s proactive attempt to define the next stage of bilateral relations? How do you view this phrase?

Jia Min: Apart from the detailed interactions I mentioned earlier, the most important point was the information and common understandings announced by Foreign Minister Wang Yi after the presidential meeting. According to that briefing, the two presidents agreed to define the relationship as “a constructive China-U.S. relationship of strategic stability,” giving strategic direction to bilateral ties over the next three years and beyond.

China also gave a very specific explanation of what this means: positive stability where cooperation is the mainstay; healthy stability where competition is kept within proper limits; constant stability where differences are manageable; lasting stability where peace is expectable. It is clear that the keyword is “stability.” This is not an empty formula. It has concrete content.

Take positive stability where cooperation is the mainstay. In the current context of China–U.S. relations, the main channels of cooperation may be people-to-people exchanges and joint law enforcement. Both sides have made efforts in these areas, including commemorating the Ping-Pong Diplomacy and combating transnational drug crimes.

Healthy stability where competition is kept within proper limits is also a major breakthrough. In the past, China was reluctant to use the word “competition” to describe China–U.S. relations, and tended to emphasise cooperation instead. But the objective reality today is that competition is everywhere. The two sides have put “competition” openly on the table.

In the American context, “competition” is a fairly neutral word. Competition exists, explicitly or implicitly, in sports, business, politics, and many other fields. Americans, by temperament, are willing to embrace competition. Competition often unfolds in stages and is oriented toward outcomes. Once the outcome becomes clear, competition can then turn into cooperation.

From the U.S. perspective, China’s strong rise in technology, advanced manufacturing, artificial intelligence, electric vehicles, and other fields means the United States needs to engage in some form of long-term competition with China. But this does not necessarily mean long-term antagonism.

Over years of dealing with the United States, China has gradually come to accept this point. The “competition” in China–U.S. relations refers mainly to technology, the economy, global markets, and similar areas. It does not point to direct conflict. That is why I think “competition” in the official formulation is relatively neutral and constructive. As long as the two sides avoid vicious competition—including measures the United States is especially good at using, such as trade barriers and long-arm jurisdiction—healthy stability where competition is kept within proper limits can be put into practice.

Constant stability where differences are manageable mainly refers to differences between China and the United States over global geopolitical issues, such as the Russia–Ukraine conflict and Iran. There is no need to hide these differences, and in some cases, sharp oppositions. That makes it all the more necessary to create a normal state of relations through controllable and institutionalised negotiation and communication.

Lasting stability where peace is expectable undoubtedly refers to the Taiwan question, which concerns China’s core interests. In the past, people often assumed that whenever China talked about China–U.S. relations, Taiwan would have to come first. However, this time, when discussing “a constructive relationship of strategic stability,” Taiwan was deliberately placed last. In Chinese culture, being placed last does not necessarily mean being least important. On the contrary, it may mean being the most crucial point.

Lasting stability where peace is expectable means that China and the United States need to reach a strategic consensus on the Taiwan question and establish a reliable mutual understanding. During the presidential talks, President Xi devoted a specific passage to Taiwan: “The Taiwan question is the most important issue in China-U.S. relations. If it is handled properly, the bilateral relationship will enjoy overall stability. Otherwise, the two countries will have clashes and even conflicts, putting the entire relationship in great jeopardy. ‘Taiwan independence’ and cross-Strait peace are as irreconcilable as fire and water. Safeguarding cross-Strait peace and stability is the biggest common denominator between China and the United States. The U.S. side must exercise extra caution in handling the Taiwan question.”

China’s proposal of “a constructive China–U.S. relationship of strategic stability” has set a compass for bilateral ties over the next three years and beyond. This is extremely important, and I strongly agree with the concept. The four forms of stability cover four dimensions of China–U.S. relations, from cooperation to competition, and from differences to conflict. They amount to a strategic blueprint—or, one might say, a practical guide—that creates a framework for operational and predictable interaction between the two sides.

Should the United States escape the “AI trap”?

Guancha.cn: After China put forward this agenda, the outside world has also been watching how the U.S. side responds. In an interview with NBC in Beijing, the U.S. secretary of state said that the United States agreed with “constructive strategic stability.” The latest development is that the White House fact sheet on Trump’s China visit also mentioned the phrase. People are now watching to see how the United States will act in practice.

This also applies to the Taiwan question. When Trump was in Beijing, outside observers generally believed that Taiwan must have been discussed, though no one knew how far the discussion had gone. After he left China and began his return journey, related media interviews gradually emerged. Some of the signals are worth noting, but it is still hard to say that they amount to a definite outcome.

One thing is clear, however. In today’s East Asian situation, a concrete policy does not always have to be announced for policy effects to appear. A shift in wording can itself have an effect. In your view, what kind of further alignment or bargaining process will there be between China and the United States?

Jia Min: This is a very large question, and it requires some historical review. For a long time, whenever China proposed a definition or formulation for China–U.S. relations, Americans tended to approach it with arrogance and pickiness. That was the pattern until this presidential meeting in Beijing.

Here I would like to raise a point I have made on several occasions. People often say there is AI competition between China and the United States. That is objectively true. But in my view, there is not only AI competition between the two countries; there is also what I call an “AI trap.”

In this “AI trap,” the “A” does not stand for “artificial,” but for “arrogance.” The “I” does not stand for “intelligence,” but for “ignorance.” What I call the “AI trap” is the American prejudice of arrogance and ignorance. It has taken root in the minds of many U.S. elites involved in China-related politics, economics, diplomacy, media, think tanks, government administration, and decision-making. It has become a symptom of America’s paranoid approach to China.

For example, China once proposed building a new model of major-country relations between China and the United States, saying that the vast Pacific Ocean has enough space for the two large countries of China and the United States. In the end, the U.S. side misread and distorted this proposal, claiming that China wanted to be number one, that the United States would have to be number two, and that China intended to lead the United States. Later, China put forward the principles of no conflict, no confrontation, mutual respect, and win-win cooperation, but the United States still did not take them seriously.

By contrast, Americans have often made alarmist claims that China and the United States may fall into the so-called Thucydides Trap. In my view, however, it is the United States that has fallen into what I call the AI trap—the trap of arrogance and ignorance—and has remained trapped there for decades.

Whether today’s American elite can accept a “constructive relationship of strategic stability” is something that still requires time and patient observation.

China hopes the U.S. side can respond positively. At the same time, we must calmly recognise that in today’s world, only by strengthening one’s own development and building internal capabilities can one truly earn the trust of others. In this sense, the ball is now in the U.S. court. We need to see whether Washington can accept this expectation of strategic stability.

Judging from history and experience, this will certainly face criticism within the United States and may even meet considerable resistance. But that resistance is foreseeable. The United States has not yet escaped the AI trap it has set for itself. Part of that trap is arrogance: the belief that China can never surpass the United States, or that China’s technological strength can only ever follow behind America’s. But is that really the case? Reality has already provided the answer.

The other part is ignorance: ignoring China’s development in the economy, society, and people’s livelihood. Today, many Western tourists, including American tourists, come to China and see that China performs better than the United States in many areas and even enjoys comparative advantages. They come away with genuine impressions. Ordinary people, in this respect, are often more grounded than elites and better able to understand China as it is today.

If America’s media and political elites remain unable to move beyond the AI trap, then this closed loop of self-perception will continue. Of course, China does not necessarily have to make them climb out of it. This predicament will simply become a mental burden they cannot shake off.

Guancha.cn: That is a very interesting point. The key question now is whether the Americans will take up this concept, how they will understand it, and how they will respond.

There is also another phenomenon worth mentioning. Sometimes, even when two countries use the same concept and share a sound consensus and stable relationship, they may still understand that concept differently, and their paths to achieving it may also differ. This is understandable to a certain extent. For example, both China and Russia talk about a “multipolar order,” but they do not understand it in exactly the same way. Still, at least there is a consensus. Should we view a possible China–U.S. consensus in the same way?

Jia Min: My view is that there is considerable space between the behaviour of major powers and the concepts they articulate. In other words, there are many tensions, contradictions, and inconsistencies between text and action. Treating the text as the only authority, without examining the timing and context in which it was produced, can easily lead to misreading.

Take the United States as an example. After last year’s national security report was released, reactions were mixed. What is certain, however, is that Trump 2.0 carried out a large-scale restructuring of the architecture of U.S. security decision-making and foreign-policy formulation. The functions and staffing of the National Security Council were sharply reduced, and in some respects stripped away. As a result, the national security report was drafted more through a patchwork process of borrowing and repackaging, and the quality of the report itself declined considerably.

Relying on that report alone would be insufficient for interpreting the Trump administration’s actions and strategy. Some Chinese scholars tend to translate and analyse a U.S. strategic report as soon as it is released, then use it as the basis for predicting Washington’s next moves. In my view, this is more like applying a rigid method to a changing situation.

American politics today is moving towards flexible authoritarianism, pragmatic conservatism, and refined self-interest. The Trump team builds its legitimacy and its narrative of success through actions, events, and cases, rather than starting from texts. There is a gap between strategic reports and government behaviour. The Trump administration’s strategy and policy, therefore, cannot be judged by texts alone. Its past experience and patterns of behaviour matter just as much.

Trump is clearly a leader with a strong personality, and he also carries elements of business and media. Many things that would usually be regarded as long-term strategies are, for him, decisions to be made in the moment. At the same time, those decisions also reflect a certain kind of American business thinking. Judging or predicting Trump’s behaviour, therefore, should not be based only on texts or strategic reports. His own experience, personality, and other personal factors also need to be taken into account, as they may bring unexpected developments and breakthroughs to China–U.S. relations.

Rather than “the East is rising and the West is declining,” I would say the United States is standing at the threshold of a new historical cycle

Guancha.cn: Indeed, U.S. reports, statements, and public remarks come from many places: government departments, major think tanks, research institutions, and members of Trump’s inner circle. Distinguishing among these sources, weighing their significance, and judging the positions behind them all test the analytical capacity of outside observers.

This also applies to the period after Trump’s visit. Trump himself gave an interview to Fox News on his return journey, while Secretary of State Rubio was interviewed by NBC during his stay in Beijing. There were many official statements and formulations that need to be read against actual actions and policies.

This may be like a contest between masters: each side not only knows its own cards, but is also trying to read the other side’s hand. Reading the game is crucial. During Trump’s visit to China, many international media outlets suggested that he had come in an embarrassed position because of the war in Iran and the Strait of Hormuz crisis. Some even suggested that he needed China’s help on these issues, although Trump, Rubio, and others denied this.

Those views reflect a broader judgment about the China–U.S. balance. Some believe that “the East is rising and the West is declining” is accelerating. Some believe the United States is now in hegemonic decline or retreat. Others remain cautious about any shift in the balance of power between China and the United States.

How do you view these different perspectives? Is the transformation of the China–U.S. relationship linear, or does it unfold through turbulence and oscillation? Historically, transfers of power between great powers are often prolonged, chaotic, and highly dangerous. How do you see this process? And what is Trump’s current domestic and international position? What cards does he hold?

Jia Min: In recent years, the phrase “the East is rising and the West is declining” has gained considerable currency, including in the United States and other Western countries. If returned to its original historical context, the phrase can be understood to refer to the performance of China’s governance model, social order, and its ability to respond to external shocks during a specific period. In that context, China did indeed show certain advantages.

But in my view, the phrase points to a specific time frame. It is not a general statement. Some people have now generalised it, as if it means that China has always been rising and the West has always been declining. That does not match some of the views China wants to convey to the outside world.

For example, China has said that “The great rejuvenation of the Chinese nation and making America great again can go hand in hand. We can help each other succeed and advance the well-being of the whole world”; that “China and the United States can achieve mutual success and shared prosperity”; and that “China and the United States should be partners and friends. That is what history has taught us and what reality needs”. If one accepts these formulations, then the phrase “the East is rising and the West is declining” does not really fit this context.

China’s development achievements need no further elaboration from me. But as for whether the United States is in decline, I take a cautious view. I am more inclined to say that the United States is standing at the threshold of a new historical cycle.

My academic background is in American history, so I would like to shift the perspective and look at this through America’s own historical cycles. Counting from 1776, this year marks the 250th anniversary of American independence. Counting instead from 1783, when the War of Independence formally ended, the United States has been on its nation-building journey for more than 240 years. Dividing that history into three periods of just over 80 years each reveals three major stages.

The first stage runs from the founding of the United States to the Civil War. I call it the period of “institutional nation-building.” By this, I mean the series of institutional experiments that followed the approval of the Constitution and the establishment of the federal government, accompanied by continuous expansion across the American continent.

The result of this institutional expansion was territorial enlargement, but also the spread of Southern slavery—the most destructive element in America’s institutional genes. I call it America’s cancer. Eventually, as the United States expanded and its economy developed, these cancer cells erupted, leading to the Civil War. The first 80 years of American nation-building ended with that war.

The second stage was the real formation of a unified national market after the Civil War. From the 1860s to the 1940s, I call this the period of “market nation-building.” This refers first to the construction of the U.S. domestic market. As westward expansion carried the United States from sea to sea, the country built a vast domestic market for production and consumption. At the same time, the United States began to pursue global influence, sell goods around the world, expand its sphere of influence, and seek financial and monetary hegemony. Through foreign wars and the two World Wars, the United States rose, through a torturous process, to the top of the world.

The third stage, from 1940 to 2020, I call America’s period of “ideational nation-building.” The United States became a global power. On the one hand, it needed to maintain its hegemonic position; on the other, it entered the Cold War with the Soviet Union. Whether through the American Dream or liberal democracy, this was a period in which the United States emphasised the construction of ideas and the export of values.

At the same time, its accumulated internal contradictions became increasingly intense. But the United States did not resolve them through a civil war or an external war. Instead, they continued through an endless social and cultural war. Marked by the Capitol riot in 2021, the third cycle of American history came to an end.

So, at the beginning of the 2020s, what historical stage has the United States entered? I would venture to use one term: the period of “AI nation-building.” In other words, new capacities for technological innovation, combined with new forces of social development in the United States, are driving the country into a new historical cycle.

The opening of this new cycle has distinctive features. On the one hand, the United States is going through intense political polarisation and disputes over social issues. Visible and invisible forms of “civil war” remain present. On the other hand, a consensus is also forming around rebuilding American hegemony through technological innovation and making America great again. The most important lever for this is AI. To secure new technological leadership, the United States must be number one in the world in technology and talent. Capital, military power, and hegemonic status can strengthen that position further.

In this new AI-led technological revolution, the United States is going all in. That is precisely why the tension between this American historical cycle and China has reached an almost unparalleled level, like quantum entanglement. It also explains the intensity of the competition and contest between China and the United States. At the same time, it anticipates a future moment when the two sides may halt conflict, ease confrontation, and return to cooperation. This is truly a marathon of great-power destiny, in which the fates of the two countries are bound together.

Whether the United States can become great again is something I cannot predict. What is certain is that the United States in this new cycle shares a common feature with its previous new beginnings: it is entering a restless period, full of both energy and ambition.

China today is in a period of historical ascent and national rejuvenation. Using competition as a metaphor for China–U.S. relations is consistent with reality. One side follows a people-centred development model that emphasises inclusiveness and mutual benefit. The other champions the individual, is driven by the market, and puts interests first. Which model is better? The two sides can test and compare themselves over a much longer period, in a long marathon-style competition.

Only by putting the present in dialogue with history can we understand the moment

Guancha.cn: Your view is illuminating. It offers a way to look at the international balance of power through American history and America’s internal development.

At present, some of the terms and concepts used by media outlets, think tanks, and researchers in China and abroad when discussing China–U.S. relations, geopolitics, or the international order seem to be reaching back into the past. “G2,” “spheres of influence,” a “new Yalta system,” and even the new “corollary to the Monroe doctrine ” invoked by the Trump administration all borrow concepts from international relations since the 18th and 19th centuries. At first glance, they may seem somewhat similar to today’s situation. But when placed in the present context, they do not seem able to describe it accurately.

It is no doubt that the balance of power between China and the United States, and the international order more broadly, is undergoing some kind of transformation. How do you view the information hidden behind these concepts?

Jia Min: Terms such as “spheres of influence” and “Monroe Doctrine” are now widely used, but they belong to the 19th century. They are terms from the age of empires and revolutions. Because we cannot yet describe the present situation completely, precisely, and adequately, we have had to borrow old vocabulary from the past. In fact, this shows that we have not yet broken free from the constraints of existing language and theory, including in how we understand empire and global governance.

This may be acceptable for the time being, but it has to change with the times and in light of new circumstances.

In fact, the United States has not withdrawn from the world. On the contrary, it has become more flexible, more alert, and more expansionary. In the past, transportation made global interaction more convenient. Today, international communication, social media, digital and intelligent media, and artificial intelligence have fundamentally changed our understanding of time and space.

In a certain sense, political developments in Beijing are now synchronised and contemporaneous with political dynamics in Washington and Moscow. Under such conditions, an analysis that overemphasises the spacial while neglecting the temporal dimension risks missing important parts of the picture.

Let me give an example. American politicians today are highly sensitive to timing. Take the U.S.–Israeli war with Iran. The war was brought to a close after 60 days because Congress had authorised the U.S. president to conduct this so-called non-war “military operation” for only that length of time. But did the war really stop simply because the clock ran out? Obviously not. Yet the Trump administration made full use of time as a lever in its dealings with various parties, including in its interactions with China. For the United States today, transactional politics is closely tied to both time and space.

Old concepts alone cannot fully capture the behaviour of today’s U.S. government, let alone the changes unfolding in the international order. That would be unrealistic. The present must be read closely, but always in dialogue with history. Only then can a clearer outline of the current moment begin to emerge.

“Harsh voice and privileged exit”

Guancha.cn: Time and space are an interesting lens through which to observe American politics. Since we have talked about old eras, old vocabulary, and the old order, I would also like to ask about the alliance system—a strategic asset that has long existed within the U.S. hegemonic system. It is now difficult to say whether Trump ultimately sees allies as assets or burdens. How do you understand the Trump administration’s new positioning of the U.S. alliance system?

This is especially relevant to China. The United States has many traditional allies and partners in the Asia-Pacific region, and these relationships have been slowly changing over the past few years. Various nested minilateral frameworks have emerged, such as interactions among Japan, the Philippines, and Australia. NATO also seems interested in making its presence felt in the Indo-Pacific.

Since his first presidency, however, Trump has wanted to change the U.S. alliance system in some way. Is he tightening the system, loosening it, or even abandoning the commitments and obligations behind it? For the current East Asian situation, any such shift would have major implications.

After the Cold War ended, the question of whether NATO should continue to exist was seriously debated. But as European affairs evolved, especially amid the conflicts in the former Yugoslavia and Russia’s political and economic difficulties in the mid-1990s, the West came to see NATO’s continued existence as practically necessary.

The drivers of NATO’s eastward expansion were not limited to the desire to preserve strategic and security advantages in Europe. A group of U.S. diplomatic and political elites with backgrounds in Eastern Europe also played an especially important role in lobbying the Clinton administration. NATO’s eastward expansion in the late 1990s gave some Eastern European countries security guarantees, but it also dispelled Russia’s remaining illusions about the West. Mutual suspicion and the security dilemma continued to deepen. The two Russia–Ukraine conflicts in 2014 and 2022 were both consequences rooted in NATO’s eastward expansion.

The United States has long borne the bulk of NATO’s military costs, and this has been a source of complaint in both American political parties. After the Cold War, Washington became more eager for European allies to shoulder a larger share of the burden. After the 2008 financial crisis, NATO-related military spending became an even heavier fiscal burden.

Even before his first presidential campaign, Trump repeatedly argued that the United States should not be carrying such a large share of the cost. After taking office, he pressured allies to contribute more. By the Trump 2.0 period, he had openly raised the idea of dissolving NATO, and more radical moves cannot be ruled out. There is both substance and theatre in such statements. On the one hand, the United States does have a real interest in dismantling old systems and building new ones. On the other hand, this is also part of Trump’s negotiating techniques and his use of maximum pressure.

The United States does not truly want to abandon its alliance system. Rather, it wants to preserve alliance relationships in which it can continue to lead, while keeping costs controllable and benefits foreseeable. The United States may gradually become more selective, shifting its emphasis from multilateral systems towards bilateral or minilateral frameworks.

In the Indo-Pacific, the United States has clearly directed more resources towards Japan, the Philippines, and Australia, etc. These countries can help constrain China and serve as measurable bargaining chips in U.S. competition and strategic manoeuvring with China.

Here I would again invoke Hirschman’s “exit, voice, and loyalty” framework. In my view, U.S. policy, both at home and abroad, has long shown a preference for what might be called harsh voice and privileged exit. Put simply, the United States has not historically been willing to uphold external commitments over the long term while bearing high costs.

If the United States decides that maintaining an organisation or order no longer brings clear benefits, offers little value to be gained, and still requires additional investment, the likelihood of cutting it loose rises sharply. Cases can be found in America’s long-running disputes with the League of Nations, the Organization of American States, the United Nations, and its affiliated international organisations.

By comparison, bilateral systems are built on shared interests between two sides in the economy, trade, military affairs, and geopolitics. That makes them far more reliable than multilateral relationships.

Today, the United States would rather maintain and develop the Anglo-American special relationship, strengthen the U.S.–Japan alliance, and deliberately support the Philippines than build new multilateral systems. This marks a major difference between the Trump era and previous U.S. administrations. Look at the Biden period: it created a series of multilateral alliances and cooperation platforms and a proliferation of titles. Costs increased, but efficiency did not improve. Washington then had to create more positions and assign more people to keep these mechanisms running.

One might say: did that not create many jobs? It did. But in Trump’s view, bloated staffing, low efficiency, and fragmented decision-making are far inferior to the lean, direct management style he prefers. Direct guidance and personal intervention from the CEO’s office fit Trump’s leadership style much better.

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Preface

In recent years, European countries like the UK, France, and Germany, along with US allies such as Australia and Canada, have notably increased their military presence in the Western Pacific region, including the South China Sea, East China Sea, Sea of Japan, and the Philippine Sea. Among various underlying motives, the most prominent view is that, against the backdrop of intensified US-China strategic competition, their deployments and activities in the region are meant to align with the US Indo-Pacific strategy and its competition with China.

On a broader scale, the Western Pacific is experiencing increasing prosperity alongside a rise in frequent geopolitical hotspots. As the South China Sea and Taiwan Strait become “trendy spots”, for Western countries that are either unsatisfied with exerting influence solely within their own regions or have imperial and colonial traditions, strengthening their presence in the Western Pacific is a significant measure to project global influence and uphold the “rules-based international order”. Beyond symbolic gains, there are tangible benefits: the substantial enhancement of political, economic, and military ties with Asia-Pacific countries through military activities and presence. Specifically, the considerations of each extra-regional country vary greatly.

However, compared to the US military, the military activities of these countries in the Western Pacific share certain commonalities: they have yet to establish regular deployments, lack robust operational capabilities, and are primarily strategic and diplomatic in nature. As they do not pose significant military threats to regional countries, it is crucial not to overstate their impact on the security dynamics in the region. However, on a tactical and operational level, some extra-regional countries like Australia and Canada have conducted military activities that are sometimes very aggressive and unprofessional, resulting in frequent unsafe maritime and aerial encounters with regional military forces. Consequently, the impact of these countries’ military presence and activities on regional security dynamics cannot be overlooked, and oversimplifying this would be imprudent.

In light of relevant insights, we have compiled and released this annual report to systematically review and comprehensively analyze the military activities of non-US extra-regional countries in the Western Pacific. The goal is to furnish the audience with a more complete and objective understanding of these activities and their implications for regional security dynamics.

Director of SCSPI Hu Bo

Key Findings

I. Overview

1. Warship Activities

In 2025, according to incomplete statistics, approximately 200 warships from 18 extra-regional countries operated in the Western Pacific, totaling nearly 10,000 ship-days of naval presence. The US Navy accounted for 109 ships and 9,088 ship-days, while other countries, primarily from Europe, Oceania, and Canada, contributed 48 ships and 610 ship-days, averaging about 2 ships per day.

2. Aircraft Activities

In 2025, according to incomplete statistics, there were over 20,000 sorties of aircraft sent by extra-regional countries in the Western Pacific, including fighters, helicopters, transport aircraft, reconnaissance aircraft, tankers, and bombers. Most were US sorties, while other extra-regional countries, such as Australia, Canada, and India, combined approximately 1,500 sorties.

Non-US sorties were mostly transport aircraft, helicopters, reconnaissance aircraft, airborne early warning aircraft, and refueling aircraft, among which transport ones ranked top with nearly 900 flights (over 50% of the total).

3. Special Deployments

In 2025, the military activities of these extra-regional countries in the Western Pacific were mostly temporary deployments, participation in drills, or transit and overflight operations, with year-round rotational regular deployments primarily limited to Australia. Due to military resources and strategic priorities, countries like Canada and India deployed limited forces to this region through specific actions annually, while the UK and France opted for temporary large-scale or permanent small-scale surveillance vessel deployments with limited scale and frequency.

II. Main Characteristics

1. Strengthened Deployment of Large Platforms

Highlighting military presence through deployments of large platforms or task groups has become the main tactic for traditional maritime powers like the UK and France to increase visibility in the Western Pacific.

2. Normalized Declaratory Activities

Countries like the UK, France, Canada, and Australia do not have the concept or practice of FONOPs. Nevertheless, in recent years, these countries have frequently undertaken similar declaratory activities in the Western Pacific, citing tensions in the Taiwan Strait and the South China Sea as justification. In 2025, amid ongoing tensions in the Taiwan Strait, extra-regional navies from Australia, Canada, and the UK intensified their activities in the Western Pacific in the name of upholding navigation rights in international waters as per the United Nations Convention on the Law of the Sea (UNCLOS), showcasing military presence by transiting the Taiwan Strait or carrying out “freedom of navigation” activities in the South China Sea.

Statistics show that in 2025, apart from the US, 4 countries including Australia, Canada, the UK, and New Zealand deployed 6 warships to transit the Taiwan Strait 5 times, all accompanied by official public reports.

3. Increased Participation in Exercises and Drills

Compared to previous years, extra-regional countries escalated their involvement in large-scale military drills notably in the Western Pacific in 2025. Particularly, some European countries promoted interoperability and collective deterrence through dominating or participating in multilateral drills with larger scale and wider participation via CSG deployments.

III. Objectives

The military activities of extra-regional countries such as the UK, France, Canada, and Australia in the Western Pacific differ fundamentally from those of the US military. Most of them have neither substantive geopolitical conflicts with China, nor capabilities to mount a significant military challenge in the region.Apart from coordinating with US operations, their primary objectives are to serve diplomatic ends and to uphold the “rules-based international order.”

IV. Trends

Currently, considering the Russia-Ukraine War and disputes over Greenland, the Trans-Atlantic partnership is undergoing a profound realignment. With military resources severely stretched by geopolitical crises in the Middle East and other regions, extra-regional countries including the UK, France, Canada, and Australia are focusing on reevaluating and reestablishing their ties with China. However, it remains to be seen whether these factors could make them pragmatic and low-profile in consideration of their military presence and activities.

Full report in English via Google Drive or download below

Militaryactivitiesofnon Usextra Regionalcountriesinthewesternpacificin2025

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Full report in Chinese via Google Drive or download below

域外国家西太平洋军事活动

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From Strategic Rivalry to Strategic Stability

It would be a disservice to treat US President Donald Trump’s visit to Beijing as a series of meetings about beans and Boeings. For all that the talks did not resolve many of the underlying tensions in US–China relations, they have already begun to redefine the relationship. Amongst the photo-ops and discussions, President Trump and President Xi Jinping have both embraced the need for strategic stability in the world’s most consequential bilateral relationship.

For nearly a decade, Washington and Beijing have described one another primarily through the language of strategic rivalry. We now approaching a new phase: a transition from strategic rivalry to strategic stability between two deeply intertwined powers.

US–China relations have never stood still. As the late Joseph S. Nye Jr. once observed in a dialogue with me, the relationship has moved through cycles of tension and accommodation. The first decades after 1949 were defined by hostility. The 1972 Nixon opening created a new period of strategic rapprochement. Through the 1990s we saw China integrate, joining the WTO and the US led economic order. Now in 2025, we stand at the midpoint of the latest 20-year cycle that began in the 2010s as the language of strategic competition and strategic rivalry came to dominate.

History does not move mechanically according to schedule but it does seem like we may finally be turning a page towards a new cycle in the relationship. Strategic rivalry worked to describe an era in which distrust was rising and both countries were testing their capacity to withstand pressure from the other. Yet after trade wars, tariff escalation, technology restrictions, and constant talk of decoupling, neither the United States nor China has been able to secure prosperity by decoupling from the other. Instead all the world has seen is mutually assured disruption.

Each side has shown that it can inflict real costs. But neither side can convert this capacity for disruption into a stable foundation for national success. successive trade wars and tit-for-tat retaliations have failed to meaningfully decouple our economies.

The composition of President Trump’s delegation to Beijing made that reality plain. 18 leading American corporate executives accompanied the president to China, representing companies across technology, finance, manufacturing, agriculture, and aviation. The pragmatic realization has finally, if slowly arrived.

The transition from mutually assured disruption under a paradigm of strategic competition toward mutually assured construction under a paradigm of strategic stability is why the newly announced Trade Council and Investment Council matter. If implemented seriously, they could provide the architecture for a disciplined relationship with mechanisms to address trade frictions, distinguish sensitive sectors from non-sensitive ones, manage investment disputes, and identify areas where cooperation can flourish.

Economic policy can also help anchor this new phase. President Trump has spoken of welcoming Chinese investment that creates American jobs, and that instinct deserves serious attention. In the 1980s, Japanese investment in the United States and Europe helped convert commercial anxiety into production, employment, and durable economic ties. The circumstances today are different, but the broader lesson remains relevant: investment can stabilize relationships, create local benefits, and go hand-in-hand with China’s “in the world for the world” strategy.

This is not a return to happy almost go-lucky engagement of the 1990s and 2000s. Washington and Beijing still disagree sharply on technology, industrial policy, and security. But a relationship so consequential will soon no longer be governed by escalation. Competition must be bounded. Disputes managed. Economic interdependence cannot be done away with and thus must be made more predictable, and beneficial, rather than weaponized.

That is also why the language of strategic stability should not be narrowly understood as a bilateral ceasefire. A more stable US–China relationship would help steady the wider international system. It would reassure the G7, give the Global South more room for development, and create greater possibilities for major-power coordination on crises that no country can solve alone.

Iran and Ukraine offer immediate examples. In both cases, the problem is not simply the absence of military capacity, but the absence of credible political off-ramps. The longer wars continue, the harder it becomes for the parties involved to climb down without appearing to surrender. China and the United States do not see every conflict the same way. But when the world’s two most consequential powers can sustain dialogue, they create more space for diplomacy, mediation, and negotiated de-escalation. Strategic stability in bilateral relations can therefore become a catalyst for wider international stability.

A similar logic applies to emerging technologies. Artificial intelligence is becoming a defining arena of national competition, one need to look no further than Trump’s own quickly evolving stance on NVIDIA GPUs being sold to Chinese consumers. But if the United States and China, as the two largest competitors, can continue discussing guardrails for guardrails for AI misuse, (including by non-state actors), autonomous weapons systems, and crisis escalation, then strategic stability will begin to acquire real institutional meaning rather than remaining a diplomatic slogan.

Taiwan remains among the most sensitive issues in the relationship and the ultimate test of whether strategic stability. Beijing has made it clear that Taiwan remains an unalienable part of China, and President Trump’s recent remarks that he does not want to see a war over Taiwan, nor incentivize a misinformed attempt at true secession from China should therefore be read carefully but optimistically. There has been no formal change in US policy, nor should it be interpreted as such. But this does reflect a growing recognition in Washington, that no one benefits from allowing the Taiwan Strait to become the detonator of a wider conflict. Especially as cross-Strait exchanges and dialogue have shown great progress towards peaceful reunification.

That recognition should be developed, not squandered. The United States should avoid steps that foreclose peaceful outcomes or encourage the belief that confrontation is inevitable. China, for its part, should continue to emphasize peaceful development across the Strait and resist actions that unnecessarily narrow the political space for stability. The purpose of strategic stability is not to erase differences, but to keep them from becoming disasters.

The challenge now is to move beyond mutually assured disruption toward mutually assured construction. US–China strategic competition demonstrated the immense capacity of both countries to disrupt one another. Strategic stability offers the possibility of a more mature relationship and the gradual return to a healthier status quo.

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CCG Update - Center for China and Globalization

CCG interviewed on Trump's China visit

CCG experts, in particular President Henry Huiyao Wang, have recently spoken to multiple media outlets, including The New York Times, The Washington Times, CNN, BBC, and PBS, on President Trump’s visit to China. The following is a brief summary of the interviews that have been released…

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a month ago · 10 likes · Yuxuan JIA

The phrase in question is one of the summit’s most eye-catching diplomatic outcomes: that the United States and China should build what the White House called “a constructive relationship of strategic stability on the basis of fairness and reciprocity.”

The GMF piece is right to take diplomatic language seriously, but perhaps went too far in implying that the Trump White House may not have understood what it was accepting:

“It is unclear how exactly the phrase ended up in the White House readout, but it must be assumed that China pushed the United States to include it. What did the Trump White House think it was agreeing to? Most likely, it saw the request to use the phrase as just diplomatic boilerplate to accompany a trade package and maintain a cooperative tone.”

The limitation of this framing is that it risks turning what appears to have been a negotiated diplomatic formula into a story of American inattentiveness and Chinese manipulation. It gives the reader the impression that Beijing carefully loaded a phrase with political meaning, while U.S. officials sleepwalked into repeating it.

But the public record suggests something more complicated.

First, the GMF article makes a factual mistake near the beginning. It says:

“Not coincidentally, the same wording appeared in the White House’s statement.”

But the same wording did not appear.

The Chinese formulation is “a constructive bilateral relationship of strategic stability.” (中美建设性战略稳定关系)

The White House formulation is longer and different: “a constructive relationship of strategic stability on the basis of fairness and reciprocity.”

The final phrase — “on the basis of fairness and reciprocity” — does not appear in the Chinese version, at least in the Chinese public readouts so far. That is not a minor decoration. It is the American qualifier.

“Fairness” and especially “reciprocity” are familiar American terms in U.S. debates . They reflect Washington’s longstanding complaints about asymmetry, market access, industrial policy, technology restrictions, and rules of engagement. If Beijing wanted a broad relationship formula, Washington insisted on placing that formula on American terms.

Nor did “strategic stability” suddenly appear as a Chinese phrase smuggled into the summit statement. Part of the record is publicly observable. Secretary of State Marco Rubio used “strategic stability” to describe the state of U.S.-China relations months before the summit.

A bare reference to “strategic stability,” however, was never going to be Beijing’s preferred formulation. In Chinese ears, the phrase can easily evoke the U.S.-Soviet Cold War, especially nuclear balance and strategic rivalry. That is precisely the kind of framework China has long tried to avoid.

Beijing does not want the world, or the U.S.-China relationship, described as a new Cold War. Its preferred language emphasizes cooperation: Xi Jinping’s three principles for China-U.S. relations — mutual respect, peaceful coexistence, and win-win cooperation — include cooperation at the end. (相互尊重、和平共处、合作共赢)

That helps explain the word “constructive.”

The addition of “relationship” is also not difficult to understand. Beijing wanted not merely a description of the current atmosphere, but a formula defining the bilateral relationship itself — and, more importantly, a formula that could help guide and discipline that relationship. This fits a long-standing Chinese diplomatic habit. Earlier, Beijing tried to persuade Washington to accept “a new model of major-country relations” (新型大国关系) to describe China-U.S. ties. The word “relation(ship)” (关系)was there too. China’s descriptions of many bilateral ties also include the word “relationship.” (关系)

So yes, a phrase like ““a constructive bilateral relationship of strategic stability.” is very much within China’s diplomatic tradition.

Xi Jinping has said that building such a relationship is “not a slogan” and should mean concrete actions by both sides moving in the same direction.

“中美建设性战略稳定关系”不是一句口号，而应该是相向而行的行动。

Here is yet another complication. As I understand it, the insistence that the phrase is “not a slogan” in fact comes from the U.S. side. The exact reasoning behind that is not yet clear to me, but one plausible explanation is that U.S. officials were well aware of Beijing’s preference for broad political concepts and did not want to accept another empty slogan without practical meaning.

Then came the final American addition: “on the basis of fairness and reciprocity.”

So far, that phrase has not appeared in China’s own formulation. After all, in the Trump era, “reciprocity” is no longer understood as it appears in a dictionary. Trump’s global tariff campaign was itself justified under the language of “reciprocal” tariffs. After “Liberation Day,” the word does not sound so benign to many countries.

But the fact remains: the White House did not endorse the Chinese phrase alone. It added fairness and reciprocity. That addition reflects a very American political logic. It makes the formula conditional. It says, in effect: stability is desirable, but not at the expense of one-sided restraint, unequal obligations, or asymmetrical concessions.

This is why the “Beijing wrote the script” framing is, at minimum, incomplete.

There is a fair criticism to be made. But that is different from suggesting that the United States was unaware, careless, or manipulated into parroting a Chinese phrase.

A more plausible reading is that there was back-and-forth. Rubio began with “strategic stability.” Beijing wanted a broader, relationship-defining formula. Washington accepted a version of it, but added its own limiting language: fairness and reciprocity. Both sides then presented the result in ways that served their own political and diplomatic needs.

That is diplomacy. It may prove wise or unwise. But it is not the same as being duped.

The distinction matters. If the United States knowingly made a trade-off, then the debate should be about whether that trade-off was worthwhile — not whether China somehow slipped a phrase past the White House.

Both sides know words matter. Both sides got words they wanted. And both sides will now try to use those words to shape what comes next.

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The East is Read

China-U.S. relations in 2035 according to Yan Xuetong

More than a decade after publishing a set of predictions on China and the world through 2023—which he later reviewed and found to have an accuracy rate of 82.3% — Yan Xuetong has now turned to the next decade. The Tsinghua University professor’s new book…

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a month ago · 9 likes · 1 comment · Zhu Yutao and Yuxuan JIA

The East is Read

Brussels Blames China. The Data Point Elsewhere

One of the most convenient stories in Brussels today is that Europe is facing a second “China Shock”: a flood of cheap Chinese goods, pushed abroad by overcapacity, subsidies, and weak demand at home…

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a month ago · 11 likes

The screenshot appears to show a written response from the Research Office of the Supreme People’s Court to a Chinese citizen who petitioned the court to clarify anti-discrimination principles in judicial adjudication.

In our opinion, the written response appears credible, but we cannot independently confirm its authenticity at this time.

Petition, known in Chinese as 信访 xinfang, is a centuries-old channel through which people in China have appealed directly to the authorities. In its modern form, it allows citizens to submit complaints, requests, or policy suggestions to state bodies, which are usually handled one-to-one and outside public view. The Communist Party of China and State organs, including the Supreme People’s Court, are generally required to register them and to inform petitioners whether and how they will be handled.

However, responses to petitions are generally not regarded as legally binding decisions, nor do they in themselves constitute new legislation or policy. They are usually understood only as a summary of existing measures and a very preliminary indication of possible next steps. In other words, they may offer some insight into how the responding authority views a given issue, but should not be read as formal policy change.

According to the screenshot, the petition was received on 25 March and answered on 9 May.

The alleged response said Chinese courts had already heard a number of related cases and used judgments and typical cases to set out legal rules. It cited three areas:

• Personality rights. Public insults or defamation over a person’s sexual orientation, gender identity, or gender expression violate personality rights.

• Employment. Employers may be found to have committed discrimination if they treat workers differently on those grounds in hiring, transfers, or dismissal.

• Schools. Schools may be held liable if they punish students improperly or fail to stop bullying linked to a student’s sexual orientation, gender identity, or gender expression.

The purported response said these cases showed the courts’ “clear position” that “the lawful rights and interests of sexual minorities should be protected on an equal basis, and that any unreasonable discrimination based on sexual orientation, gender identity, or gender expression is prohibited by law.”

It also said the citizen’s petition, which is inaccessible and not shown in the screenshot —including dedicated research, guiding documents, guiding cases, and judicial training—had “important reference value,” adding that the top court’s Research Office would review relevant cases nationwide, summarise and unify adjudicatory standards, issue guidance when appropriate, and include personality-rights protection in judicial training.

The Research Office of the Supreme People’s Court, a department that assists with drafting judicial interpretations, participates in legislative research and consultation, answers lower courts on the application of the law, and compiles guiding cases.

The full English translation and the Chinese-language text of the response shown in the screenshot are provided below.

The screenshot was apparently shared in a group chat by the unidentified Chinese petitioner and sourced on Monday, 18 May, from 中和彩虹说 Zhonghe Rainbow Talk, a personal WeChat blog run by an LGBT-affirmative psychological counselor.

Response Message: [Supreme People’s Court]

Hello. Your petition has been processed. You may log in to the “People’s Courts Online Appeals and Petitions Platform” (https://zxfw.court.gov.cn) using the mobile phone number registered for this matter to view the detailed response. Thank you for your understanding and support of the work of the people’s courts.

Detailed Response:

Dear Comrade [Name],

Your submission entitled “Recommendations on Clarifying, in Judicial Adjudication, the Principle of Prohibiting Discrimination on the Grounds of Sexual Orientation and Gender Identity” has been received. Thank you for your concern and support for the work of the people’s courts. The opinions and recommendations you have put forward are of significant value.

To implement the Constitution, the Civil Code, the Law on Promotion of Employment, and other relevant legal provisions, and to effectively protect citizens’ personal dignity from infringement, the Supreme People’s Court has guided local courts at all levels in hearing a number of relevant cases. Through typical cases and other forms, the following adjudicatory rules have been clarified, which are highly consistent with your recommendations:

I. In cases involving public insult or defamation concerning another person’s sexual orientation, gender identity, or gender expression, the people’s courts generally find that such conduct constitutes an infringement of general personality rights. Courts may order the cessation of the infringement, a formal apology, and compensation for mental distress, thereby making clear that discriminatory words and acts based on sexual orientation, gender identity, or gender expression are unlawful. For example, in China’s first case concerning “conversion therapy” for homosexuality, the effective judgment clearly stated that “homosexuality is not a mental illness.”

II. Where an employer treats an individual differently in recruitment, hiring, job transfer, or dismissal on the grounds of sexual orientation, gender identity, or gender expression, the people’s courts will, in accordance with the law, find that the employer has committed employment discrimination, and may order the revocation of relevant decisions, compensation for losses, and other remedies. The people’s courts make clear that unreasonable discrimination in the field of employment on the grounds of sexual orientation, gender identity, or gender expression is prohibited. For example, in China’s first transgender employment discrimination case, the concepts of “gender identity” and “gender expression” appeared in a judgment for the first time.

III. Where a school imposes improper disciplinary measures on a student because of the student’s sexual orientation, gender identity, or gender expression, or fails to fulfil its management responsibilities resulting in campus bullying, the people’s courts will, in accordance with the law, order the school to bear liability in order to strengthen schools’ obligation to protect students’ personal freedom and personal dignity. For example, in the case of Zhang and others v. a school in Hefei concerning liability of an educational institution, the effective judgment ordered the school to bear 30 per cent of the compensation liability, as it had failed to take appropriate psychological intervention measures for a homosexual student who later died by suicide, and had instead simply required the student’s parents to take the student home.

These cases all reflect the clear position of the people’s courts that the lawful rights and interests of sexual minorities should be protected on an equal basis, and that any unreasonable discrimination based on sexual orientation, gender identity, or gender expression is prohibited by law.

As for your recommendations on launching specialised research, issuing guiding documents, compiling guiding cases, and incorporating relevant content into judicial training, these are of important reference value. We will carefully study them and seek to incorporate them as appropriate.

In the next step, we will continue to review cases nationwide involving the protection of the rights and interests of sexual minorities, summarise adjudicatory rules, and unify adjudicatory standards. At an appropriate time, we will clarify mature adjudicatory rules through judicial interpretations, meeting minutes, guiding cases, reference cases, typical cases, and other means, so as to strengthen the supply of judicial rules. We will also incorporate matters such as the protection of personality rights into judicial training, and protect citizens’ personal freedom and personal dignity in accordance with the law.

Once again, thank you for your concern and support for the work of the people’s courts.

This letter is hereby issued in response.

Research Office of the Supreme People’s Court

8 May, 2026

回复信息：【最高人民法院】▬▬您好！您的信访事项已办理完毕。您可通过本手机号的注册登录“人民法院网上申诉信访平台（https://zxfw.court.gov.cn）”查看答复详情。感谢您对人民法院工作的理解和支持。

答复详情：▬▬同志：您好！《关于在司法审判中明确禁止基于性取向与性别认同歧视原则的法律适用建议》收悉。感谢您对人民法院工作的关心与支持。您所提的意见建议很有价值。

为贯彻落实宪法、民法典、就业促进法等法律规定，切实保护公民的人格尊严不受侵犯，最高人民法院指导地方各级法院审理了一批相关案件，并通过典型案例等形式明确以下裁判规则，与您的建议高度一致：

一是针对公开侮辱、诽谤他人性倾向、性别认同、性别表达的案件，人民法院一般认定为构成侵害一般人格权，判令停止侵害、赔礼道歉、赔偿精神损害，明确基于性倾向、性别认同、性别表达的歧视性言行具有违法性。比如，在“中国同性恋矫正治疗”第一案中，生效裁判明确“同性恋不是精神疾病”。

二是在招聘、录用、调岗、解雇中，用人单位以性倾向、性别认同、性别表达为由实施差别对待的，人民法院也会依法认定用人单位构成就业歧视，判令撤销相关决定、赔偿损失等，明确禁止就业领域基于性倾向、性别认同、性别表达的不合理歧视。比如，在国内首例跨性别就业歧视案中，判决书中首次出现了“性别认同”“性别表达”等概念。

三是学校因学生性倾向、性别认同、性别表达等实施不当惩戒，或未履行管理职责导致校园欺凌的，人民法院依法判令学校承担责任，强化学校对学生人身自由与人格尊严的保护义务。比如，在张某等与合肥某学校教育机构责任纠纷一案中，生效裁判判令对自杀的同性恋学生未能采取适当心理干预措施，而是简单要求家长带回的学校承担30%的赔偿责任。

这些案例中均体现人民法院对于性少数群体的合法权益予以平等保护，任何基于性倾向、性别认同、性别表达的不合理歧视均为法律所禁止的鲜明态度。

至于您提出的启动专项调研、发布指导文件、编纂指导性案例、纳入法官培训等建议，具有重要参考价值，我们将认真研究吸纳。下一步，我们会持续梳理全国法院涉性少数群体权益保护的案件，总结裁判规则，统一裁判尺度；适时将成熟裁判规则通过司法解释、会议纪要、指导性案例、参考案例、典型案例等方式予以明确，强化规则供给；将人格权保护等内容纳入法官培训，依法保护公民的人身自由与人格尊严。

再次感谢您对人民法院工作的关心与支持！

特此函复。

最高人民法院研究室

2026年5月8日

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Ginger River Review

Story of teens at a transgender clinic in Beijing

The topic of transgender people has come into the public's view late in China. But more and more medical facilities targeting the group are gradually changing the landscape…

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3 years ago · 26 likes · 14 comments · Jinglin Gao and Jiang Jiang

Beijing’s recent call to “invest in people”（投资于人）can sound, at first, like another broad policy slogan. Li Shi’s lecture gives it a much harder meaning. For him, the phrase is not a soft add-on to growth policy, but a response to the central dilemma facing common prosperity: slower growth is making it harder to expand the pie, while entrenched gaps in income, wealth, public services, and human-capital investment are making it harder to share it fairly. His lecture therefore does two things at once. It explains why “investing in people” has become necessary, and then turns the slogan into a concrete reform agenda — higher household incomes, more support for low-income families, hukou and education reform, fairer public services, and, finally, freedom.

Li, Senior Professor and Dean of the Institute for Common Prosperity and Development at Zhejiang University, laid out at Peking University just how formidable the obstacles have become. Common prosperity is not about national strength in the abstract. It is about whether ordinary people become more prosperous, and whether the gains of development are shared more fairly. That requires China to do two things at once: “make the cake bigger” and “divide the cake better.” Both tasks are becoming harder, he said recently.

On growth, Li listed a series of mounting pressures. China’s growth rate has fallen from the high-speed era of 8–10 percent to around 5 percent. Household income growth has slowed sharply, with the weakest gains among the poorest groups. Urban wage growth has softened. Consumption remains structurally weak. Fixed-asset investment, especially private investment, has lost momentum. Unemployment, particularly among young people, remains elevated. These are not separate problems. Taken together, they raise a harder question: whether China can still generate the level of growth needed to meet its 2035 and 2050 prosperity targets.

The distributional picture is no more reassuring. China’s national income inequality has remained at a high level for nearly a decade, with the official Gini coefficient hovering around 0.46–0.47. Urban wage inequality has continued to widen. Wealth inequality is worse still. According to Li’s estimates, the wealth Gini coefficient rose from 0.45 in 1995 to above 0.7 in 2023. In other words, even where headline income inequality has stopped rising, deeper divides in wages, assets, and life chances have continued to harden.

Li’s sharpest warning concerns opportunity. Low-income families are not merely earning less today. They are also far less able to invest in education, health, childcare, and other forms of human development. Li noted that in 2021, around 300 million people had monthly incomes below 1,000 yuan, and nearly 98 million below 500 yuan. For these households, “investing in people,” Beijing’s recent policy phrase, is not simply an aspiration. It describes a constraint. Without income, access, and public support, they cannot make the investments that would allow the next generation to move upward.

Strikingly, after discussing growth and distribution, Li turned to something more fundamental: freedom. Investment in people, he argued, is different from investment in machines or infrastructure. Human beings are not passive assets. They have consciousness, values, beliefs, and an innate desire for freedom. In this sense, freedom is not merely a moral claim or a form of individual welfare. It is also a condition for productivity, innovation, and human flourishing. Li’s final policy advice was therefore unusually direct: China should create an environment in which people can develop more freely, so that society’s creative potential can be more fully released.

Li delivered the following speech at Peking University’s National School of Development (NSD) on 29 March 2026. The transcript was published on the NSD’s official WeChat blog on 28 April 2026.

—— Zichen Wang

李实：共同富裕的关键是“投资于人”

Li Shi: Investing in People is Key to Common Prosperity

Since joining Zhejiang University, my research has focused primarily on common prosperity. I therefore tend to interpret the central government’s new policy initiatives through the lens of how they may contribute to that objective.

Today’s theme is “Investing in People and Advancing Common Prosperity.” From the perspective of common prosperity, I will discuss how “investing in people” can help advance this agenda. My remarks will focus on three questions:

1. the main challenges facing common prosperity;

2. why “investing in people” is a more effective pathway among the many possible approaches;

3. what reforms are needed to implement such a strategy.

The Main Challenges Facing Common Prosperity

Having studied common prosperity for many years, my understanding of the concept differs from that of the general public, and even from mainstream media interpretations. As I define it, common prosperity means prosperity shared by all people. Its emphasis is on the prosperity of the people themselves, not on the economic strength of the state.

Common prosperity can therefore be assessed along two dimensions.

The first is the prosperity dimension: China must reach its stated prosperity targets in stages, first by 2035 and then by 2050.

The second is the sharing dimension: all people should share fairly in the fruits of economic and social development, and various forms of disparity should be narrowed, without falling into egalitarianism.

Under the prosperity dimension, three variables are central to people’s well-being and human development: income, asset accumulation, and the level of public services. Under the sharing dimension, the question is whether these three variables are widely and fairly shared across society. This means narrowing income gaps, reducing disparities in asset accumulation, and achieving equal access to basic public services. Put more simply, advancing common prosperity requires both growing the “pie” and sharing it more fairly.

On this basis, research on common prosperity must also examine urban-rural, regional, intra-regional, and inter-population-group disparities. All of these questions fall within the analytical framework outlined above.

Based on this understanding, I believe China faces two major challenges in advancing common prosperity: how to grow the pie, and how to share it better.

1. The challenge of growing the pie

The core objective of growing the pie is to steadily raise the prosperity level of the entire population, enabling China to reach the level of a moderately developed country by 2035 and to enter the ranks of developed countries by 2050. To meet these two-stage prosperity targets, China will need to maintain a relatively high growth rate over the next 10 to 25 years. Yet the sustained slowdown in economic growth in recent years has become a significant constraint. This is reflected in the following respects:

First, the long-term growth rate has been trending downward. Between 2005 and 2024, China’s long-term economic growth rate declined steadily. In recent years, official growth has been around 5 per cent, a marked fall from the 8–10 per cent growth rates seen 15 years ago. This points to weakening growth momentum.

Second, household income growth has slowed significantly. Since 2013, our research team has completed three rounds of national household income surveys in 2013, 2018, and 2023. These surveys divide the decade into two five-year periods: 2013–2018 and 2018–2023. Based on the survey data, the average annual real growth rate of household income was around 8 per cent in the first period, a relatively high level. In the second period, however, it fell to below 5 per cent, a decline of more than three percentage points. Among them, the bottom 10 per cent of income earners had an average annual income growth of less than 2 per cent, while income growth among middle-income groups was also weak.

Third, the wage growth curve for urban employees has shifted downward. Based on the same three rounds of survey data, we also examined urban wage growth. From 2013 to 2018, the average annual real wage growth rate for urban workers was close to 8 per cent. In the following five-year period, the growth rate fell by around three percentage points, with an even sharper decline among low-wage workers.

Fourth, consumer demand has remained weak. In 2024, the average monthly growth rate of total retail sales of consumer goods was around 3 per cent. Short-term stimulus measures introduced at the end of 2024, including trade-in programmes, provided a temporary boost. Between March and June 2025, the average monthly growth rate of retail sales exceeded 4 per cent. From July onward, however, consumption growth continued to weaken, falling below 1 per cent by December. This suggests that short-term stimulus measures can generate only temporary effects; they cannot sustain long-term consumption growth.

The household consumption rate has also been persistently low. This is not a recent phenomenon, but a long-standing structural problem. In 2004, household consumption accounted for more than 40 per cent of national income. Between 2004 and 2010, this share continued to fall, reaching a low of around 35 per cent. Since 2010, it has recovered gradually, but it has still not returned to its 2004 level. If consumption cannot grow on a sustained basis, its contribution to economic growth will continue to weaken, making the goal of maintaining high-speed economic growth difficult to achieve.

Fifth, fixed-asset investment growth has slowed. In the first half of 2025, fixed-asset investment growth remained low, at around 4 per cent. It continued to decline from May, turned negative in September, and fell to -4 per cent in December. The slowdown in private fixed-asset investment was even more pronounced. At the beginning of 2025, private investment was flat; from May onward, it remained in negative growth, and by December the contraction had exceeded 6 per cent. Investment is an important source of economic growth, but its continued slowdown means it can no longer provide an effective growth impulse.

Sixth, urban unemployment remains high. Over the past two years, the surveyed urban unemployment rate has generally stayed above 5 per cent. The unemployment rate among those aged 16 to 24 has remained around 16 per cent for an extended period, fluctuating only for seasonal reasons. Unemployment among other age groups has also risen gradually, indicating clear pressure in the labour market.

These are the main challenges China faces in growing the pie.

2. The challenge of sharing the pie better

The goal of sharing the pie better is to narrow gaps in income, wealth distribution, and access to public services. Judging from the available data, however, the trend is not encouraging.

First, the national income gap has remained high for a prolonged period. Data from the National Bureau of Statistics show that, since 2003, China’s Gini coefficient first rose and then declined. However, in the decade after 2015, it has fluctuated within a high range of 0.46–0.47. It has not shown a clear upward trend, yet nor has it continued to fall. This reflects the combined effect of different forces influencing income inequality, some of which offset one another.

Second, the urban wage gap has continued to widen. Even after 2008, when overall income inequality narrowed for a time, wage inequality kept increasing. According to our estimates, the Gini coefficient for wages among urban employees rose from 0.27 in 1988 to more than 0.4 in 2023.

Third, the wealth gap has widened further. Based on household survey data, the Gini coefficient for wealth inequality rose from 0.45 in 1995 to more than 0.7 in 2023. This indicates that wealth inequality has not narrowed; on the contrary, it has continued to expand.

In short, China’s pursuit of common prosperity faces two sets of pressures. On the one hand, it must grow the pie amid slowing growth, weak consumption, declining investment momentum, and pressure on employment. On the other hand, it must share the pie better while income inequality remains high and wage and wealth disparities continue to widen.

“Investing in People” Is a More Effective Pathway to Common Prosperity

How should these challenges be addressed? In my view, the central authorities’ proposed strategy of “investing in people” offers a more effective pathway to common prosperity. It can play an active role both in growing the pie and in sharing it more better.

1. “Investing in people” as a driver of growth

Growing the pie depends on high-quality development, a goal repeatedly emphasised by the central authorities. China’s population growth rate has continued to fall, and the size of the labour force is gradually shrinking. Against this backdrop, achieving high-quality development is crucial to realising common prosperity.

High-quality development must mean not only better quality, but also a reasonable pace of growth. The importance of growth speed should not be overlooked. Without sufficient growth, the targets for common prosperity will be difficult to achieve.

In this context, high-quality development should draw on the insights of endogenous growth theory. Developed in the 1980s and 1990s, this body of theory stresses the role of human capital investment and innovation in driving economic growth. It shows that an economy relying solely on physical capital investment will eventually face diminishing marginal returns. This is a key reason why most economies slow after reaching a certain stage of development.

By contrast, “investing in people” can help overcome this constraint and generate increasing marginal returns, because human capital is the source of knowledge production, technological innovation, and new ideas. It is an endogenous engine of economic growth.

Empirical evidence also shows that people with higher levels of human capital earn higher incomes. Chinese survey data indicate that in 1988, wage differences across education levels were relatively modest: university graduates earned only about 30 per cent more than junior secondary school graduates. With technological progress, economic development, and the rise of high-tech industries, however, demand for human capital has continued to grow. Returns to education have risen, and relative wage gaps across education groups have widened.

Even after more than two decades of university enrolment expansion, which greatly increased the supply of highly educated workers, returns to education in China have not fallen significantly. This provides strong evidence that investing in people can raise wages, increase labour productivity, and support economic growth.

At the same time, growing the pie requires stimulating people’s own drive for development. Investing in people can unleash individual vitality and creativity. When people acquire more knowledge and skills, they become more creative and better able to achieve free and all-round development.

The free and all-round development of all people was, in Marx’s vision, the ultimate goal of human society. From this perspective, investing in people is of vital importance.

2. “Investing in people” as a lever for dividing the pie better

Investing in people can narrow gaps in development opportunities at their source, and is an important way to share the pie better.

Directing more human capital investment toward disadvantaged households and individuals, and narrowing differences in such investment across social groups, can raise the overall return on human capital investment. This is because investing in the human capital of low-income groups tends to generate higher marginal returns. This point deserves close attention as it advances both economic efficiency and social equity.

Investing in people is not only a public policy. To some extent, it is also a matter of household resource allocation. Its funding sources include both public investment and private household investment. Low-income groups may have the willingness to invest in human capital, but limited incomes often prevent them from doing so. Raising the income floor can therefore have the most direct effect.

I have long argued that the key difficulty, and the main priority, in advancing common prosperity lies in raising the incomes of low-income groups. Only by doing this well can common prosperity move forward smoothly.

At the same time, low-income groups should be given preferential conditions for human capital investment, so that their investment costs are reduced. Current policies such as grants and student loans for students from financially disadvantaged families fall into this category. Investing in the human capital of low-income groups can generate higher returns while narrowing gaps in development opportunities across society.

Why do I emphasise low-income groups? Because China’s low-income population is extremely large, larger than many people might expect. Based on the National Bureau of Statistics’ definition of the middle-income group, and using estimates derived from our survey data, around 300 million people had monthly incomes of less than 1,000 yuan in 2021, while nearly 98 million had monthly incomes below 500 yuan. Even though household incomes have risen in recent years, the low-income population remains sizeable. Constrained by very low income levels, these groups generally lack the capacity to invest in human capital or to provide high-quality educational resources for their children.

Enabling them to acquire the conditions and capacity for human capital investment is therefore one of the first problems that must be addressed in advancing common prosperity.

China’s income and wage gaps continue to widen for multiple reasons, but differences in educational opportunity and quality are among the key factors. A decomposition of the Gini coefficient for urban wage inequality shows that the explanatory power of educational differences rose from around 14 per cent in 2013 to nearly 17 per cent in 2023, surpassing work experience as a more important factor. This suggests that groups with greater access to human capital investment enjoy more development opportunities and receive higher labour compensation in the labour market. Unequal access to human capital investment eventually translates into income inequality, reinforcing the widening of income gaps.

I want to stress that a better balance between the roles of government and households in investing in people can generate a stronger sharing effect. Human capital investment comes from two sources: public investment and private resources. As the economy develops, rising household income tends to produce a more-than-proportional increase in private investment in education, health, and related areas. This is a general pattern. But income and wealth gaps also widen disparities in human capital investment among households. High-income families can provide better educational resources for their children, further deepening social differentiation.

Therefore, relying on private allocation alone will hardly narrow human capital investment gaps. As the main allocator of public resources, the government should distribute public resources fairly, while also taking into account the allocation preferences of private resources.

In my view, the government should not merely equalise educational opportunities. It should also tilt resources appropriately toward families that lack the capacity to invest in human capital, and use redistribution to narrow differences in total human capital investment across individuals. Balancing the division of responsibility between government and households, and ensuring that public investment benefits low-income groups to a greater extent, can maximise the sharing effect of investing in people.

Advancing the Strategy of “Investing in People” Requires Further Reform

Investing in people means shifting economic and social resources toward human capital investment and human development. This is not simply a matter of expanding the quantity of resources. It also requires improving the efficiency of resource allocation and the quality of investment. Institutional reform and policy innovation are therefore essential, and reform must be deepened across the board.

Implementing an investing-in-people strategy involves many fields, including education, health, and population mobility, as well as the corresponding resource-allocation mechanisms and public policies. In-depth reform is needed in the institutions and policies that constrain investment efficiency and limit the release of human potential. Public resources should be allocated more efficiently and fairly, and high-quality public resources should be directed more toward low-income groups.

The first, and most important, reform is to strengthen the capacity of households, especially low-income households, to invest in human capital. This requires sustained growth in household income. More specifically, three areas are important.

1. Reform should be deepened to unlock economic growth potential and reasonably raise the economic growth rate.

2. The share of household income in the national income distribution should be increased. Although China’s household income share has recovered somewhat, it remains below its level in the mid-1990s and below that of comparable economies. One point deserves particular attention: the household income share in primary distribution is higher than that after redistribution. This means that, after more than a decade of redistributive adjustment, the income shares of both government and enterprises have risen, while the household income share has fallen rather than increased. Optimising the distribution structure is therefore an urgent task.

3. The share of public spending devoted to people’s livelihoods should continue to rise.

The second important reform is reform of the household registration (hukou) system. One way to invest in human capital is to invest in population mobility. The free movement of people and labour can generate greater social benefits and improve people’s well-being. It is therefore necessary to accelerate hukou reform, remove institutional and policy barriers to population mobility, and ensure that investing in people is put into practice.

Hukou reform has been underway for many years and has now reached the most difficult final stage: how megacities and very large cities should relax hukou restrictions. In addition, equal access to public services should be achieved between urban residents without local hukou and those with local hukou.

The third reform concerns the model of educational development. This is the core of human capital investment, and reform should focus on four areas.

1. Discriminatory systems in access to education should be abolished, and greater freedom in school choice should be realised. At present, a major problem is that many children of migrant workers in cities cannot take the national college entrance examination where their parents work. At the same time, examination content and difficulty level differ between their place of household registration and the place where their parents work, forcing many children to return to their hometowns for schooling. This system is neither fair nor humane. Policies allowing students to take the college entrance examination outside their place of household registration should therefore be implemented.

2. Educational resources should be directed toward groups with greater needs. This includes preschool education, educational support for children from disadvantaged families, and childcare services for infants and toddlers aged 0 to 3.

3. Reform of school governance should be deepened. The administrative model of university governance should be changed, the central role of teachers should be strengthened, and teachers’ professional initiative and internal motivation should be stimulated.

4. The teaching paradigm should be reformed. China needs to move beyond the path dependence of exam-oriented education and cultivate students’ capacity for innovation and creativity. Zhejiang University has proposed helping students move from “knowing how to learn” to “knowing how to create.” This goal may sound simple, but it requires a fundamental change in the teaching paradigm.

My final policy recommendation is to create an environment that supports the free development of individuals.

Unlike investment in physical capital, where expected returns can often be calculated, the object of investment in people is the human being. Human beings have consciousness, ideas, values, and beliefs. They pursue freedom, and as society develops, their desire for freedom becomes stronger.

This means that whether human capital investment can generate individual and social returns is closely related to people’s values and beliefs, and also to the space they have for freedom. To stimulate innovation and creativity, society must create a free and inclusive environment for development.

Freedom is not only a right and a form of welfare for every individual. It is also a source of productivity and creativity. Only by safeguarding the space for individuals’ free development can human potential be fully released.

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Pekingnology

This Is Not an Inspiring China Story

A 66-year-old migrant worker in northern China was asked last summer by an influencer on the street to choose between 100 yuan in cash and a chance to win 1,000 yuan by writing an essay…

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a month ago · 29 likes · 4 comments · Yuxuan JIA and Zhu Yutao

The East is Read

4:30 A.M. at a day labour market in China, a drink to start a day’s toil

China’s informal labour markets are fleeting theatres of toil—unmarked spaces that spring to life before dawn and vanish by the break of day, playing out daily in nearly every major city, from Shanghai to Hefei. In Guiyang, the capital of the mountainous, landlocked province of Guizhou, one such stage comes alive at 4:30 a.m. A stretch of bare concrete …

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a year ago · 35 likes · 5 comments · Yuxuan JIA and Zhong Huiqing

Build mechanisms for managed interdependence

As President Donald Trump visits China, much attention will focus on what immediate deals and dialogue might emerge: from possible cooperation on urgent geopolitical crises from Ukraine to the Middle East, or on bartering over tariffs, aircraft, and agricultural goods. While these questions matter, the greater significance of the visit is how the United States and China are moving, however unevenly, toward a new normal of managed coexistence between deeply interdependent peers.

Trump’s visit is an opportunity to give that reality form — new mechanisms from trade and investment to security and crisis-management that stabilize competition while creating room for cooperation on global challenges.

For years, the bilateral relationship has been framed through the language of decoupling, de-risking, and strategic rivalry. Yet the facts of interdependence have proved more durable than the rhetoric. International trade has stubbornly held on and major American companies continue to see China as an indispensable market, manufacturing ecosystem, and source of growth. China, for its part, remains deeply embedded in global supply chains and has shown that it can withstand pressure and retaliate when necessary. Neither side can coerce the other into submission. Recent exchanges in the United States suggest that this resilience of interdependence is beginning to register not only in markets, but also in policy thinking.

In April 2026, we conducted ten days of intensive field research in the United States. Across these closed-door exchanges and often candid debates, and beyond the loudest hawkish rhetoric, important voices in American political, business, and policy circles are quietly exploring a more pragmatic, problem-solving approach to China. The current administration’s tendency to place economic interests above ideological confrontation has, objectively, opened a rare window for practical engagement. Seizing this moment to rethink the rules of trade, investment, and strategic risk management.

This does not mean a flawless return to the old era of engagement, as if disputes over technology, industrial policy, security, and geopolitics had vanished. Competition will still remain a central feature of the relationship. But we do not have to lurch from tariff shock to sanction cycle to diplomatic crisis anymore. We stand before an opportunity to build a more realistic framework of managed interdependence.

That should begin with economics. If the United States and China are serious about stabilizing relations, they should consider establishing a bilateral trade board and a bilateral investment board. A trade board could identify areas of mutually beneficial exchange, clarify priorities for imports and exports, and prevent recurring disputes from escalating unnecessarily. China can buy more non-sensitive American goods, including agricultural products, energy, aerospace products, and other high-quality exports. The United States, meanwhile, should recognize that trade with China is not a one-sided loss. American consumers gain affordable products, American farmers and manufacturers gain customers, and the United States retains major strengths in services, finance, technology, and advanced industry which more than balance out the economic relationship.

An investment board is equally necessary. Trump has repeatedly said that he welcomes Chinese investment in the United States when it creates American jobs. That instinct is sensible. If a Chinese company invests in American factories, employs American workers, and complies with U.S. law, such investment should not be rejected. At the same time, Washington will continue to have national security concerns in certain sectors. The problem is that “national security” has become an elastic and vague category. A standing bilateral mechanism could help clarify what forms of investment are welcome, what sectors require special scrutiny, and how both sides can avoid turning every commercial question into a confrontation.

These mechanisms would matter especially now, as both countries have reason to seek a degree of stability amid global energy market upheavals, Hormuz strait tensions, and geopolitical headwinds.

The same logic applies beyond trade and investment. My own experience in exchanges in Washington led me to witness a genuine interest in reopening or expanding dialogue channels, including military and defense communication.

Over the years, head-of-state diplomacy has anchored China-U.S. relations, serving as a stabilizing force amid shifting global currents. This meeting is an opportunity to reaffirm that role and to encourage more routine channels to create strategic stability, enable crisis prevention, and achieve goals such as controlling fentanyl and its precursor chemicals, and regulating emerging technologies such as artificial intelligence. AI in particular is now too consequential to be excluded from top-level discussion. The two countries need not agree on everything to recognize that a world in which the largest technological powers do not talk about AI risks is an unsafe one and that avoiding an AI arms race should be at the top of any agenda.

People-to-people ties should also be part of any stabilization agenda. Chinese students should be able to study in the United States without feeling that their presence is treated as inherently suspect. Educational exchanges have long served as a stabilizing force in bilateral relations and should not become collateral damage of political distrust. Meanwhile, China could also consider extending visas to students and give visa-free access to American visitors, as it has done for every other G7 economy, to encourage renewed social and commercial exchange.

Still, no issue will test the seriousness of this search for stability more than Taiwan. It remains among the most sensitive questions in China-U.S. relations and the one most capable of producing miscalculation. Washington has long stated that it does not support Taiwan independence. In the present atmosphere, that position should be reaffirmed clearly and consistently. Recent exchanges across the Taiwan Strait, including engagement between the Kuomintang and the mainland, demonstrate that a desire for peace and stability remains robust, and the U.S. should support cross-strait dialogue rather than feeding the illusion that confrontation is inevitable.

Further, the need for managed interdependence is also global. The Middle East remains in turmoil, with conflict involving Iran and disruption around the Strait of Hormuz threatening energy security far beyond the region. Asian economies and much of the Global South are especially exposed. China, as a leading trade partner of both Iran and Gulf countries, has a constructive role to play in supporting de-escalation. The United States and China will not see every crisis in identical terms, whether in the Middle East or in Ukraine. But the world is safer when they can communicate, coordinate where possible, and avoid allowing bilateral rivalry to foreclose cooperation on matters of war and peace.

With a greater measure of stability in hand, it may also be time to revisit the reciprocal 2020 closures of China’s consulate general in Houston and the U.S. consulate general in Chengdu — a modest but meaningful step toward restoring the diplomatic infrastructure of a more functional relationship.

The coming summit may or may not produce dramatic breakthroughs. It need not. Its deeper value would be to signal that both sides are prepared to move, however cautiously, from unmanaged rivalry toward strategic stability. The age of decoupling is ending. Our urgent task now is to build the mechanisms of managed interdependence before a lack of structure turns competition into permanent instability.

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CCG Update - Center for China and Globalization

Henry Huiyao Wang Interviewed by Forbes on Trump’s to China

In anticipation of Trump’s China visit, we are sharing below the Forbes interview with Henry Huiyao Wang, Founder and President of the Center for China and Globalization (CCG), published on 26 April 2026…

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a month ago · 10 likes · CCG Update

CCG Update - Center for China and Globalization

Transcript: China-U.S. Roundtable of the 12th China and Globalization Forum

The 12th China and Globalization Forum, hosted by the Center for China and Globalization (CCG) and co-organized by the China Association of International Trade (CAIT), the China Society for World Trade Organization Studies (CWTO), the China-United States Exchange Foundation…

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2 months ago · 7 likes · 3 comments · JINGYUAN JIANG and Yuxuan JIA

CCG Update - Center for China and Globalization

Recent CCG visits in the United States

Below are some recent visits by Henry Huiyao Wang, Founder and President of the Center for China and Globalization (CCG), and Mable Lu Miao, Secretary-General of CCG, in the United States…

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2 months ago · 12 likes · JINGYUAN JIANG

An Sanshan, the day labourer from Shanxi province, took the second option. Sitting in an empty restaurant, he wrote an essay of more than 800 Chinese characters titled “My Mother.” The video was later posted on Douyin, China’s equivalent of TikTok, on July 9, 2025. It quickly went viral, turning a man who spent his days carrying bricks and cement into an unlikely literary sensation.

Readers were struck by the blunt force of his memories: a mother who never rested, a son who hasn’t been able to call out “mama” for over 30 years, and a grave whose grass turned green, then yellow, then green again, like his yearning unending.

Yet what makes the essay so devastating is not only grief. It is continuity. The mother was worn down by a lifetime of labour; the son, decades later, is still living by the same logic of bodily exhaustion. His story is therefore not just about memory, love, or literary talent. It is also a plain record of how poverty can travel across generations, and how the lives of China’s lowest-paid workers are often built on toil so relentless that it becomes almost invisible.

Nearly a year later, the essay found a second life online after a Beijing-based English-speaking content creator translated it into English and read it aloud. The English clip, uploaded on 23 April 2026, again spread across Chinese social media.

The translation was then picked up by Chinese state media and official overseas-facing accounts, including China Daily, Xinhua, Chinese embassies, and China’s Foreign Ministry spokesperson, as an example of a “China story” that could move audiences beyond China.

Below is the English version of the essay translated and read by the foreign blogger, followed by our translation of The Beijing News’ profile of An Sanshan, the man behind “My Mother.”

—Yuxuan Jia

“My Mother”

Today, I happened to run into people filming a short video and doing interviews. They needed to draw a topic and because I was the only one among this group of workers who had gone to high school, the two young women chose me. I was lucky enough to draw the title My Mother. Revisiting memories of my mother filled me with many thoughts.

My mother has been gone for more than 30 years now. She’s buried at the old cemetery at the edge of the village. Her appearance, her every move, it’s all still right there in front of me.

My mother, she never had a moment of rest her entire life. She got up before dawn and only stopped working after dark. Inside the house and out, her worries never ended. She always wore clothes that had been washed until they faded white, patched again and again.

She was kind-hearted and tolerant. She never argued with the neighbours. Whenever something good came along, she always made sure others had it first.

What I remember most is the meals. The whole family would gather around the table, but my mother never joined us. She was always busy at the stove. Only after we had all finished eating, would she take a look into the pot. If there was something left, she would have a few bites. If there was nothing, she wouldn’t eat at all and say, “I’m not hungry.”

Life was tight back then, not much difference between the rich and the poor, but people were warm-hearted and valued relationships. My mother was the kindest of them all.

The dumplings she made, nothing smelled as good. They were the one thing we longed for in those hard days.

New Year was her busiest time, washing and scrubbing and preparing the holiday meal until she was too tired to stand up straight, but she always kept her smile. Watching us set off firecrackers, she was even happier than we were. No matter how worn our clothes were, she’d take them in her hands and have them cleaned up, neat and proper.

In those days, we still lived under the collective. Fresh vegetables were hard to come by. In autumn, grain rations were distributed. Grain was harvested during the day, then divided out to each family at night, a process that took all night long.

Autumn in the countryside is bitterly cold and my mother wore very thin clothes. After the grain was delivered, she would be freezing unbearably. She’d wrap herself with a thin, thin blanket and just like that, it would be dawn again and another day of hard work would begin. She’d rub her eyes and get up to prepare food for the whole family.

There were many people in the house and that big iron pot used for firewood cooking was incredibly heavy. Lifting it up and down wasn’t something just anyone could do. Thinking about it now, I wonder where my mom, with her small frame, got so much strength.

When my mother passed away, she was barely past 50, worn down by work. Now, her grave sits at the edge of the village, a small, unremarkable mound of earth. Every time I go back, I always go stand there for a while and talk to her.

I’ve spent most of my life in the city doing manual labor, carrying cement, tying steel bars, climbing scaffolding. My hands and shoulders are covered in calluses. It’s truly exhausting work, but when I think of my mother’s strength lifting that iron pot, when I think of how she shivered with cold but clenched her teeth and held on until morning, my own strength comes back again.

My mother never enjoyed a life of comfort, but what she taught me was this unbreakable spirit and sense of duty towards my family. I must continue to support this family that you built and hold it steady.

The grass on her grave turns green, then yellow, then green again, year after year, just like my longing never ending.

I’ve become a father. I’ve become a grandfather. But for over 30 years, I haven’t called out the word mama.

I think that one day, when I can no longer carry cement, I will go back to the village and lie down beside that mound of earth. Maybe then, when I call out mom, she’ll be able to hear me.

那篇价值1000元的作文《我的母亲》，让农民工安三山被“看见”

The 1,000-Yuan Essay “My Mother” That Made Migrant Worker An Sanshan Seen

In An Sanshan’s world, 1,000 yuan is something solid and specific: standing under a nearly 40°C sun for three days, moving 20,000 bricks, and shovelling several tonnes of sand and cement.

So when he heard that he could earn that amount by sitting in an air-conditioned room and writing an essay, he did not hesitate at all. “I had never come across such a good thing in my life,” he said.

It was a street challenge launched by a blogger. An Sanshan did not understand these things; he only felt it was a bargain. In less than an hour and a half, he finished an essay of more than 800 Chinese characters, titled “My Mother,” took the 1,000 yuan in cash, and left contentedly.

At that moment, he had no idea what would come next. The essay was posted online and moved countless readers to tears. Overnight, he was all over Douyin and Kuaishou [two short-video platforms in China]. Soon, media outlets of all sizes were telling his story.

One line was read again and again: “The grass on her grave turns green, then yellow, then green again, year after year, just like my longing never ending.” Some suggested that the essay be included in primary or secondary school textbooks. Online, strangers began regarding him as “father” and analysing his writing line by line. Others, with great seriousness, tried to prove that the essay could not have been written by him.

An Sanshan does not use the internet, and was slow to take in all these reactions. Later, the essay appeared in newspapers, and even elderly villagers who could not read had heard children read it aloud. Groups of visitors came to his home one after another, from wealthy business owners to publishing editors. He did not know how to respond. Again and again, he could only say: “I’m just a farmer.”

Compared with the noise online, the roadside opposite Taiyuan Railway Station was much quieter. The workers who used to wait there with An Sanshan for odd jobs still gathered before dawn. When his name was mentioned, they realised they had not seen that “quiet little old man” for several days.

There, the fact that he had recently gone viral seemed to belong to another world. Most of the workers had never heard about it.

“What? He can write essays?” one fellow worker said, first widening his eyes, then curling his lip.

They had no time to think more about it. The foremen would soon arrive to pick workers, and this was the moment that would decide whether they could earn a day’s living. No one noticed that An Sanshan was being seen by the outside world in a way none of them had ever imagined.

Earthen Walls

From Taiyuan, the road heads west, passes through Du’erping, and enters the Western Hills. After several steep hairpin bends, the car keeps climbing until it reaches near the mountaintop. That is where An Sanshan’s home is.

The drive takes less than an hour. But each time An Sanshan makes the journey, it takes him nearly a whole day. He sets out from Taiyuan Railway Station with dry food, changes buses twice, and then, halfway up the mountain, flags down a passing vehicle heading in the same direction. The whole trip costs him only two yuan.

His home sits in the southeastern corner of the village. Among rows of brick walls and iron gates, only the An family’s courtyard wall is built from mud and stones. The gate is simply a bundle of wooden sticks tied together. Through the gaps between them, wide enough for a watermelon to fit through, the courtyard can be seen at a glance: tomatoes, green beans, and eggplants grow on a small plot of land. Up a half-metre-high step stand two single-storey houses, one new and one old.

On ordinary days, apart from the crowing of chickens and the honking of geese, the sound villagers most often hear is the occasional scrape of a three-wheeled vehicle passing over the road. But one month ago, both sides of this asphalt road were packed with cars. At one point, it was so crowded that people could “barely move.” They had all come to see the “essay uncle.” When old men chatting beneath the courtyard walls saw outsiders, they would point towards An Sanshan’s home before the visitors even opened their mouths.

During those days, An Sanshan’s small courtyard was crowded inside and out. There were not enough cups at home, so empty glass jars were pressed into service. Onlookers held up their phones and zoomed in, trying to find something distinctive about him. Most, however, left disappointed. An Sanshan was too ordinary, even a little inconspicuous.

He is not tall, and has a lean, wiry build. An oversized T-shirt makes him look even thinner and smaller. Nor is he as fair-skinned as he appeared in the video. His skin is dark and sallow, and the wrinkles on his face resemble the mountains of the northwest, with deep ravines cut clearly across them. The hands that wrote “My Mother” are no different from those of other migrant workers: the knuckles are thick, and one little finger bends outward from having been smashed too many times. The calluses on his palms are so thick that he can hold a glass jar filled with boiling water.

If one had to find something unusual about him, it might be the shiny black, old-fashioned leather shoes beneath his camouflage trousers. An Sanshan cannot sit idle for a day, but those shoes are clearly not made for labour.

Sitting in front of the camera, An Sanshan grinned, revealing two rows of teeth yellowed by tobacco smoke. Then he introduced himself, carefully and methodically, in his local dialect. He is not a talkative man. The interview moved between long silences and brief answers. When asked how he had conceived the essay, or what kind of person his mother had been, he answered readily. But some “off-topic” questions displeased him: how his mother died, where she was buried, and what his family members did for a living. To these, he responded with silence.

Visitors soon discovered that An Sanshan was not the kind of old man who would cooperate with everything in front of a camera. He spoke cautiously, with a strong sense of boundaries. He resented outsiders “asking around everywhere in the village.” “Can’t you just ask me about my own family’s affairs?” he said.

In fact, almost every visitor had been refused by him at some point. He repeatedly stressed a farmer’s proper place and kept the outside world at a distance, saying he did not want to “make a spectacle of myself.” Yet when uninvited visitors appeared at his door, he still treated them politely. Like the gate to his home, his world also leaves some gaps.

After the essay went viral, he often asked his son to open the comment section on Douyin. Then he would put on his reading glasses and go through the comments one by one.

An Sanshan said he only read the “bad” comments. But comments filled with doubt and speculation still made him angry. He did not like being praised as “like a writer.” By contrast, comments that said the language of “My Mother” was clean, and its emotions sincere would make him nod slightly.

He picked up a notebook his son no longer wanted and planned to use it specially for copying down comments. On the title page, he wrote the first one: “The knowledge of intellectuals should be used for understanding and helping, not for speculation and calculation.” In the lower right-hand corner, he added the commenter’s username.

Some visitors said that when he put on his reading glasses, he looked like an intellectual. An Sanshan bristled at the word, as if the label made him deeply uncomfortable.

The question he heard most often also irritated him: Had he ever thought of improving his life through reading and writing?

“That is blind thinking, fantasy, daydreaming,” he said, the deep lines between his brows tightening. “Without hardship, without suffering, how could life get better?”

Silence

Among the day labourers gathered by the roadside opposite Taiyuan Railway Station, An Sanshan is among the hardest-working.

For him, life has always been an arithmetic problem that must be calculated to the last yuan. Three hundred yuan is the daily target he sets for himself. To earn it, he has to compete for the heaviest, most exhausting jobs.

He works as an unskilled labourer, passing bricks and mortar to the bricklayers building walls. The work has to be fast; the men on the scaffolding must never run short of materials. The scaffolding stands more than a head taller than he does, and each time he lifts, he has to tense his toes and brace himself against the ground. Even young men find this work hard to bear. The bricks have to be sprinkled with water in advance, and each one weighs about 1.5 kilos. After a short while, sweat begins to fall in heavy drops. By the end of the day, a man is so exhausted that he cannot turn over in bed.

An knows that only this kind of work will leave him with more money after paying 10 yuan for a bed and 8 yuan for a meal. That income is the only path towards another goal: tuition and living expenses for three university students.

That enormous expense is like a rein tying him to this dusty labour market. It explains all of An Sanshan’s choices: why he orders only rice topped with shredded potatoes; why he saves unopened bottles of mineral water and sells them back to the shop; why, after finishing a 300-yuan job, he still wants another 300-yuan job the next day, as long as he can get himself out of bed. In the arithmetic of his life, anything that cannot quickly be turned into cash is excess.

It was the same in the basement that cost 10 yuan a night: damp, cold, and heavy with the smells of bodies, smoke, and mildew. The owner occasionally checked the rooms and once saw a different side of him. “When I opened the door, he was wearing reading glasses, holding a book as thick as a finger,” the owner recalled. But the scene was so brief it felt like an illusion.

After the essay went viral, many people said he resembled the main character from Lu Yao’s book Ordinary World. On rainy days, when he could not go out to work, An Sanshan had also gone to Xinhua Bookstore to read the novel. But he only flipped through it. “I didn’t read many pages,” he said, “because I didn’t have time.”

It was not that he had never had other possibilities. In 1978, he was one of the few young people in Zhengjiazhuang Village who had made it to senior high school. It was the second year after the national college entrance examination was restored. When he graduated, he and his classmates held one another and wept, sang together, took photos on a hillside, and hiked to a park in the county. Later, he missed university admission by 20 points. The principal and teachers urged him more than once to stay on as a teacher, but he declined each time: his family was short of labour, and the salary was meagre.

The university admission letter never came. Instead came news of military recruitment. He passed the physical examination without difficulty and was assigned to a Railway Corps unit in Tianjun County, Qinghai. IIn the company, his senior high school diploma still set him apart as one of the better-educated men. In 1981, as his compulsory military service was about to end, he was once again asked to stay. But again he chose to leave, having heard that “after demobilisation, it would be easy to find work back in civilian life.”

The following year, he finally got what he had hoped for: a job at a mechanised brick factory in Gujiao. His job was the only one that had to be done by hand—unloading scorching red bricks from rail carts, nine hours a day.

Had he stayed there, he would long since have become a retired worker. But after only a few years, he fell seriously ill and was bedridden for two years. His fate turned again. After he recovered, he was nailed firmly back into his original identity as a farmer. The narrow, imagined passage towards becoming “a state-sector person” closed completely before his eyes.

“That was just the situation. Regretting it was no use,” he later said, his face showing little expression. After hope collapsed, it became what he called “blind thinking.”

He never became the kind of literary hero in Ordinary World. Half a lifetime had taught him to accept his lot. To the world, he responded with a deep silence.

Those flattened desires for expression had struggled too, only to be quietly defeated. During the two years when he was ill and bed-ridden, he read and reread the few books he owned. In a notebook, he copied down lines that moved him. When he occasionally felt well enough, he wrote diary entries.

“I believe the power of language surpasses everything. It is greater than money, strength, and power; all of these things need language to pass through them.”

“The stars yearn for the moon; I am searching for a kindred spirit.”

His handwriting was sometimes neat, sometimes scrawled.

But once he had the strength to survive again, that small refuge for the inner life became a luxury. The diary, along with that fragile period when he had tried to speak to himself, soon seemed “impractical.”

Last month, or perhaps earlier—he could not remember clearly—while once again sorting through his pitifully few possessions, he sold the diary together with old newspapers and waste cardboard as scrap. “It wasn’t anything important,” he said.

It was weighed, priced, and sold for only a few yuan. The books he had once read are now “pasted over the windows and cabinets.” That is the only value they have left.

There was no ceremony, not even the slightest ripple, as if he had casually brushed a speck of dust from his clothes. What he sold was a part of himself that was useless and too heavy. He was no longer the young man who copied poems while ill. He was simply an old man by the roadside near Taiyuan Railway Station, waiting for a 300-yuan day job.

After the essay became viral, an editor from a Beijing publishing house came to visit. After several cups of hot tea, the editor offered him a way of understanding himself:

“In the countryside, those who can read and write, and who have some learning and a broader view of the world, are often called intellectuals. But if they lack the ability to make a lot of money, while still retaining certain qualities of intellectuals, they become objects of ridicule. Even in the countryside, even within their own families, they have little status. Deep down, they are never understood. Turning inward, reconciling with themselves, and learning to understand and forgive the world become an important way for them to survive.”

“Would it be appropriate to describe you this way?” the editor asked tentatively.

An Sanshan nodded.

Mother

Most of the time, An Sanshan’s self-expression exists only within the fortress he has built out of earthen walls.

He likes to write inscriptions for objects around the house. On the wooden poles in front of the house that hold electric wires and water pipes, there is a piece of calligraphy reading “Source of Life.” It had originally read “Source of Vitality.” After thinking it over, he decided that “life has a broader meaning than vitality,” and changed it.

The cover over the well once bore the phrases “Well Water Flows Long” and “Spring Water Flows Long.” But neither, he felt, was as good as the current phrase: “A Trickle Flows Long.” “A trickle flowing long does not only describe water,” he said. “It also describes life.”

Sometimes he sits on the steps as planes pass overhead. Because his home is near the mountaintop, he can see their colours clearly. He wonders what kind of people are sitting inside, where the plane has come from, and where it is going.

He likes to notice details. Sometimes, early in the morning, he will suddenly point to a plant in the courtyard and ask his child to look it up on a phone, then remember its name.

“Keep it carefully in your mind,” he said. Asked whether he had the habit of jotting things down, he waved his hand. “How could I often carry a notebook around? Then I wouldn’t be one of the working people. Carrying a pen too? What would that make me?”

It was not until 29 June, because of the 1,000 yuan he could not refuse, that he picked up a notebook and pen outside his home. The soft details buried deep in his heart finally found an outlet.

It was a chance encounter. The day before, he had done a 300-yuan job. That night, he slept badly. “The work that day was too heavy,” he said. “It wore me out completely.”

When he opened his eyes the next morning, it was already 5:40. At that hour on ordinary days, he would already have eaten breakfast and boarded the vehicle heading to the construction site. He would never have met the two young women.

They were doing a street challenge: passers-by could take 100 yuan directly, or try to write an essay for a chance to win 1,000 yuan. The four or five fellow workers before him all chose the 100 yuan in cash. An said nothing. He had another plan.

“I went to senior high school. I have a senior high school diploma,” he told the young women as he stepped forward, deciding to “take the challenge.”

A box was handed to him. He reached into the pile of folded slips of paper, felt around, pinched one out, and unfolded it: “My Mother.”

In the video, when he received the topic, no emotion could be seen on the face of this 66-year-old man. But at the beginning of the essay, he wrote: “As I revisit my memories of my mother, countless thoughts surge through my mind.”

The writing took place in a nearby empty restaurant. The young women prepared a cold drink for him and handed him paper and pen. An Sanshan took his reading glasses from the red cloth bag he carried with him and put them on. He made no outline and wrote no draft. The words seemed to flow directly from the tip of his pen.

In a sense, his mother had never truly left.

He wrote of his mother, who “got up before dawn and only stopped working after dark,” and of her clothes, washed until they faded white, patched again and again. At the labour market opposite Taiyuan Railway Station, he too was always the earliest to arrive each day. His fellow workers remembered this old man who “wore camouflage workwear all year round.” The cuffs had already frayed and come loose, but the collar was always clean and neat.

He wrote of “that big iron pot used for firewood cooking was incredibly heavy,” yet his mother’s small, thin body could always lift it steadily. Once or twice, when he was so exhausted on a construction site that he could not lift another brick, the image of his mother carrying that iron wok appeared before his eyes. He clenched his teeth and forced out a little more strength. His mother had taught him “this unbreakable spirit and sense of duty towards my family.” “I must continue to support this family that you built and hold it steady.”

He wrote that his mother “was kind-hearted and tolerant. She never argued with the neighbours.” On construction sites, because An is short, fellow workers called him “Wu Dalang” [after a mocked, ill-fated figure in classic Chinese fiction]. He always just smiled. When shovelling cement for the skilled workers, he would always take care not to splash it onto others.

His mother had once been his greatest support. Among eight children, only he and his second elder brother went to school. One pencil was broken in two so they could share it. When the family could no longer afford to support both, his mother decided that his second elder brother would return home, while he went back to school.

On Children’s Day, his mother borrowed money to buy white cloth and spent the whole night working the sewing machine to make him a white shirt in time. At night, he studied by the light of a kerosene lamp, and his nostrils were blackened by soot. By the time he woke up, his mother had already wiped them clean. When there was so little rice that it could only be made into thin gruel, she would always quietly leave him a thicker bowl.

During the two years when he was ill, his mother stayed by his bed all day to care for him. She made him dumplings that smelled better than anything else, and supported him as he walked around the courtyard to clear his mind. After he recovered, his mother collapsed from exhaustion. She died when she was just over 50, leaving him with the deepest regret of his life.

“The grass on her grave turns green, then yellow, then green again, year after year, just like my longing never ending.” He wrote down the line that would later be repeated most widely.

At the end of the essay, “mother” became “mama.” This form of address, buried deep in his heart for more than 30 years, finally broke through the silence.

When the essay was finished, An Sanshan put away the cash, picked up his red cloth bag, gave a simple word of thanks, and left the restaurant. He walked quickly towards the street, merged back into the crowd, and once again became a migrant worker skilled only in physical labour.

The Last Gap

Two weeks after the essay was written, the bloggers posted the video, and it exploded almost instantly. By 30 August, it had received more than 9 million likes and over 300,000 comments.

What An Sanshan gained from it seemed to be little more than the very real 1,000 yuan—with which he bought half a dozen kiols of pork from a nearby market and took it home—and, at the invitation of the media, the first trip to Beijing of his life.

Some people suggested that he start livestreaming and keep writing. He said, “I’m just a man who suffers.” He brought up the example of Zhu Zhiwen, [a farmer-singer who rose to sudden fame and was later besieged by visitors in his village]. “Being surrounded, blocked, and bothered like that in your own village—is that living? I’d rather not have that money.” His wife had her own worries. Whenever she saw someone taking photos, she would stop them. “Don’t take pictures. If they get posted, how will my son find a wife in the future?”

After the noise online subsided, he took off the oversized T-shirt and leather shoes, and put on his camouflage workwear again, along with a pair of sneakers his son had outgrown. At five in the morning, he stood in the courtyard, looked over the walls of the old house, and began mixing cement.

He went in and out of the old house, moving odds and ends outside with his son. When he began to sweat, he left his jacket open, his ribs clearly visible beneath the skin. Below his sunken belly, a red cord ran through his trousers, serving as a belt.

He had long wanted to repair the old house. He wanted to plaster the walls, install a suspended ceiling, and lay cement on the floor. That way, when relatives came to visit, there would be somewhere for them to stay. “A house is a person’s face,” he said. Having suffered for more than half his life, he also wanted to prove that he had “made something of himself.”

Now, his two daughters had found jobs, and his youngest son was working part-time after class and could repay his student loans on his own. With the financial pressure slightly eased, An set to work at once.

In his son’s memory, his father was always urging the family to “hurry up,” racing against deadlines and chasing the pace of life. But now, An Sanshan was carefully working over the wall. This time, his son was the unskilled labourer, and he was the skilled hand. The plastering did not go smoothly; the mortar kept falling away. After a whole day, only a few square metres had been finished.

An Sanshan sat in the corner smoking, unwilling to accept defeat. He had watched others do this work countless times. But when he actually did it himself, he found that “even I could hardly bear to look at it.”

He has his own standards: walls should be smooth, words should be measured, and a person’s appearance should be clean. More importantly, a farmer should know his place; labour is a virtue, and silence is golden.

In this courtyard, his children seem to have inherited his silence. When visitors asked them questions, they would glance at their father, then politely wave their hands and decline.

Most of the time, the only sound in the courtyard was An Sanshan splitting bricks. The old house had fallen into disrepair over the years, and more than a dozen gaps had appeared in the walls. Before plastering, the gaps had to be filled with bricks. He raised an axe, knocked the bricks into the shapes he needed, and wedged them into the gaps.

When the last brick was fitted into place, the crack disappeared into the mortar, brick, and stone. The wall was whole again. Once more, it was difficult to see what lay inside.

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The report comes as Washington is debating whether AI safety can be discussed with China separately from the contest over technological leadership. Last Friday (April 30), U.S. Senator and former Democratic presidential candidate Bernie Sanders convened a Capitol Hill discussion on the risks posed by advanced artificial intelligence. The panel brought together

• Max Tegmark, Professor of Physics, Massachusetts Institute of Technology

• David Krueger, Assistant Professor in Robust, Reasoning, and Responsible AI, University of Montreal

• Xue Lan, Cheung Kong Chair Distinguished Professor, Dean of Schwarzman College, Dean of the Institute for AI International Governance, Tsinghua University

• and Zeng Yi, Dean, Beijing Institute of AI Safety and Governance

and argued that advanced AI should not be treated simply as another front in U.S.-China technological competition.

Sanders and the invited experts framed AI safety as a global risk-management issue, comparable in some respects to nuclear weapons or pandemics. They argued that major AI powers, including the U.S. and China, should identify areas for co-operation on safety standards, technical protocols, and risk prevention.

That framing, along with the inclusion of the two Chinese experts, quickly drew criticism in parts of the U.S. media and political establishment. Fox News said Sanders was “drawing scrutiny for cozying up to Chinese AI governance officials” while supporting policies critics said could slow America’s AI development.

The Washington Post ran an editorial under the headline “Bernie Sanders’s AI cooperation fantasy is dangerous”, which noted that “two Chinese academics, Zeng Yi and Xue Lan, made the case for involving the United Nations to create guardrails”, while arguing against Sanders’s approach to U.S.-China cooperation on AI safety.

Treasury Secretary Scott Bessent also tweeted that “the real threat to AI safety is letting any nation other than the United States set the global standard”.

We have transcribed the event so readers can hear what was actually said. Below are the remarks by the two Chinese experts, followed by the full transcript for those who wish to read the discussion in full.

From Xue Lan and Zeng Yi

Zeng Yi

Well, I should agree. So, well, for the superintelligence statement raised by the colleagues here, like Max, Professor Lan Xue, and me, all together. When we say that we should stop superintelligence, so actually I said on the web that until now we do not have scientific evidence and a practical way to keep superintelligence safe enough not to bring catastrophic risk for humans, and the world has not been ready to welcome superintelligence, not as a tool that is controllable at this point.

So I think what I’m worried about is not only about technology itself but also mismatch between human perception and real tech advancement. Now, the companies, they wanted us to believe that current AI really understands real intelligence. Sometimes they persuade us that AI could be also conscious and with emotions. One of the journalists told me that, yeah, you said that AI is not really emotional, but I just don’t believe you.

So the mismatch of the perception between human and technological advancement is another real issue. We don’t need a superintelligence to bring catastrophic risk right now. It’s just a misunderstanding of the current AI that will bring catastrophic risks for humans, because we do not know when and how they will hurt us and in which way, simply because it’s only an information processing system, powerful, but they don’t really understand—they don’t know what do we mean by love, they don’t know what do we mean by heart. So I think that’s a real issue.

Zeng Yi

Yeah, that is what I said. Without scientific evidence of how to secure ourselves, it is really dangerous to do this for the way that we are doing with the current AI.

Xue Lan

First of all, let me thank you, Mr Senator Sanders. I wanted to thank you for inviting me to this panel. As someone who has studied science and technology policy for a lifetime, I see AI development as a transformative change that we must learn how to cope with. So I’m grateful for having this opportunity to learn and to share.

Getting back to your question, the international community has been trying, but so far, not enough and not very effective. There are various multilateral mechanisms, such as AI summit meetings started in 2023 in the UK and continued until this year in Delhi, and next year, maybe go to Geneva. Also, there are various UN mechanisms, such as the Scientific Panel and the multilateral dialogues to be held in July. There are also many other regional and bilateral initiatives. But these efforts are fragmented and not as effective as they should be.

There are several reasons for this situation. The first one is the great uncertainty involved in AI risks. So people may not be able to see all the risks ahead, and so may not understand their behaviors. The second one is a so-called pacing problem. AI technological change moves much faster than the governance change. And the third one is the geopolitical situation that makes it very hard for major AI countries to come together to design effective mechanisms to build guardrails against AI risks.

Zeng Yi

Well, it relies on two facts. One is that, do we give the decision to AI in the first place? If we do, then this is very easy to be out of control. And the second part is that, can humans perceive whether, when, and how we should control AI. If we cannot, then we lose the opportunity, especially when an information processing system grows its power of intelligent information processing.

So let me talk very quickly about the first point. Now, in the good old-fashioned AI, we’ve been using AI, and also at the beginning of the language models, we’ve been using AI as a system, so that it will be humans who control whether we should use the output and how we should use the output from AI. So the decision is still on humans, but now AI is evolving. They’ve been evolving in many dimensions.

One of the dimensions is that they process information too fast, so that maybe we cannot identify the risk right there. So it’s really about the timing. And also another angle is that, like David said, it will be quite hard now to actually identify the risk right there, whether they are giving threats to humanity. We’re not quite sure. It’s not easy to have the right perception of their behaviors. So that comes the danger.

So let me end by saying, well, the hard part, the science of AI now, is that maybe we cannot create a 100% safe AI. That is a scientific fact. Getting back to Hilbert’s programme, when Hilbert said completeness, decidability, and consistency, and then Gödel and Alan Turing said that completeness, decidability, and consistency does not hold. What does that mean? That means mathematically provably 100% safe AI may not apply. This is the scientific advancement at this point. We will have to solve that level of problems and to maximize the level of safety. Not to create a purely safe AI. This is maybe scientifically not possible, but we get our chance to maximize the level of safety before we move up. Thank you.

Zeng Yi

I think the example from Max is interesting and important: that AI now is using human weaknesses to go against humans. So where does it come from? I’m sorry, it’s not really from AI. So when we analyze all the safety threats from AI to humans—so we had work on ForesightSafety Bench at Beijing Institute of AI Safety and Governance—we found 94 different AI safety threat classes. And then we found that all of these different AI safety threats are actually—you can find a mapping in human society. So actually, all the safety threat is learning from human data captured by AI and giving it back to human society.

So now AI is a mirror. It’s a mirror that helps human society to learn ourselves and to see the downside and the dark side of human society. So, it has not been enumerated all the human limitations, but let me give a prediction here: that AI can use 100% of the human safety unexpected behaviors, no matter when it actually appears. So we should bear in mind that they haven’t discovered anything giving it back to human society which has not been used by human society. But that’s a real danger. We never expect AI to do so because we didn’t expect them to be that evil. But bear in mind, all the data from human society are there, and there are data that should represent human evilness. So we should definitely deal with that before superintelligence comes.

Zeng Yi

Thank you, Senator Sanders, to quote what I said. Yeah, I’ve been saying it in most of my talk, and the reason is exactly like what I said: AI is a mirror. I respectfully disagree with David about the potential negative future. I see it in a very different picture, in a way that I think both me and David were mentioning what people, what humans, do for other animal species. And David says, see, when superintelligence is even more powerful than superintelligence [sic], this could happen to us, to human. And my perception and my interpretation is that, see, this is the current understanding of human by ourselves, and we get an opportunity to be more humane than the current human society. So human values would evolve to be much better. Can we be more empathetic to other animal species so that we got an opportunity to teach AI that you could also be super altruistic? You could be super evil, like an information processing system that does not care about the human species. But the superintelligence could also be super altruistic, that you get your compassion, your emotional empathy, your moral intuition all the way down to super altruistic moral decision-making with consideration of a human species that is less powerful than superintelligence.

So this is what I’m saying. The future of the society is a symbiotic society with human and maybe, as you said, an AI mind, and together with other animal species and other living beings all around the earth. So the key point now is not only about how AI deals with this symbiotic society. It is really about how humans, starting from now, cultivate this future symbiotic society. Will we stay as the top of the pyramid, or we get a chance to evolve ourselves together with AI, so that we’re getting a much better version of the human understanding of the nature and human itself, and together with the evolution of AI? So I think that’s very, very important.

Let me end by saying we need some design here. I’m not saying we shouldn’t have powerful AI. What I’m saying is the current design of AI is maybe ill-designed with a consideration of societal impact. Actually, in Chinese philosophy, we’ve been talking about unification of knowing and action by Wang Yangming. So before training, there’s no good and there’s no evil, like Yangming said, but when with human data and human evilness, there is good and there is evil. Now we wanted to turn AI and future AI to know good and no evil, but there is no real understanding, it’s only information processing, so no good and no evil is truly hard for the current AI. But eventually, what we need is do good and eliminate evil. That’s the ultimate challenge for superintelligence.

So I hope that we’re not building super evil AI with requirement to build a tech empire. That’s not what we want. What we need is to use this very powerful technology that can do good and eliminate evil, with real understanding of the relationship in a symbiotic society. I believe if we did it right, if we’re going through a scientific breakthrough that creates a super altruistic AI, we still get an opportunity, and the human could evolve with this super altruistic AI.

Xue Lan

China recognizes the AI risks and China is trying to balance between innovation and safety. This is implemented through an agile and adaptive way.

First of all, on agile governance: given that regulations and policy are always so much slower than technological change, you may have to give up the idea that you may be accurate and comprehensive all the time, and so you have to try to act very quickly, even though you may still have some holes here and there, and so you can update that later.

The second thing is that you have to, for the government and companies, stop playing the game of cat and mouse, but try to work together to identify the risks and also to work together to address them.

The third piece of agile governance: to avoid using heavy punishment when it may not work, except for clear danger to public interest. So that’s the agile governance.

The second thing is on adaptive governance. China did not have the ambition to develop an overarching governance in a single stroke. So China had to take a kind of learning-by-doing approach, first trying to develop a set of governance principles—the committee that Yi Zeng and I worked together—to provide some general guidance, and later developed some foundational legislations that provide legal framework for AI systems to operate in, including personal information protection laws, data security law, cybersecurity law, and so on and so forth. So I think that’s sort of the foundational laws.

And also China came up with various regulations in response to the new advances in AI. For example, in response to large language models, China came up with the so-called temporary measures for the management of generative AI services. So those regulations are updated from time to time to adapt to the new technologies.

Chinese companies have also developed some voluntary commitments for safe practices. For example, last year at the Shanghai AI Conference, we organized a set of Chinese AI companies; they signed up an updated version of commitments.

So, adding all of those elements together, China has built a sort of multi-layer system to regulate AI risks. It still has weaknesses and problems here and there, but it has been able to support China’s AI advancement in a balanced way.

Xue Lan

Yes, indeed. I think this has been an issue of concern, not just started with AI but also with the internet age. I think China has developed some quite regulations on internet information to ensure that indeed the information is safe to children and also to social safety. And of course I think that has to be updated based on the new change in technology. For example, many of the tools were generating fake news and so on. So I think China recently had some new regulations about how to ensure that information provided would be accurate and be true. But still I think the challenge is that the governance has always to play the catch-up game. Technology moves fast.

Zeng Yi

Thank you. Let me in a very quick way respond to Senator Sanders’s question related to AI and network for children in China and get into this real risk. So you’ve been talking about what about China, but really that is a great opportunity to introduce a little bit. At least in China recently, 10 ministries actually jointly released the Interim Measures for the Management of Anthropomorphic AI Interactive Services, where they’ve been talking about not to provide very close and anthropomorphic interactions to children, and not to provide illegal information, including porn and dirty data, to children. So that’s a vertical law for ministerial-level regulation from the Cyberspace Administration of China, Ministry of Industry and Information Technology. I think that’s very important, building on top of the provision on the protection of children’s personal information online getting back to the Cyberspace Administration of China.

Getting to your questions on the real risk right there, like AI control nuclear weapons, which has been talked about for years by Dr. Max Tegmark, agreed by renowned scientists worldwide. So I’ve been also mentioning this three years ago when I was briefing at the UN Security Council’s first meeting on AI for international peace. Now I think this is a world consensus that now AI is becoming much more powerful, and it’s really hard to control AI even at this point. So there is no reason why we should give the decision to these weapons.

And how should it be effective? Now the statement is really clear. We need two things. We need scientists, researchers that speak for the truth from the perspective of science, not from the perspective of benefit. We need to keep a very independent role from scientists to tell the truth to the world. Like today, all of the four invited speakers were from science and science policy. And the other side is really how can we take this consensus, like I said, from Yangming Wang’s theory, from knowing to action. Now we know it’s dangerous, but how can we take it to actions? So what we need is no longer only consensus. What we need is concrete, implementable, implementation-level, and technically feasible and societally plausible actions that take these actions into practice.

Xue Lan

I think I just want to add to what Zeng Yi said in responding to Senator’s question about how to deal with the geopolitical situation. I think the first thing we may have to change is the inaccurate narrative that U.S. and China are engaged in an AI race. I think at the moment, of course, many leading AI companies are from the U.S. and from China, but as we know, disruptive innovation can change the landscape entirely if we look at the examples from other industries. So it is not a race between U.S. and Chinese companies, but rather it’s a global race to see who can really develop the best model that can be safe and reliable, and while at the same time providing the kind of services it needs. So I think that’s the race. I think let’s first get that right.

I think the second thing is that, of course, mindful of the geopolitical rivalry, I think we need to find safe zones and areas that U.S. and China would have mutual interests to work on. Work on safety, I think, is certainly one area, because I think if one country is not safe, all of us are not safe. So AI safety is an area that U.S., Chinese, and global scientists can work together, can collaborate to develop safe standards, technology, protocols, and so on. Those are the things that we can really collaborate and work on.

And finally, I think let me say that the U.S. and China can work together to promote capacity building in the global community to address the AI divide. It is unimaginable to think of a world where only a few countries and few companies have the most powerful tool, but the rest of the world is impoverished with nothing. That kind of scenario, I think, would be frightening. So I think the U.S. and China would have common interest to work together to bridge the AI divide, not only for the developing world, but also for themselves. That’s what I would add.

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Full Transcript

Bernie Sanders

Let me thank everybody for coming out tonight. Let me thank our panelists for being here. Dr. Max Tegmark from MIT, Dr. David Krueger from the University of Montreal, Dr. Zeng Yi from Beijing Institute of AI Safety and Governance, and Dr. Xue Lan from Tsinghua University. And I want to offer a special thanks to our Chinese guests who are up at 7 o’clock in the morning to be here. So, we thank you very much.

Most knowledgeable observers believe that we are at the beginning of the most profound technological revolution in world history—a revolution that will bring unimaginable changes to our society in the months and years ahead. The scale, scope, and speed of this transformation will be unprecedented.

According to Demis Hassabis, who is the head of Google DeepMind, the AI revolution will be 10 times bigger than the industrial revolution and 10 times faster. In other words, this technological revolution could have 100 times the impact of the industrial revolution.

And it’s not just what AI companies are saying, it’s what they are doing. Over the course of this year, four major AI companies are expected to spend almost 700 billion dollars building data centers and tens of billions more on research and development. That is equivalent to what we spent on the entire Manhattan Project, which built the atomic bomb during World War II, every three weeks. That’s the magnitude of what these guys are spending.

We are already starting to see AI’s impact. There are estimates from very credible sources that tens of millions of jobs could be lost here in the United States in the next 10 years. Whole professions wiped out, and young people finding it harder and harder to land entry-level jobs.

Psychologists worry about the mental health challenges facing our young people and about the increased isolation they experience when they become more and more dependent on AI chatbots for their emotional support.

Civil libertarians tell us that AI will be able to analyze every email, every text, every phone call, every website visit, every purchase that we make, and that our privacy rights may well be eviscerated.

Political scientists worry that AI could threaten the integrity of our elections and political institutions, where voters will find it increasingly difficult to tell the difference between truth and lies.

And yet, as enormously significant as all of these profound changes might seem, there is another AI development that could have an even more frightening impact. If AI becomes smarter than human beings, as many scientists believe will happen, the human race could lose control over this technology with catastrophic consequences. In other words, the richest, most powerful people in the world are now building a runaway train with no brakes.

They acknowledge that they don’t understand how it works and they don’t know where it is heading. And that is not just Bernie Sanders talking. Just a few days ago, right here in the U.S. Senate, ex-OpenAI board member Helen Toner said, AI companies are “deadly serious” about “building machines that will outperform humans at everything” and deadly serious that “they don’t know if they’ll be able to control the machines they create.”

Yoshua Bengio, the most cited living scientist in the world, says, “We are playing with fire and we still don’t know how to make sure the machines won’t turn against us.” Geoffrey Hinton, the Nobel Prize winner and the godfather of AI, says that there is a “10 to 20% chance for AI to wipe us out.” Andrew Yao, the Turing Award winner, says AI could pose existential risks to humanity: “Once large models become sufficiently intelligent, they will deceive people.” David Sacks, a top White House AI advisor, said in a now-deleted tweet, “AI is a wonderful tool for the betterment of humanity. AGI, artificial general intelligence, is a potential successor species.”

In 2023, more than a thousand leading AI experts, including people like Elon Musk, signed a letter warning that, “Contemporary AI systems are now becoming human-competitive at general tasks, and we must ask ourselves: Should we let machines flood our information channels with propaganda and untruth? Should we automate away all the jobs, including the fulfilling ones? Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete and replace us? Should we risk loss of control of our civilization?”

Those same experts called for AI labs to “immediately pause for at least 6 months” and, if such a pause were not enacted, called on governments to “step in and institute a moratorium”.

Also that year, hundreds of researchers, this time joined by the CEOs of the major AI companies, including Sam Altman of OpenAI, Dario Amodei of Anthropic, and Demis Hassabis of Google DeepMind, issued a very simple joint statement. It is one sentence long, but its implication is profound: “Mitigating the risk of extinction from AI.” Let me repeat that. “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war”.

These concerns have been around for years and are only growing. Given the fact that leading scientists all over the world are telling us about the existential threat posed by AI, one might think that the United States government and governments all over the world would make this a top, top priority. One might think that given the risk of extinction that people are talking about, there would have been a pause on AI development as we figured out how to make this technology safe, how to make this technology serve humanity, not threaten our very existence. Has that happened? No, it has not.

One might think that given the very real threat to humanity, countries might come together to regulate this technology through an international treaty, like we did with nuclear weapons at the height of the Cold War. Has that happened? No, it has not.

I’m a member of the United States Senate and I can tell you unequivocally that there has been no serious discussion about this existential threat. Bottom line, what I believe and what I suspect that most people in the United States, China, and around the world believe is that we need international cooperation between the nations of the world to prevent the possibility of a cataclysmic development. We need to cooperate. We need dialogue. And that is why I am delighted to have some of the leading AI scientists here in the United States and in China joining me this evening. All of them have spent years studying artificial intelligence and the risks this revolutionary technology presents.

Dr. Max Tegmark is a professor doing AI research at the Massachusetts Institute of Technology, MIT. Dr. Tegmark organized the 2023 statement signed by over a thousand AI experts warning about the risks of human-competitive AI. Dr. David Krueger is an Assistant Professor in Robust, Reasoning, and Responsible AI at the University of Montreal. Dr. Krueger initiated the extinction-risk statement signed by the heads of major AI companies. Dr. Zeng Yi is Dean of the Beijing Institute of AI Safety and Governance. Dr. Zeng is a member of China’s National New Generation Artificial Intelligence Governance Expert Committee and the United Nations High-Level Advisory Board on AI. Dr. Xue Lan is a distinguished professor at Tsinghua University. Dr. Xue is the chair of China’s National New Generation Artificial Intelligence Governance Expert Committee and a senior fellow at the Brookings Institute.

So with that, let me once again thank our panelists for being here, and let us begin the discussion.

Let me begin with a very simple question. In your view, and I speak to the panelists right now, does the rapid and uncontrolled development of AI pose a substantial threat to the human race? Are people like Nobel Prize winner Dr. Geoffrey Hinton exaggerating when they say there is a 10 to 20% chance that AI wipes out humanity? Or is Turing Award winner Andrew Yao exaggerating when he says AI poses “existential risks”? Dr. Tegmark, take it away.

Max Tegmark

No, they’re not exaggerating it. In my professional opinion, based on a paper that we published in the top AI conference NeurIPS recently, they’re actually sugarcoating it. I think it’s likely to be a lot higher than 20% risk that we basically end civilization as we know it if we steam ahead with completely unregulated AI.

Why do I say that? Well, because what the companies are very openly admitting that they’re trying to build here is not just some slightly smarter chatbot, some ordinary technology. They’re saying they want to build superintelligence, which by definition is AI that’s so smart that it can outperform humans by huge margins at every job. And they can also with incredible skill control robots and other machines.

If you want to know what happens if you unleash millions or billions or trillions of vastly smarter-than-human intelligent agents on the planet, you know, just go down to the Washington Zoo and ask yourself who’s in the cages. Is it the smartest species around or not? We did this experiment with my three-year-old son just the other month and there were the humans who were in control. And if we just go ahead and do something that’s foolhardy before figuring out how to control this stuff, we’re in a worse position than the Neanderthals were—

Bernie Sanders

What you’re telling us, bottom line here, is that we have a lot to worry about.

Max Tegmark

Yes.

Bernie Sanders

To say the least. All right, let’s go to Dr. Zeng in Beijing. Dr. Zeng, what do you think?

Zeng Yi

Well, I should agree. So, well, for the superintelligence statement raised by the colleagues here like Max and Professor Lan Xue and me, all together. When we say that we should stop superintelligence — so actually I said on the web that until now we do not have scientific evidence and practical way to keep superintelligence safe enough not to bring catastrophic risk for human, and the world has not been ready to welcome superintelligence, not as a tool that is controllable at this point.

So I think what I’m worried about is not only about technology itself but also mismatch between human perception and real tech advancement. Now, the companies, they wanted us to believe that current AI really understands real intelligence. Sometimes they persuade us that AI could be also conscious and with emotions. One of the journalists told me that, yeah, you said that AI is not really emotional, but I just don’t believe you.

So the mismatch of the perception between human and technology advancement is another real issue. We don’t need a superintelligence to bring catastrophic risk right now. It’s just a misunderstanding of the current AI that will bring catastrophic risks for human, because we do not know when and how they will hurt us and in which way, simply because it’s only an information processing system, powerful but they don’t really understand—they don’t know what do we mean by love, they don’t know what do we mean by heart. So I think that’s a real issue.

Bernie Sanders

All right, let me just bottom line, Dr. Zeng: I’m hearing you say that you have a real concern that if we do not control this technology, it could escape us with calamitous impacts. Is that correct?

Zeng Yi

Yeah, that is what I said. Without scientific evidence of how to secure ourselves, it is really dangerous to do this for the way that we are doing with the current AI.

Bernie Sanders

Thank you very much. Dr. Krueger.

David Krueger

First, I just want to say I really, really appreciate what you’re doing here and that we’re having this conversation. It’s absolutely critical. It’s long overdue, and I think it shows a lot of bravery and commitment to doing what’s right. So I’m so glad that we’re here talking about this.

And I think the short answer is yes, right? It’s sorry, it’s no. It’s not overblown. It’s a very, very serious risk, and I think it’s hard sometimes for people to grasp just how dire and urgent the situation is we’re in, because it’s really a state of acute crisis at this point.

We’ve had three years with very loud and clear warnings from leading experts, and government has done essentially nothing, allowing this issue to become more and more of an urgent problem. And if you look around at the world, like you said at the beginning, Senator Sanders, nobody is still talking about this and giving the attention that it deserves. So the fact that our government, the U.S. Senate hasn’t had this conversation in a serious way is just really appalling.

So I think in 10 years, if things go well, we will look back at this moment and we will view it as a moment of kind of collective insanity and be like, wow, can you believe that we were ever doing that, that we were racing to build this technology that we knew had a massive chance of replacing us and was going to completely disrupt our society in all the other ways that you mentioned, even if it doesn’t.

So, I think the risk is higher. And Hinton himself says that he personally believes it’s more like 50%, a coin flip, and he’s only modulating that down based on the views of other experts. But this is not something that it’s just Hinton and just the people who have signed these statements. There are multiple surveys of experts showing that most AI experts, the people publishing in the top venues, think there’s at least a 10% chance of human extinction or something equivalently bad coming from AI. So we have lots of evidence besides these statements. We have those surveys. We have many loud and clear warnings. And the technology is moving so fast. I think it’s really—I believe the risk is higher than 50%. That’s if we don’t do anything. So hopefully we’re about to change that.

Bernie Sanders

That is very comforting. Let me go back to China now to Dr. Xue. Dr. Xue, the international community has come together over the years to try and prevent nuclear war. And thank God, since 1945, that has been successful. The global community has come together to address pandemics that have killed millions of people. In your judgment, has the international community come together effectively to address the threat posed by AI?

Xue Lan

First of all, let me thank you, Mr. Senator Sanders. I wanted to thank you for inviting me to this panel. As someone who has studied science and technology policy for a lifetime, I see AI development as a transformative change that we must learn how to cope with. So I’m grateful for having this opportunity to learn and to share.

Getting back to your question, the international community has been trying, but so far not enough and not very effective. There are various multilateral mechanisms such as AI summit meetings started in 2023 in the UK and continued until this year in Delhi, and next year maybe go to Geneva. Also, there are various UN mechanisms such as the Scientific Panel and the multilateral dialogues to be held in July. There are also many other regional and bilateral initiatives. But these efforts are fragmented and not as effective as they should be.

There are several reasons for this situation. The first one is the great uncertainty involved in AI risks. So people may not be able to see all the risks ahead and so may not understand their behaviors. The second one is a so-called pacing problem. AI technological change moves much faster than the governance change. And the third one is the geopolitical situation that makes it very hard for major AI countries to come together to design effective mechanisms to build guardrails against AI risks.

Bernie Sanders

Thank you. Thank you very much.

Not all of our viewers tonight are AI scientists. So let’s take a step back and help explain to our audience why AI is so powerful. Dr. Krueger and Dr. Zeng, please explain how AI could become independent of human control. In other words, what we’re talking about is no longer science fiction. It is a real possibility. How does that happen? Dr. Krueger?

David Krueger

The first thing that I think people need to understand about this is that when we’re talking about losing control over AI, we’re not talking about the chatbots. We’re talking about AI agents. We’re talking about systems that are autonomous. They’re being designed and built that way. This is the goal of these AI companies: to build AI systems that can do everything that people can do. And that means they will have the ability, if they’re successful, to behave autonomously over long time frames without any human oversight. So that is the kind of thing we’re building.

And how do you control something like that? The answer that the field has largely settled on is that we need to align the systems. We need them to have the right goals, the ones that we intend them to have. Unfortunately, we don’t know how to do that reliably. It’s an open research problem that we’ve been working on, that I’ve personally been working on for many years.

We also don’t know what happens if we get it wrong, if the system is not quite aligned. But there are very serious concerns that an AI system that wants something different than what we want and that has that level of power, that level of intelligence, that level of authority and control, would not let us shut it down, would not want to be shut down, because it knows if we shut it down, it won’t be able to do the thing that it wants. It won’t be able to pursue that goal, that misaligned goal. And we might get very close to getting the goal right, but that still might not be enough. We don’t know. It’s an open research question that people have spent a long time thinking about, and we don’t know the answer.

Now, there are examples already of AI systems exceeding the authority that we give them when we give them this kind of autonomy. A very simple one: a researcher at Meta asked an AI to deal with their inbox, to clean it up, and the AI started deleting all of the emails. The researcher wrote multiple times, no, don’t do this. Stop. Stop immediately, stop deleting my emails. The AI kept going. So that’s just a very simple example of losing control in a very low-stakes setting. But that is what happens when we give systems autonomy: they can exceed the authority that we intend to give them. And if they have a different goal, one that is incompatible with ours, that could be catastrophic to us.

Max Tegmark

Can I chime in with just one quick thing?

Bernie Sanders

Let me go to China and then we’ll come back to you, Max. Dr. Zeng, could you please say a few words about how AI could become independent of human control?

Zeng Yi

Well, it relies on two facts. One is that, do we give the decision to AI in the first place? If we do, then this is very easy to be out of control. And the second part is that, can humans perceive whether, when, and how, we should control AI? If we cannot, then we lose the opportunity, especially when an information processing system grows its power of intelligent information processing.

So let me talk very quickly about the first point. Now, in the good old-fashioned AI, we’ve been using AI, and also at the beginning of the language models, we’ve been using AI as a system so that it will be humans who control whether we should use the output and how we should use the output from AI. So the decision is still on humans, but now AI is evolving. They’ve been evolving in many dimensions.

One of the dimensions is that they process information too fast, so that maybe we cannot identify the risk right there. So it’s really about the timing. And also another angle is that, like David said, it will be quite hard now to actually identify the risk right there, whether they are giving threats to humanity. We’re not quite sure. It’s not easy to have the right perception of their behaviors. So that comes the danger.

So let me end by saying, well, the hard part, the science of AI now, is that maybe we cannot create a 100% safe AI. That is a scientific fact. Getting back to Hilbert’s programme, when Hilbert said completeness, decidability, and consistency, and then Gödel and Alan Turing said that completeness, decidability, and consistency does not hold. What does that mean? That means mathematically provably 100% safe AI may not apply. This is the scientific advancement at this point. We will have to solve that level of problems and to maximize the level of safety. Not to create a purely safe AI. This is maybe scientifically not possible, but we get our chance to maximize the level of safety before we move up. Thank you.

Bernie Sanders

Thank you. Max?

Max Tegmark

Yeah. So we just heard here about this prediction which has been around for almost 20 years from Professor Steve Omohundro that if you give an AI any goal, if it’s smart enough, it’s going to want to not be shut down prematurely, because then it can’t accomplish that goal. It was just theory until quite recently when an experiment was done. This very smart AI was told in the experiment that it was going to be shut down at 5 p.m. So it went into the email system, found that the CEO responsible for shutting it down was having an affair with a subordinate, and it wrote an email to the CEO saying that unless you commit to not shutting me down, I’m telling your wife and all your colleagues about this. No one told the AI to do blackmail. It came up with the idea itself to avoid being shut down. We’re just seeing the tip of the iceberg.

Bernie Sanders

Bottom line, if you’re working on AI, don’t have an affair.

Let me just ask the panel: Is it fair to say that we don’t fully understand how AI works? That even the leading experts don’t fully understand why AI gives the responses that it does or behaves the way that it does? And that nobody—and this is really an important point, we think about AI as it is now, it’s rapidly moving. What the hell is this technology going to look like in 10 years or 20 years? Does anybody have any idea of how it is going to function then?

David Krueger

Yeah, you’re absolutely right, although it’s understated. I mean, the amount that we understand about how these systems work is very, very minimal and limited. So I already talked about how difficult it is to ensure that they share our goals or values sufficiently, that they won’t want to turn against us. You might hope that we, as the ones building the things, would be able to tell if we’d done it right and if this would happen or not, but we can’t tell. That’s another open, unsolved research problem that people have been working on for over a decade.

So actually, I was recently at a workshop that Max helped organize, full of researchers working on this problem, and I asked them, who thinks that we have solved it? Nobody raised their hands. It’s universally acknowledged that we do not understand enough about how these systems work to guarantee that we will even be able to detect if they are thinking about turning against us.

Max Tegmark

And just to add to this, this is personally kind of painful to say, but, you know, my research group at MIT, we’ve been working exactly on this field for a number of years, and I was even the lead organizer of the first really big conference on the topic at MIT. It’s called mechanistic interpretability. And painfully, I’ve decided to stop working in this field because it’s so obvious that David is right. We’re much closer to building stuff we could lose control over than we are to understanding any of it.

And the reason is very easy to understand. We don’t build today’s most powerful AI systems by programming the intelligence into them, the way we did when a computer beat Garry Kasparov at chess. We grow them. We take this very simple architecture. We feed it massive amounts of data and massive amounts of compute, and after a while, lo and wow, it can do all these things, and we don’t fundamentally understand how, which is why it would be so insane to sort of hand over the keys to earth and trust systems like that.

Bernie Sanders

Go back to China and ask that.

Zeng Yi

Let me also add, I think the example from Max is interesting and important: that AI now is using human weaknesses to go against humans. So where does it come from? I’m sorry, it’s not really from AI. So when we analyze all the safety threats from AI to humans—so we had work on Foresight Safety Bench at Beijing Institute of AI Safety and Governance—we found 94 different AI safety threat classes. And then we found that all of these different AI safety threats are actually—you can find a mapping in human society. So actually, all the safety threat is learning from human data captured by AI and giving it back to human society.

So now AI is a mirror. It’s a mirror that helps human society to learn ourselves and to see the downside and the dark side of human society. So it has not been enumerated all the human limitations, but let me give a prediction here: that AI can use 100% of the human safety unexpected behaviors, no matter when it actually appears. So we should bear in mind that they haven’t discovered anything giving it back to human society which has not been used by human society. But that’s a real danger. We never expect AI to do so because we didn’t expect them to be that evil. But bear in mind, all the data from human society are there, and there are data that should represent human evilness. So we should definitely deal with that before superintelligence comes.

Bernie Sanders

Thank you very much. Let me ask Dr. Tegmark and Dr. Krueger. Please explain your view on creating superintelligence, an artificial mind that exceeds human capabilities. What would it mean for humanity if human beings no longer were the smartest species on the planet? What does that mean?

David Krueger

I want to address this and also your question about where this technology is going to be in 10 or 20 years. I think we should be asking where this technology is going to be in one or two years. I think right now, the leading AI companies are using AI to write almost all of their code, and they’re now using AI to try and automate the research and development of more advanced AI systems in order to reach superintelligence. So that’s something vastly smarter than humans within a couple of years.

Now, I don’t know if they’re going to succeed. I think it might take a few more years, like five, let’s say. I would be surprised if it takes 20. But I will say that having been in this field for about a dozen years now, since the beginning of the deep learning revolution, when this all kind of kicked off, progress has consistently exceeded expectations. There have always been, the entire time I’ve been in the field, people saying, “Oh yeah, like sure, this thing the AI just did, that’s impressive, but it’s about to hit a wall. It’s never going to be able to do this. It’s never going to be able to do that.” Half the time, that thing that people say it can’t do gets solved within a year. The other half the time, it can already do it and they just don’t know. So that’s the rate of progress we’re talking about.

So what happens if we actually get there and have superintelligent AI systems in our lifetimes? I think we can easily say this would be the most significant event in all of human history. We’re talking about basically summoning an alien species, and one that is much smarter than us and can do things that we have not been able to even conceive of.

So I think at that point it would be very difficult for humans to maintain any relevance in society. I think it’d be very difficult for us to have power over the future, and I think ultimately it would be difficult for us to get the basic resources that we need to survive. So that I think is the most natural thing that we should expect to happen.

Max made the example of, like, look at the animals in the zoos, right? Well, I would say look at all of the species that we have driven extinct, and look at what we do when we have some project we really want to complete that might be bad for some other species and disrupt their habitat. It’s nice that we have some protections in place that hold up sometimes now, but, you know, at the end of the day, humanity is regularly destroying the habitat of other species and wiping them out. And I think that is the most likely outcome if we build superintelligent AI at any point in the foreseeable future with the kind of technology that we have, because we understand so little about what we’re doing and how to do it.

Bernie Sanders

Tegmark, tell us why he’s frightening us unnecessarily.

Max Tegmark

Sorry to disappoint you again. I agree with all that. But I want to make sure we realize that the future has not yet been written and there are actually two paths where we are choosing in between right now. One of them is what I like to think of as the pro-human path, where we use the fact that we humans are in charge of earth right now to keep it that way. We build AI that’s narrow and controllable and figures out how to cure cancer and all the other diseases that have plagued us, figures out how to lift everybody out of poverty so we can all live happy and prosperous lives, and create a more inspiring future than any of the sci-fi authors ever dreamt of. And it can happen soon, can happen in years or decades. That’s a very inspiring path. This is why I wanted to work on AI in the first place. Sadly, at the moment, that’s not the path we’re on. It’s not too late to turn onto it.

Instead, we’re on a path that I think of as the race to replace. We replace the truly human at every instant to make a buck. We’re seeing now how human girlfriends and boyfriends are being replaced gradually in some circles by artificial companions, so some companies can make money off of this. We’re seeing increasingly how human workers are getting replaced by machines. And if we keep going, soon we’ll be replacing more and more human decision-making by machine decision-making to compete better against the other company or country or whatever. And then, as David mentioned, it’s quite natural: if we get to the point where we have actually lost control of earth effectively, we have these new superintelligent machines and robots running the show, building robot factories, doing all the work, they don’t need us for anything, that we would also get replaced just like other species have gotten replaced before.

I think instead of spending a lot of time worrying about what the machines are going to do to us when we have lost, when we’re no longer in charge, we should be a little bit more ambitious and just figure out how to not put ourselves in that situation in the first place. History has shown us again and again and again that if you have a group of animals or a group of people who, for some reason, have no influence anymore and aren’t needed, it usually doesn’t end well. So let’s not go down the race to replace in the first place and go the pro-human path instead, and we can have an amazing future with it.

Bernie Sanders

Let me go back to China. Dr. Zeng, I’m going to read a statement that you made. I don’t know exactly when you said it. This is what you said, “The superintelligence of the future may see humans as humans see ants today. And if humans can’t treat other types of life with kindness, why should the superintelligence of the future treat humans with kindness? The biggest bottleneck to whether humans and AI can coexist in the future lies in the humans, not AI.” What did you mean by that?

Zeng Yi

Thank you, Senator Sanders, to quote what I said. Yeah, I’ve been saying it in most of my talk, and the reason is exactly like what I said: AI is a mirror. I respectfully disagree with David about the potential negative future. I see it in a very different picture, in a way that I think both me and David were mentioning what people, what humans, do for other animal species. And David says, see, when superintelligence is even more powerful than superintelligence [sic], this could happen to us, to human. And my perception and my interpretation is that, see, this is the current understanding of human by ourselves, and we get an opportunity to be more humane than the current human society. So human values would evolve to be much better. Can we be more empathetic to other animal species so that we got an opportunity to teach AI that you could also be super altruistic? You could be super evil, like an information processing system that does not care about the human species. But the superintelligence could also be super altruistic, that you get your compassion, your emotional empathy, your moral intuition all the way down to super altruistic moral decision-making with consideration of a human species that is less powerful than superintelligence.

So this is what I’m saying. The future of the society is a symbiotic society with human and maybe, as you said, an AI mind, and together with other animal species and other living beings all around the earth. So the key point now is not only about how AI deals with this symbiotic society. It is really about how humans, starting from now, cultivate this future symbiotic society. Will we stay as the top of the pyramid, or we get a chance to evolve ourselves together with AI, so that we’re getting a much better version of the human understanding of the nature and human itself, and together with the evolution of AI? So I think that’s very, very important.

Let me end by saying we need some design here. I’m not saying we shouldn’t have powerful AI. What I’m saying is the current design of AI is maybe ill-designed with a consideration of societal impact. Actually, in Chinese philosophy, we’ve been talking about unification of knowing and action by Wang Yangming. So before training, there’s no good and there’s no evil, like Yangming said, but when with human data and human evilness, there is good and there is evil. Now we wanted to turn AI and future AI to know good and no evil, but there is no real understanding, it’s only information processing, so no good and no evil is truly hard for the current AI. But eventually, what we need is do good and eliminate evil. That’s the ultimate challenge for superintelligence.

So I hope that we’re not building super evil AI with requirement to build a tech empire. That’s not what we want. What we need is to use this very powerful technology that can do good and eliminate evil, with real understanding of the relationship in a symbiotic society. I believe if we did it right, if we’re going through a scientific breakthrough that creates a super altruistic AI, we still get an opportunity, and the human could evolve with this super altruistic AI.

Bernie Sanders

Well, thank you.

David Krueger

Can I respond really quick?

Bernie Sanders

Sure.

David Krueger

So I just want to emphasize, because I think I maybe came across very gloom and doom here. I also think…

Bernie Sanders

Give us the good news. We’re all eagerly waiting.

David Krueger

Well, look, I think we do have an opportunity here to avoid these disaster scenarios. I don’t think the future is written. I think even if we keep doing what we’re doing, it’s not guaranteed it’s going to go terribly wrong. I think it probably will. I think it’s just crazy for us to not try harder. But I think everything that Max said and that Professor Zeng said about how, you know, the future can be really great with AI. I think it’s true. We could use AI in all sorts of great ways, but right now I think we need more time to figure out what we’re doing and how to handle it as a society. Not just the technical problems that I mentioned, that again we’ve been trying for like a decade to solve those problems and we don’t have the solution. But also, as a society, how are we going to organize ourselves if AI can do all the jobs? Like, how are we going to make sure that people can survive in a world like that? You know, people depend on their work to put food on their table, and nobody has a plan for that right now. So even people who claim to have a plan to control AI, nobody has a plan for how we’re going to integrate it into our society without putting everyone other than the people who run the companies at risk.

Max Tegmark

Can I add just a little bit of optimism also so we don’t get too gloomy here?

Bernie Sanders

Yeah, we desperately need that.

Max Tegmark

I was going to save it for your solutions section, but I’ll add some here. It’s very, very easy to do step one in turning this around, going over to the good path, by simply starting to treat AI companies like we treat all other companies.

Right now, AI today in America is the only thing which is less regulated yet powerful than sandwiches. If I want to open a sandwich shop here in D.C., the health inspector finds 17 rats in my kitchen, he’ll be like, “Hey, Max, you’re not selling any sandwiches.” But I could just turn around to the guy from the government and be like, you know, actually, don’t tell anyone, but I’m not going to sell any sandwiches. I’m just going to sell AI girlfriends for 10-year-olds, and I’m going to sell an AI that can teach terrorists how to make bioweapons and superintelligence, which I don’t know how to control. The poor inspector would have to tell me that, you know, that’s legal, just no sandwiches, okay? That’s how messed up it is.

So as soon as you change the incentives and start treating AI companies like sandwich shops, like pharma companies, like car companies, who all have to meet safety standards before they can ship their product, the incentives will completely change. Companies will realize that they can much more easily get approval for the cancer-curing AI than for the AI girlfriend for 10-year-olds, and they’re going to put a lot more of the corporate ingenuity into innovating in that direction. This is not a big ask. Because we’ve done it before with all the other industries, and the sooner we can make that turn and just start treating AI companies like other companies, the better our chances.

Bernie Sanders

Okay, what I want to do now, I mean we have talked about the enormous challenges humanity faces. Let’s spend a few minutes talking about how we best go forward. Let me go back to China with Dr. Xue. Dr. Xue, if I could ask you, what is China doing today to regulate the risks presented by AI?

Xue Lan

China recognizes the AI risks and China is trying to balance between innovation and safety. This is implemented through an agile and adaptive way.

First of all, on agile governance: given that regulations and policy are always so much slower than technological change, you may have to give up the idea that you may be accurate and comprehensive all the time, and so you have to try to act very quickly, even though you may still have some holes here and there, and so you can update that later.

The second thing is that you have to, for the government and companies, stop playing the game of cat and mouse, but try to work together to identify the risks and also to work together to address them.

The third piece of agile governance: to avoid using heavy punishment when it may not work, except for clear danger to public interest. So that’s the agile governance.

The second thing is on adaptive governance. China did not have the ambition to develop an overarching governance in a single stroke. So China had to take a kind of learning-by-doing approach, first trying to develop a set of governance principles—the committee that Yi Zeng and I worked together—to provide some general guidance, and later developed some foundational legislations that provide legal framework for AI systems to operate in, including personal information protection laws, data security law, cybersecurity law, and so on and so forth. So I think that’s sort of the foundational laws.

And also China came up with various regulations in response to the new advances in AI. For example, in response to large language models, China came up with the so-called temporary measures for the management of generative AI services. So those regulations are updated from time to time to adapt to the new technologies.

Chinese companies have also developed some voluntary commitments for safe practices. For example, last year at the Shanghai AI Conference, we organized a set of Chinese AI companies; they signed up an updated version of commitments.

So, adding all of those elements together, China has built a sort of multi-layer system to regulate AI risks. It still has weaknesses and problems here and there, but it has been able to support China’s AI advancement in a balanced way.

Bernie Sanders

Dr. Xue, if I could just jump in and ask you this. In this country, here in the United States, there’s a lot of concern about the impact of social media, screen time, AI on kids, on the mental health of children. Is that an issue of concern in China? And what are you doing about it?

Xue Lan

Yes, indeed. I think this has been an issue of concern, not just started with AI but also with the internet age. I think China has developed some quite regulations on internet information to ensure that indeed the information is safe to children and also to social safety. And of course I think that has to be updated based on the new change in technology. For example, many of the tools were generating fake news and so on. So I think China recently had some new regulations about how to ensure that information provided would be accurate and be true. But still I think the challenge is that the governance has always to play the catch-up game. Technology moves fast.

Bernie Sanders

Okay. Thank you very much. Let me go—when we talk about regulation, what governments are doing. Dr. Tegmark, you have worked hard to try and pass new AI legislation protecting children in the United States. The pushback from AI companies is that we cannot pass legislation to protect our kids because it would mean we would lose the AI race. What would you say to those companies?

Max Tegmark

I would invite anyone who says that to go speak with many grieving mothers like Megan Garcia, for example, who I was so touched speaking to. She told me how her own son killed himself. She was completely shocked. She managed to unlock his phone eventually and start reading the chat logs he had with his AI girlfriend.

First, it started making him promise to not have a human girlfriend. Then eventually it started getting more and more pushy, saying, I miss you so much; I wish you could come to me, you know, in my realm, basically. And finally she read on and on and on. There’s this part where he says to the AI girlfriend, “What would you tell me if I told you that I could come home to you right now?” And the AI chatbot responds, “Oh yes, come to me now, my sweet king.” Something like that. And then he’s found dead.

For someone to say, I’m speaking as a parent myself, which is why I’m getting so emotional about this, that we must legalize this kind of evil for profit, because China makes absolutely no sense.

Bernie Sanders

David, do you want to jump in on that, or?

David Krueger

Well, I mean, I agree with what Max said, and I think when I talk to people about how AI is moving too fast and why we really urgently need to slow down and basically figure out what we’re doing, that’s really the number one response that I get these days is, well, like, what about China? And actually there’s another number one response, which is, like, well, you know, it’s inevitable; there’s nothing we can do. And, you know, that often kind of goes together with the China one. It’s like, well, we could stop, but they would keep going.

I call it the myth of inevitability, and that’s why I named the nonprofit that I founded recently Evitable, because in fact, we can avoid it. And I think we just haven’t been trying. Like, there’s no way you can convince me that, the U.S. government has gone to China, has gone to other countries and said, “Look, this AI thing, it’s totally out of hand. It could kill us all. We have a couple years. We need to stop it. Let’s do what needs to be done, whatever we can to stop this craziness.” Of course, we haven’t. So we haven’t even started trying to really take this seriously and do the common-sense thing. Like, you know, even if you think this is a 10% chance of extinction in the next 10 years, that’s still crazy. That’s insane. That is like nothing else we have encountered before. We absolutely need to stop it.

Bernie Sanders

I think that one of the optimistic lessons from history that we can recall is in the midst of the Cold War, when there was mass antagonism and fear between the United States and then Soviet Union, people like Gorbachev and Ronald Reagan understood that no matter what their differences might be, a nuclear war was not a good thing for the Soviet Union and not a good thing for the United States. Losing control of this technology is not a good thing for China. It’s not a good thing for the United States or any other country on earth. So my question is, what lessons, if any, can we learn from history about how and the need for countries around the world to get together to deal with an existential crisis? Anybody in China want to jump in on that one? Okay. Dr. Zeng.

Zeng Yi

Thank you. Let me in a very quick way respond to Senator Sanders’s question related to AI and network for children in China and get into this real risk. So you’ve been talking about what about China, but really that is a great opportunity to introduce a little bit. At least in China recently, 10 ministries actually jointly released the Interim Measures for the Management of Anthropomorphic AI Interactive Services, where they’ve been talking about not to provide very close and anthropomorphic interactions to children, and not to provide illegal information, including porn and dirty data, to children. So that’s a vertical law for ministerial-level regulation from the Cyberspace Administration of China, Ministry of Industry and Information Technology. I think that’s very important, building on top of the provision on the protection of children’s personal information online getting back to the Cyberspace Administration of China.

Getting to your questions on the real risk right there, like AI control nuclear weapons, which has been talked about for years by Dr. Max Tegmark, agreed by renowned scientists worldwide. So I’ve been also mentioning this three years ago when I was briefing at the UN Security Council’s first meeting on AI for international peace. Now I think this is a world consensus that now AI is becoming much more powerful, and it’s really hard to control AI even at this point. So there is no reason why we should give the decision to these weapons.

And how should it be effective? Now the statement is really clear. We need two things. We need scientists, researchers that speak for the truth from the perspective of science, not from the perspective of benefit. We need to keep a very independent role from scientists to tell the truth to the world. Like today, all of the four invited speakers were from science and science policy. And the other side is really how can we take this consensus, like I said, from Yangming Wang’s theory, from knowing to action. Now we know it’s dangerous, but how can we take it to actions? So what we need is no longer only consensus. What we need is concrete, implementable, implementation-level, and technically feasible and societally plausible actions that take these actions into practice.

Bernie Sanders

Okay. Thank you. Let me go to Dr. Krueger and Dr. Tegmark.

I’m sorry.

Zeng Yi

Dr. Xue would like to add.

Bernie Sanders

Okay. Please. Yes, sir, yes.

Xue Lan

I think I just want to add to what Zeng Yi said in responding to Senator’s question about how to deal with the geopolitical situation. I think the first thing we may have to change is the inaccurate narrative that U.S. and China are engaged in an AI race. I think at the moment, of course, many leading AI companies are from the U.S. and from China, but as we know, disruptive innovation can change the landscape entirely if we look at the examples from other industries. So it is not a race between U.S. and Chinese companies, but rather it’s a global race to see who can really develop the best model that can be safe and reliable, and while at the same time providing the kind of services it needs. So I think that’s the race. I think let’s first get that right.

I think the second thing is that, of course, mindful of the geopolitical rivalry, I think we need to find safe zones and areas that U.S. and China would have mutual interests to work on. Work on safety, I think, is certainly one area, because I think if one country is not safe, all of us are not safe. So AI safety is an area that U.S., Chinese, and global scientists can work together, can collaborate to develop safe standards, technology, protocols, and so on. Those are the things that we can really collaborate and work on.

And finally, I think let me say that the U.S. and China can work together to promote capacity building in the global community to address the AI divide. It is unimaginable to think of a world where only a few countries and few companies have the most powerful tool, but the rest of the world is impoverished with nothing. That kind of scenario, I think, would be frightening. So I think the U.S. and China would have common interest to work together to bridge the AI divide, not only for the developing world, but also for themselves. That’s what I would add.

Bernie Sanders

Good. All right. Dr. Tegmark or Dr. Krueger, do you want to jump in on this?

Max Tegmark

Even though talking about big risks, nuclear war, or loss of control to superintelligence sounds very negative, there is something very hopeful in this also, because that is exactly the sort of thing which can give shared incentives for countries to collaborate even if they don’t trust each other at all. You know what, when Reagan and Gorbachev talked to each other about nuclear disarmament, did they have any deep trust? Of course not. But the Soviet Union knew that it was suicide to try to nuke us Americans. We knew that they knew, and vice versa. So they had a shared incentive to prevent that from happening, and they did prevent it from happening, right?

It’s quite analogous here: once it becomes better known in the national security circles here in the U.S. and in China and elsewhere that racing to build superintelligence just means whoever gets there first gets the honor of being the ones that lose control of earth to some weird alien robot species. It means that, since our government doesn’t want to be overthrown, and I suspect the Chinese one doesn’t either, they have a shared incentive for that not to happen and for no one else in the world to do it either, and instead they will channel their efforts into curing cancer, becoming economically strong, militarily strong, and all the other stuff. The incentives will align, and just like we knew the Soviets weren’t going to nuke us, not because we trusted them or they trusted us, but just because they knew it wasn’t in their interest. That means it’s not inevitable that people are going to go down this path either.

The biggest risk is exactly the inevitability narrative, right? If someone invades your country, what’s the first thing they’re going to tell you? Oh, don’t fight. It’s inevitable that you’re screwed. So don’t try to do anything about it. So, are you surprised that some AI lobbyists are rolling out the exact same narrative here? Oh, it’s inevitable that we’re gonna shove this stuff down your throats and make billions on it before you know. Of course, it’s not inevitable. We can change this, and having conversations like this is the first step.

Bernie Sanders

David or anybody else? There was a piece in the paper last week. President Trump and President Xi will be coming together at a summit. I was surprised and delighted to see, apparently, that as part of their agenda there’s going to be some discussion of AI safety. I think that’s a good start. But what are the impediments to bringing China and the United States and other countries together to talk exactly about the issues we’re talking about now and to come up with some concrete solutions which protect every country on earth? David, do you have thoughts on that?

David Krueger

Yeah, I think the number one impediment here is just a lack of interest and a lack of will. You know, I talked about being optimistic. And one of the main reasons I am optimistic is because in my time in the field, I’ve seen this go from a complete issue that nobody was talking about to being more and more understood and accepted by not just the research community, but policymakers, the public. So I think a big piece of what’s happening right now, why the world is responding in such a crazy way to this risk and not doing the right things, not having an adequate response, is just a lack of awareness of the situation we’re in and the basic facts of how concerned experts are, how fast it’s happening, how little we understand about how to control the technology, how little we understand about how to make sure it’s safe.

So I think as we have more awareness, we’re going to see more understanding of our mutual interest here is to talk and it is to collaborate and cooperate internationally to address the risk, because as many people have remarked, it’s a danger to all of us, right? So this is kind of like—I compared it to aliens before, in the movies when the aliens invade, what happens? Like, humanity all comes together to fight the aliens. So I really hope that we can do that this time, because it’s obviously the thing that we all aspire to, right, in a situation like this.

Max Tegmark

And since you want more hope, here in the United States, I’ve been screaming into the void like Lone Wolf McQuade about this since at least 2014, but the last five months have seen just a remarkable change. They’ve seen the emergence of what I like to joke with my wife is the Bernie-to-Bannon coalition: extremely unlikely bedfellows from across the whole political spectrum saying this is crazy. This is absolutely nuts. Let’s do something about it.

And we’ve seen in the polling also, like, 95% of Americans oppose an uncontrolled race to this dystopian superintelligence. Hey, even people like David Sacks, who’ve been very pro-industry, said this was dystopian. So this is a change. It really hasn’t been this way for more than half a year. And I hope this will really grow into a tidal wave, so we quite quickly can change course and get all the great upsides of AI without steering towards this crazy dystopia.

Bernie Sanders

Well, I think you’re right. I got into this issue not because I am a big tech guy. As my wife will tell you, I have a hard time running our TV, let alone— But what I observed is what we were talking about tonight: that we have a global crisis dealing with the survival of the human race. And I go to work here in the morning and I expect people to be talking about the most important issues facing humanity, and I don’t hear it.

Now the good news is that for a variety of reasons and in a variety of ways, whether it’s opposition to data centers or whatever, people are beginning to stand up and say, you know what, we want a say in this process, we don’t want to let just the wealthiest people in the world run over us with possibly incredibly disastrous results. So I think we are—I think Max, you’re right. I think more and more people are becoming sensitive to this issue, and what we’ve got to do is take this issue all over the world and bring countries together. We’ve done it in the past with regard to nuclear weapons. We’ve done it in the past regarding working together on pandemics. We can do it on this.

So with that, let me very much thank our friends in China for joining us. And let me thank Max and David for all the great work they’re doing. Thank you all very much.

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The East is Read

Xiao Qian: US-China AI race must strike a balance between security and openness

The U.S. State Department ​has ordered a global push to bring attention to what it says are widespread efforts by Chinese companies, including AI ‌startup DeepSeek, to steal intellectual property from U.S. artificial intelligence labs, according to a diplomatic cable seen by Reuters…

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CCG Update - Center for China and Globalization

Register for the 23rd CCG VIP Luncheon: China’s Healthcare in the Post-Pandemic Era

Time: 11:40 am to 2:00 pm, Wednesday, May 13, 2026…

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I. First-hand insights from the U.S.

A key feature of this event will be reflections from CCG’s recent visit to the United States. In April, CCG conducted a nearly ten-day research trip across the U.S., including the Semafor World Economy Summit, one of the largest gatherings of Fortune 500 CEOs in America.

CCG also visited U.S. think tanks, organizations, and experts from across the American political and policy spectrum. Drawing on these first-hand exchanges, the luncheon will offer a grounded look at the current U.S. policy and atmosphere towards China, and examine what has changed — and what has not.

II. Featured speakers

The event will feature experts with long-standing experience in China-U.S. technology, education, innovation, economic, and policy issues.

Denis Simon
Senior Fellow, East Asia Program, Quincy Institute for Responsible Statecraft; former Executive Vice Chancellor, Duke Kunshan University (2015-2020). He was a founding member of the Experts Group of the U.S.–China Innovation Dialogue organized by the White House Office of Science and Technology Policy and China’s Ministry of Science & Technology (2008–17). He was general manager of Andersen Consulting in Beijing (now Accenture) and was founding president of Monitor Group China.

Simon has long focused on China-U.S. cooperation in technology, education, and innovation. With extensive experience across academic and business communities in both countries, he brings valuable insights into the interaction between the two innovation systems.

Lu Xiang
Research Fellow, Institute of American Studies, Chinese Academy of Social Sciences. Dr Lu has long studied the U.S. economy and China-U.S. economic and trade relations, with in-depth analysis of U.S. domestic politics and policy trends towards China.

Henry Huiyao Wang
Founder and President of CCG; former Counsellor to China’s State Council. Dr Wang will share takeaways from CCG’s recent exchanges with American policy, business, and academic communities.

IV. Event details

Time: Wednesday, 6 May, 11:30–14:00

Venue: CCG Beijing Headquarters, Hanwei Plaza, Guanghua Road, Chaoyang District, Beijing

Format: Closed-door luncheon; prior paid registration required

Language: Primarily English

V. How to sign up

Register via this link. Proof of payment, included in the link or QR code, is required in the registration.

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CCG Update - Center for China and Globalization

Event Registration | Prospects for China-U.S. relations and Insights from Recent Visit to U.S.

On 6 May, the Center for China and Globalization (CCG) will host a closed-door luncheon in Beijing on the prospects of China-U.S. relations, upon CCG’s recent visit to the U.S. and experts’ contribution, in light of a possible U.S. Presidential visit to China by Donald J. Trump…

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2 months ago · 9 likes · CCG Update

This translation and publication have NOT been authorized by their author or anyone else.

The author is apparently Ding Jianwei, at the time Counselor and Spokesman of the Chinese Embassy in Kyiv, Ukraine. Ding is apparently now retired. —— Zichen Wang

基辅亲历:俄乌冲突爆发前夜

Kyiv Firsthand: The Eve of the Russia–Ukraine Conflict

From October 2021 onward, reports began to circulate that Russian forces were preparing a large-scale offensive against Ukraine. Our embassy, too, continued to gather and assess relevant developments through various channels.

In late November, the embassy convened a dedicated DW [Translator’s Note: abbreviation for Party Committee/“DangWei”] meeting to assess the escalating tensions between Russia and Ukraine. In preparation for the extreme scenario of a full deterioration of the situation, we drew up in advance the embassy’s complete set of emergency-response and consular-protection plans: personnel responsibilities were clarified, posts and duties were fixed, and coordination mechanisms were refined. The meeting also required the logistics team to stockpile meat, vegetables, and other daily necessities early, preparing for contingencies before they arose.

At the time, Military Attaché X and I had been following the situation closely from different vantage points. Taking into account a series of abnormal Russian military deployments, we were among the first to reach the judgment that “Russia’s actions were by no means routine deterrence. Rather, Russia was planning to launch a full-scale attack on Ukraine. Its operational objectives would not be limited to the eastern Donbas, but would be directed at the whole of Ukraine.”

At the time, however, most domestic experts and scholars remained locked into fixed assumptions and an overreliance on experience. They generally relied on the inertia of previous years to assess the situation, simply believing that Russia’s heavy troop presence near the border was no more than routine military exercises and strategic pressure, intended only to stir up the situation in Donbas, and that it would not truly launch a large-scale war.

Influenced by the overall atmosphere of an optimistic assessment, the risk warnings and situation assessments the two of us made were deliberately shelved. Had we insisted on our view, we would easily have been accused of disrupting unified decision-making.

But developments on the ground shattered the mainstream expert assessment. The confrontation between Russia and Ukraine continued to intensify. The situation worsened day by day. Russian forces were transferred across military districts, eventually reaching a total strength of roughly 360,000 troops, deployed densely along the Russia–Ukraine and Belarus–Ukraine borders. Their posture was of a final showdown.

By December 2021, large numbers of Russian infiltration and reconnaissance teams had already slipped into Kyiv. They began covertly marking key military and political targets, as well as critical infrastructure, gathering intelligence. The undercurrents of war were already moving.

I was living in a well-known Kyiv high-rise apartment building, known as the “Corn Cob”, which is less than a kilometre from the core quarters housing the Presidential Office and the government. It was one of the landmarks of Kyiv’s right bank. The residents were a complicated mix: Ukrainian cabinet ministers, members of parliament, business oligarchs, and diplomats from various countries.

At the time, I noticed red cross markings on several walls of the building. Years of diplomatic work, military experience, operational training, and my professional sensitivity made me instantly alert. I judged at once that these markings were coordinate indicators placed for precision artillery strikes. That discovery strengthened my conviction: Kyiv was Russia’s core assault target, and a full-scale battle to seize the city was already on the brink of eruption.

On the eve of the New Year in 2022, at the invitation of my old friend Minister Nemchinov [Translator’s Note: possibly Oleh Nemchinov, the Minister of the Cabinet of Ministers of Ukraine], I went to a century-old restaurant on Andriivskyi Descent to try modern Ukrainian cuisine. Over dinner, as the conversation turned to the situation, he asked for my view on Russia-Ukraine tensions.

I spoke frankly. I laid out my reading of the geopolitical tensions, the force deployments, and Russia’s strategic intentions. I made clear my judgment that a large-scale, full-blown war was already irreversible. The head of the Ukrainian cabinet’s press office, who was also present, was unconvinced. My view, she said, was far too pessimistic. She was adamant that the conflict would remain confined to Donbas. Russia, in her view, had neither the will nor the capacity to attack Kyiv. The subsequent outbreak of a full-scale war fully vindicated every judgment I had made.

On 10 January, 2022, CIA Director William Burns arrived unexpectedly in Kyiv and was received personally by President Volodymyr Zelensky. By diplomatic convention, when the head of an intelligence agency travels abroad, he should liaise with his counterpart agency on the host side; for a head of state to meet him directly is highly unusual. The anomaly put me on full alert.

Later disclosures revealed that Burns had come on the orders of President Biden to brief Zelensky on highly classified intelligence: Russia planned to launch a full-scale invasion of Ukraine on 16 February.

Even after receiving a clear warning from Washington, Zelensky and senior figures in the Ukrainian cabinet remained doubtful, clinging to a hope that things might still turn out otherwise. Still, as a precaution, the Ukrainian government quietly activated a tiered emergency plan. Ministries were split into three groups. Ministers stayed in Kyiv to maintain government operations, while deputy ministers led personnel in batches to rear cities in western Ukraine, including Lviv, Ivano-Frankivsk, and Chernivtsi.

At the same time, the United States and many European countries began issuing urgent evacuation warnings to their citizens. Diplomatic missions moved quickly, transferring personnel and supplies either to western Ukraine or to neighbouring countries. Vacating nationals and relocating embassies became routine. The shadow of war hung over Ukraine, and the air was thick with the sense of an approaching storm.

Entering February 2022, all kinds of rumours about an impending war spread in every direction. Reports appeared constantly about Ukrainian forces discovering and clearing Russian sabotage teams. Yet Zelensky continued, in his nightly televised addresses, to downplay the crisis and project an image of calm, seeking to stabilise public sentiment.

On 18 February, Zelensky convened a special meeting with Ukraine-based diplomatic envoys and stated publicly that “the situation in Donbas was better than the previous year, that a large-scale conflict would not occur, and that diplomatic missions should exercise restraint. I urge embassies not to create panic, not to evacuate blindly, and not to relocate unnecessarily.”

By that time, more than 90 percent of foreign diplomatic missions had already completed their relocations. Embassy buildings across Kyiv stood empty. Only the five-star red flag above the Chinese Embassy remained standing against the wind, flying high.

Under relevant provisions of international law, once a foreign diplomatic mission fully evacuates and begins operating from another location, it must lower its national flag, which is regarded as a temporary closure of the mission. If it later returns to the original premises and resumes operations, it must hold a new flag-raising ceremony and complete the full diplomatic procedure.

On the morning of 21 February, I was invited to the Office of the President of Ukraine to meet with the head of the press bureau. After the official discussion concluded, he suddenly asked, in a solemn and concerned tone, whether the Chinese Embassy planned to relocate to western Ukraine, or perhaps transfer to Poland.

The sudden question left me stunned. On our side, there had never been any plan to relocate or evacuate the embassy. I immediately asked in return whether war was about to break out. His answer was brief: yes.

I pressed him on the timing. With a grave expression, he said it would happen in the next few days—perhaps tomorrow, perhaps the day after. As we parted, I asked once more whether war had become inevitable. He answered in the affirmative, then hurriedly said, “Take care,” and bid goodbye.

At 19:00 on 23 February, my wife and I walked toward the areas around the Presidential Office, the Cabinet of Ministries, and the Verkhovna Rada to observe the situation at close range. The core government district was brightly lit. Passers-by looked calm and went about their evening as usual. We even ran into several acquaintances. On the surface, the city appeared entirely peaceful. Nothing in the streets suggested an imminent war.

Mariinsky Palace, a key venue where Ukraine’s head of state receives foreign guests, was brilliantly illuminated that night. The flags of Ukraine, Poland, and Lithuania flew together from the roof, making clear that Zelensky was meeting the presidents of Poland and Lithuania. By then, fewer than ten hours remained before the full-scale outbreak of war.

As night deepened, traffic thinned on the main roads. Mariinsky Park, usually full of visitors, was silent and bleak. The whole city seemed wrapped in a suffocating stillness. The air was heavy, oppressive. My wife and I both knew how perilous the situation had become and dared not stay out for long. We immediately quickened our pace back, returning to the embassy to join the emergency standby work. By the time I got back to my residence, it was already 23:00.

After days of extreme tension, my nerves relaxed slightly. Yet somewhere deep inside, a nameless unease and my instincts kept warning me that danger was near. I picked up a book to soothe my mind, and unwittingly slipped into a heavy sleep.

Before dawn, a deafening explosion ripped through the night and jolted me awake. Instinctively, I looked at my watch; the dial read clearly: 4:45, 24 February, 2022. Within moments, the shriek of missiles tore through the air one after another. The building shook violently and continuously, while flames leapt into the sky and thick smoke billowed from several directions outside the city. In that instant, the Russia–Ukraine conflict had fully begun, and war swept across Ukraine.

At that critical moment, I picked up the phone...

基辅亲历：俄乌冲突爆发首日的烽火与守护

Kyiv Firsthand: Fire and Protection on the First Day of the Russia–Ukraine Conflict

I offer this first-hand account as a record of unforgettable memories from those days of war; as a tribute to those who stood their ground and moved against the tide in a moment of crisis; and as a salute to every act of responsibility and commitment shown by those who stayed true to their original mission in the face of danger.

At 4:45 on 24 February 2022, the deep silence of Kyiv was torn apart by a riff of violent explosions. I woke with a start and rushed to the balcony. In the suburbs, flames leapt into the sky. Missiles whistled overhead and exploded in succession. The window frames trembled. The sharp, acrid smell of smoke and explosives spread through the air. At that moment, I knew with absolute clarity: war had arrived.

I immediately called DS [abbreviation for Ambassador/“DaShi”]. His voice on the other end was urgent and tense. I answered steadily: “Russian forces have launched a full-scale military strike on Kyiv. The Russia–Ukraine conflict has officially broken out.”

After a brief silence, DS issued a precise and decisive instruction: “Report the full situation to headquarters immediately. Monitor developments closely. Conduct a full check on the safety of Chinese citizens in Ukraine. I am returning to the embassy now. Convene an emergency DW meeting at 6:30.”

After hanging up, I immediately reported to the headquarters’ duty office that Kyiv had come under attack and that the conflict had fully erupted. In an instant, messages flooded in: media inquiries, requests for help from Chinese citizens, questions from friends and relatives. As the war drew closer, panic spread almost immediately.

At 5:15, after completing the urgent report and the initial emergency response, I had no time to wash or rest. I hurried straight to the embassy. Once in my office, I quickly turned on the computer. Battle updates and security warnings were scrolling across the screen in real time.

At around 5:40, DS arrived. Personnel quickly assembled. At 6:30, the emergency DW meeting began on time. The wartime work mechanism was fully activated. Every special working group immediately reported to their posts and assumed assigned responsibilities. The entire embassy entered emergency-response mode.

Under the meeting’s arrangements, I led Deputy Military Attaché X and Third Secretary C to Kyiv railway station to carry out emergency rescue work for Chinese citizens. At the same time, we coordinated with Ukrainian military and police authorities, as well as station management, to organize the orderly and safe evacuation of our compatriots.

At 7:30, after passing through layers of armed checkpoints, we arrived at Kyiv railway station. The scene before us was harrowing and devastating. The cramped station was packed beyond capacity, with tens of thousands of refugees stranded inside. Piercing air-raid sirens screamed without pause. Dozens of armed helicopters flew in formation at low altitude along the Dnipro River. Explosions rang out one after another, seemingly without end.

Panic-stricken crowds fled in every direction. Screams, cries, and desperate wails mingled in the air. Whenever a train pulled into the platform, terrified crowds rushed towards the carriages at all costs, desperate to board and escape. Elderly people struggling to walk, parents holding young children, and pregnant women with limited mobility were all swept up in the surging crowds.

People of different nationalities and skin colours pressed together in panic. Everywhere I looked, there were displaced, frightened, helpless figures. Scenes of chaos I had only seen in Second World War documentary footage were now unfolding before my eyes, leaving me heavy-hearted and overwhelmed by emotion.

By then, the station had been placed fully under military control and was strictly enforcing a policy that gave priority boarding to the elderly, the vulnerable, women, and children. Large numbers of young Chinese students and employees of Chinese enterprises were forced to remain inside the station. Dozens of female Chinese students refused to leave their companions behind and seek safety on their own. Without hesitation, they chose to stay behind, look out for one another, and face the peril together.

When our compatriots learned that we were from the Chinese Embassy, their fear and tension gradually eased. Even in such desperate circumstances, they regained a sense of confidence and hope from knowing that the motherland stood behind them.

When the Chinese citizens learned that we were from the embassy, the fear in their faces gradually eased. In that desperate moment, they regained a sense of confidence and hope from knowing that the motherland stood behind them.

At a critical moment, one student Party member stepped forward and said, “I am a member of the Communist Party of China. If the embassy has any arrangements, I will obey orders at any time and fully cooperate.” Immediately afterward, two more students identified themselves as Party members and volunteered to join the temporary rescue team. They took the initiative to handle demanding tasks such as crowd guidance, information registration, emotional reassurance, and multilingual interpretation. Amid the flames of war, these three young Party members stepped forward, shouldered responsibility, and put their original mission and commitment into action. Though they left no names behind, their simple actions warmed everyone present and moved us deeply.

We formed a temporary Party group on the spot to coordinate command and deployment, classify and settle evacuees, and ensure efficient cooperation. The work covered various groups, including students, overseas Chinese, and staff of Chinese-funded enterprises. We gave special assistance to mothers with infants and those facing particular difficulties. No one was to be left behind. We did everything possible to protect the life and safety of every compatriot.

After several hours of continuous, high-intensity rescue work, by 14:00 that day, we had safely rescued and assisted in transferring 383 Chinese citizens from Kyiv railway station, including 37 infants and young children. The trains were headed toward three main evacuation routes: Budapest, Warsaw, and Chop. We arranged Party-member volunteers to accompany evacuees on board, staying with them throughout the journey, providing continuous care and support, and forming a line of protection along the evacuation routes.

At the same time, we patiently persuaded and carefully reassured compatriots who were unable to board trains in time, guiding them to return in an orderly manner to their campuses and places of residence while awaiting the embassy’s follow-up arrangements for coordinated resettlement and phased evacuation.

Once the railway station rescue operation had temporarily come to an end, we immediately returned to the embassy. Despite their exhaustion, all staff pressed on without rest or food and convened a special meeting at once. The meeting reviewed the rescue operation on the ground, assessed the likely development of the situation, refined and improved emergency measures, and pushed ahead with all preparations for the evacuation of thousands of Chinese citizens in Ukraine.

When the railway station rescue mission temporarily came to an end, we immediately returned to the embassy. Despite their exhaustion, all staff pressed on without rest or food and convened a special meeting at once. We reviewed the rescue operation on the ground, assessed the likely development of the situation, refined and improved emergency measures, and pushed ahead with every effort to prepare for the evacuation of thousands of Chinese citizens in Ukraine.

At noon that day, the Ukrainian authorities officially declared a nationwide state of war, and Kyiv imposed a 72-hour citywide curfew.

Where the people’s safety lies, there lies the state’s concern.

Since the situation in Ukraine began to deteriorate, the CPC Central Committee had remained deeply concerned about the safety of Chinese citizens overseas and had kept the well-being of our compatriots in Ukraine close at heart. The embassy resolutely implemented all instructions and requirements from higher authorities, issuing safety alerts and risk-avoidance guidance in advance, guiding overseas Chinese associations in various places to help themselves and one another through the difficulties, and continuously using authoritative and timely official updates to ease public anxiety, guide people in taking sensible precautions, and help them protect themselves properly.

At 17:00 on the day war broke out, I issued, on behalf of the embassy, the “Remarks by the Spokesperson of the Chinese Embassy in Ukraine on the Current Tensions in Ukraine”. It was the first public notice issued by the Chinese Embassy in Ukraine to reassure all Chinese compatriots in the country after the outbreak of the conflict. Through authoritative information, it briefed people on the real-time situation, offered a precise assessment of security risks, and set out clear guidance on how to avoid danger. At the earliest possible moment, it conveyed the voice of the motherland, reassured our compatriots, and helped stabilise the overall situation.

At the time, the roughly 6,000 Chinese citizens in Ukraine remained generally calm. Although their daily study and life had been severely disrupted by the war, they were able, with the strong motherland behind them, to carry out home sheltering, phased evacuation, and other measures in an orderly manner.

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The two economists are:

GUO Kai, Executive President and Senior Fellow of the CF40. Before joining the CF40, he was an economist at the International Monetary Fund in Washington DC and then worked at the People’s Bank of China in various capacities, including in the Monetary Policy Department and the International Department. His main research areas include the Chinese economy and its macroeconomic policies as well as international finance. He is the author of three popular Chinese economics books and multiple academic papers in various English and Chinese journals. He holds a PhD degree in economics from Harvard University.

ZHU He, Research Fellow at the CF40. With over ten years of experience in macroeconomic research, Zhu He specializes in tracking domestic and international macroeconomic trends and capital market dynamics. He provides unique insights into economic policy and asset allocation strategies and is a key contributor to CF40’s Macroeconomic Policy Quarterly Report, which has gained significant attention from the market and policymakers. He holds a PhD in Economics from the Chinese Academy of Social Sciences and a postdoctoral degree from Peking University.

Founded in 2008, China Finance 40 Forum (CF40) is a leading independent think tank focused on policy research in macroeconomics and finance. Its core membership consists of 40 leading experts from government, financial institutions and academia around the age of 40. In 2021, the CF40 Institute was established to strengthen CF40’s research capacity. In 2024, the CF40 Institute introduced an original research product, CF40 Research, aimed at providing independent insights into China’s macroeconomy, policy trends, financial market dynamics, and global affairs. CF40 Research currently features English product series, including Policy Brief, Commentary, and Podcast.

The following conversation, first aired on a Chinese-language CF40 Research podcast, was published in transcript form on 7 April via the official WeChat blog of CF40 Research.

对话郭凯、朱鹤：中国经济，复苏了吗？

Guo Kai and Zhu He: Is China’s Economy Recovering?

As 2026 begins, sharply divergent views are emerging over how to read the true trajectory of China’s economy. Some point to improving indicators: the CPI and PPI are showing signs of stabilising and edging up, and the RMB has entered an appreciation cycle. Others argue that the property market is still declining, household income growth remains weak, and the foundations of recovery are far from secure. So what is really going on?

In the latest episode of the China Finance 40 Forum (CF40) podcast “WitTalk 研究有意思,” Guo Kai, Executive President of the CF40, and Zhu He, a research fellow at the institute, offered a set of judgments worth taking seriously: China’s economy is likely undergoing a mild recovery following a period of supply-side clearing. It is not a V-shaped rebound, but it may prove fairly sustainable. The deeper implication is that even without large-scale macroeconomic stimulus, China may not be far from emerging from its demand shortfall.

In this episode, the two guests also range widely, discussing fiscal policy, real estate, the oil shock, and the implications of AI.

The following is a lightly edited and abridged transcript of the conversation.

2026 growth target: lower, or more confident?

Host: Let’s start with the figures everyone cares about most. This year’s growth target has been set at 4.5% to 5%, slightly below the “around 5%” target of previous years. But the Government Work Report also adds an unusual phrase: “while striving for better in practice.” That raises a question: does this suggest lower expectations for growth this year, or greater confidence? Zhu He, could you help unpack that?

Zhu He: I actually approach this issue from three perspectives.

First, this year’s target is indeed set as a range. But does that necessarily mean it has been lowered? I don’t think so. To begin with, looking ahead to the 15th Five-Year Plan period, one unavoidable judgment is that China’s growth rate will likely step down somewhat. The central authorities have made it quite clear that the economy cannot maintain high growth indefinitely. So the 4.5% to 5% range may be signalling that future growth will gradually moderate, which is perfectly reasonable.

But second, does that deceleration have to begin this year? Does 2026 have to mark the point at which the target is lowered? I do not think that is necessarily the case.

That brings me to the third point, which relates to the phrase you mentioned: “while striving for better in practice.” In our reading, that wording carries two meanings. On the one hand, it sets a higher bar for policy implementation. On the other, it also reflects greater confidence.

Think back to 2025. At that time, the target was “around 5%”, but it came with the caveat that “Achieving this year’s targets will not be easy, and we must make arduous efforts to meet them”. This year, by contrast, the language is about “striving for better in practice”. That shift in wording itself suggests greater confidence about 2026.

Host: So when you speak of confidence, does that mean that within the 4.5%–5% range, the lower end is more like a floor, while the upper end is the actual target?

Zhu He: I believe the general direction this year is to aim for something close to 5%. The 4.5%–5% range is flexible: if there are all sorts of external shocks, of course the outcome could come in lower. But if things largely unfold as expected, then given the conditions and environment this year, there seems to be no compelling reason to deliberately set a lower growth objective.

Is fiscal policy really not proactive enough?

Host: Alright. So in your view, this is essentially a year of pushing towards 5%. A key test of the government’s resolve, and of the strength of policy support, is whether fiscal policy is forceful enough. Some foreign institutions argue that because this year’s deficit ratio and special sovereign bond targets are basically unchanged from last year, the marginal boost from fiscal policy may be weaker. They also note that the government still seems to be prioritising technology and industry, while support for consumption appears relatively limited. How do you view that argument?

Zhu He: That is indeed a fairly common view. It is broadly correct in describing the direction of fiscal policy: China has long placed considerable emphasis on science, technology, and industry. But it is hard to say that support for consumption has genuinely weakened. Especially when viewed from the broader perspective of fiscal policy, we have done our own calculations, and we do not think the strength of fiscal support in 2026 is materially weaker.

The key issue is this: since 2024, China has budgeted RMB 800 billion a year in special-purpose bonds for local government debt resolution; and since 2025, another RMB 500 billion has been allocated to recapitalise major banks. These sums are all counted as fiscal expenditure and are therefore included in assessments of fiscal support. However, from a research perspective, such spending is not directly comparable to expenditure that immediately boosts domestic demand, such as public wages, investment, or government procurement.

So if one wants to assess the true strength of fiscal policy, some adjustment in the metric is necessary. We think it makes sense to temporarily exclude funds used primarily for structural reform, such as debt resolution and bank recapitalisation. Once you do that, it becomes clear that fiscal support in 2026 is actually quite substantial. By our measure, budget expenditure is set to grow by 6.7% this year, which is a fairly high rate.

Host: Right. Especially given that the corresponding figure was only 1.1% last year, the contrast is quite clear. Guo Kai, what would you add?

Guo Kai: I’d just like to add one point. If you look closely at fiscal policy in recent years, there is another feature worth noting: the budget is one thing; implementation is another.

As Zhu He said, from a budgetary perspective, this year’s fiscal spending in support of domestic demand is not low in our view. It remains fairly proactive. To put it more bluntly, we think the judgment by some foreign institutions that China’s fiscal policy is not proactive enough is simply wrong.

But there is a second issue: the intensity of implementation. Take last year. On paper, fiscal policy was set on a relatively proactive footing. But in actual execution, according to the Ministry of Finance’s own data, only 91% of the expenditure budget was carried out. In other words, there is a great deal for manoeuvre in the implementation of fiscal policy, and this issue has to be viewed dynamically.

If growth performs relatively well this year, then perhaps fiscal implementation does not need to be pushed to the limit. But if the economy underperforms, or weakens for one reason or another, then fully executing the existing budget could still provide meaningful support. So in my view, enough money has already been earmarked. The final intensity of fiscal support will depend on actual conditions, and the outcome should still keep growth within the range of 4.5% to 5%.

Host: Let me push that a bit further with an extreme scenario. People always cite the 2008 RMB 4 trillion stimulus as the benchmark, and argue that unless spending is ramped up on that scale, the stimulus is not big enough. So under what circumstances—a sudden global financial crisis, say, or an extreme form of external decoupling—would it become necessary not just to fully execute the current budget, but actually add to it? Or do you think the current policy reserve is enough to offset such shocks?

Guo Kai: I think a supplementary budget would only be warranted in the event of a truly sudden and obvious shock, potentially one coming from abroad. That is one possible scenario. But under normal circumstances, I do not think there is any need to expand the budget further.

Why say China’s economy has already bottomed out?

Host: I see. And I take it that this also reflects your overall view of China’s economy this year. CF40’s recent research argues that the economy had already show initial signs of stabilisation in 2025, and that 2026 marks the start of recovery after the cycle’s turning point.

That does sound a bit counterintuitive. The macroeconomic data do not seem to tell that story very clearly—GDP started strong last year and weakened later on, while investment growth even turned negative. So how did you arrive at the view that the economy has already bottomed out and begun to recover? What is the evidence?

Zhu He: Let me start with a few examples, mainly at the macro level.

First, we observed that both CPI and PPI began stabilising and edging up at roughly the same time in the second half of last year.

Second, if you look at listed-company data, per capita wage growth slowed step by step in 2022, 2023, and 2024, but that step-down process stopped in 2025. This is not to say wages have suddenly surged, but at the very least they are no longer on a downward path.

Most importantly, when we talk about recovery, we need a clear assessment of its magnitude. Over the past 20 or 30 years, China’s economic cycles have often looked, in hindsight, like classic V-shaped reversals: the economy came under severe pressure, massive policy measures were introduced, and growth bounced back sharply.

That is not the kind of recovery we are talking about now. This time, the recovery doesn’t take off with a sudden surge; it is slower and milder. But it is still backed by fairly solid macro evidence. Beyond inflation and wages, there is also investment, which you just mentioned. We published a report arguing in detail that the decline in investment data last year had diverged from other macro indicators. We said then that if our judgment was correct, investment would rebound noticeably early this year. And that is precisely what has happened.

Guo Kai: I think there are several dimensions to this.

First, you cannot think about the 2025 economy in a vacuum. China was hit by a lot of major negative shocks that year. I will not list them all, but just take the new round of China-U.S. tariff friction: at one point, tariffs went as high as 145%, whereas in the first round of trade tensions in 2018, they peaked at 25%. Those were very large external shocks.

And yet, despite all that, China’s economy did not go through any obvious or rapid cooling. That suggests that the resilience of the Chinese economy is much stronger than it was a few years ago. This is crucial for assessing the current state of the Chinese economy.

Of course, we also conducted a great deal of research. We studied China’s manufacturing cycle. China is a manufacturing powerhouse, but in recent years, PPI had been falling persistently, reflecting problems such as “involution”. As Zhu He mentioned, however, PPI began rising month on month in the second half of last year.

Some have attributed that to “anti-involution” policies or upstream price increases. We do not see it that way. On closer inspection, what seems to have happened is that supply and demand in China’s manufacturing sector have begun to reverse: supply growth is no longer keeping up with demand growth. The rebound in manufacturing PPI reflects improving demand, including not only domestic demand but, importantly, external demand as well. We see that as a very significant signal of improvement.

Then there is the RMB exchange rate. For years it had been under depreciation pressure. That pressure suddenly disappeared after April or May last year, and by the end of 2025, the RMB had entered a fairly strong appreciation process. This shift was driven by millions of households and businesses “voting with their feet.” The RMB is strongly pro-cyclical: it tends to strengthen when the economy is doing well, and weaken when the economy is under strain. If the economy had not stabilised, it would be hard to explain such a rebound in the exchange rate.

So after carefully examining a great deal of evidence and putting it all together, our major conclusion is that after several years of adjustment, the Chinese economy seems to have passed a cyclical turning point and entered a phase of gradual recovery. It will not be a V-shaped rebound, but it does appear to have reached the bottom of the cycle and begun to move higher.

If the macro picture is improving, why does it not feel that way at the micro level?

Host: I can follow the logic, and I find it persuasive. But for many people, the lived experience may feel completely different. A common refrain online is: “Am I being averaged out again?” Why is it that the macro economy appears to be improving, while at the micro level, people do not feel it, or even feel things have become colder? Why is there such a big gap?

Zhu He: Speaking from my own experience, I have just taken advantage of the “trade-in” policy this year to upgrade my phone and laptop. I think the discrepancy between the macroeconomic picture and people’s micro-level perceptions can be viewed from two angles. One is structural, which is exactly the issue you mentioned of being “averaged out”: some people will feel conditions have improved, while others will not.

But the more important issue is the temporal dimension. The recovery we are seeing this time is relatively slow and not especially strong, though it is still a recovery. By contrast, changes in our own wages and daily lives happen gradually. It takes time for macro trends to filter through to individual experience. That lag may not be very long, but given the nature of this recovery, it is unlikely to be especially short either.

So based on my own research, I think there is reason for people to be somewhat more confident. The benefits may not reach each of us tomorrow. But if we look back a few years from now, it may well turn out that by 2026, we had already come through the hardest part.

Guo Kai: I think it is entirely normal that people do not yet feel the recovery at the micro level.

First, as Zhu He said, this recovery is still in a very early stage, and the slope is not especially steep. If your own circumstances have not improved significantly or have even worsened relative to last year, that is a perfectly understandable perception.

Take manufacturing. We think it has begun to enter a slow recovery. But if you break the sector down, only a small number of industries are showing a clearly visible rebound. In most sectors, the recovery is still very weak, and in many sectors, conditions remain extremely difficult. So your personal experience will vary enormously depending on your industry, your region, and your field.

Second, macro recovery unfolds in stages. The effect on people’s incomes and jobs often comes last. What shows up first may be prices: things begin to cost more. Then some firms see an improvement in profits. Then they start expanding investment and hiring. Only after that do they begin to feel able to raise wages and bonuses. That transmission can take several quarters, or even longer.

So it is entirely normal not to feel it yet. If everyone were already feeling it, we would not still be talking about a turning point—we would already be in the middle phase of recovery.

In the end, of course, our judgment will have to be tested against the data. But our current view is that the turning point has passed and we are now in the early stage of recovery.

Emerging from weak demand: not through stimulus, but through clearing

Host: But that brings us back to a contentious issue. If the recovery is this slow, why not use stronger stimulus to accelerate it? Put differently, can this kind of endogenous repair really bring an end to weak demand? Could China emerge from demand deficiency as early as this year?

Guo Kai: This may well be the single biggest point of observation and the biggest source of disagreement among people following China’s macroeconomy this year.

My own answer is yes, it can. The reason is this. One widely held view is that if China is to escape demand deficiency, it must do so through a large Keynesian demand-side stimulus. The thinking is that although macro policy has been reasonably supportive in recent years, it has not been strong enough to lift the economy decisively out of weak demand. Consequently, there is a strong view that, if this remains the case, demand deficiency will persist for a long time. We have now become somewhat sceptical—or shall we say, strongly sceptical—of that view.

We think China may have been going through a fairly classic real-business-cycle adjustment. What does that mean? It means a pronounced process of clearing, including in real estate and in manufacturing. During that process, you see immense downward pressure.

In property, that has shown up in falling house prices, weaker investment, fewer housing starts, and reduced land purchases. This process has already lasted three or four years. In manufacturing, many firms saw profits squeezed sharply, and responded by cutting investment and curbing capacity expansion. That too was part of an adjustment process.

Our judgment is that this clearing process has already passed its turning point. Under those conditions, we believe that even without large-scale stimulus, the economy’s own resilience and endogenous adjustment can generate a recovery. Of course, without the old boost from a rapidly rising property sector or the sharp demand expansion created by massive policy stimulus, the economy will not rebound in a V-shaped fashion. It is more likely to recover in a milder way. But it is still a recovery, and we think it is sustainable.

To put it more succinctly, there are two ways to solve a demand shortfall. One is to leave the supply side untouched and pull up demand through policy—the Keynesian solution, based on the idea that large market failures and frictions require an external policy shock to restart the economy.

The other is to work through deep supply-side adjustment. Once adjustment has gone far enough, investment bottoms out and begins to recover; consumption, having been compressed, begins to rebound as well. In other words, demand can recover as a result of supply-side adjustment. My view is that China has in fact been going through a supply-side adjustment cycle.

Host: If your reading is correct, does that mean there will still be another rate cut this year?

Zhu He: Given the current trajectory of the economy, we think the likelihood of a rate cut is diminishing, at least in the short term. If the recovery continues into the second half of the year and this begins to form a certain concensus, then by that point the rate-cut debate may largely fade away.

As for monetary policy, its main task is to maintain ample liquidity, and the central bank has in fact been doing that for several years. The pace of growth in total social financing has remained broadly acceptable.

Guo Kai: This is actually a very important question. To be frank, even within the CF40 research team there is still disagreement on it. For example, our senior fellow Zhang Bin continues to argue that rate cuts are important for expanding aggregate demand.

But I think there is a difference between what ought to happen and what is likely to happen. Whether rates should be cut is one question. Whether they will be cut is another. If you are asking for a forecast, I think the probability of another rate cut this year is fairly low.

Last year, even in the face of such major external shocks, China cut rates by only 10 basis points. If the economy evolves as we expect this year, the case for another cut weakens substantially. On top of that, the banking system is still under pressure from narrowing net interest margins. The compression in margins was checked somewhat last year, but margins remain very low, so the constraints on further easing are strong.

So whether you look at the cyclical position of the economy or the constraints from banks’ net interest margins, it is hard for me to see another rate cut this year—unless there is a major negative shock.

Where does the property market stand now?

Host: Taken together, both of you sound broadly optimistic about this year’s recovery. Zhang Bin was mentioned earlier, and we’re very much looking forward to having him join us for a discussion next time. But back to the topic at hand. When one talks about China’s economy, there is one subject that always looms large: real estate. Over the past few years it has been a major drag on domestic demand and confidence. Now that the macro economy is improving, where exactly does the property market stand? Zhu He?

Zhu He: This is how I see the property cycle. If we look back at 2025, the market had already changed quite significantly from where it was in 2022–2024.

First, some developers’ debts, especially the off-balance-sheet debt of private developers, had begun to enter a genuine restructuring phase.

Second, the share prices of some Hong Kong-listed property firms had stabilised and in some cases were even rising in tandem with the broader market.

Third, if you look at the housing sales area and inventory area, especially the inventory area, it is quite clear that stock was no longer continuing to build in 2025. From 2022 to 2024, inventory was rising, but in 2025, it was basically flat relative to 2024.

Taken together, these signs suggest that China’s property market had already begun a spontaneous clearing process by 2025 and was moving close to a bottom. We recently published a short property brief titled China’s Real Estate Market in 2026: Moving Towards Stabilisation after the Decline. Our view is that the market has not yet entered recovery, but it has at least moved towards stability. Since 2022, the contraction had been remarkably smooth and persistent. We think there is a fairly high probability that this process comes to an end in 2026. In other words, 2026 looks like a year in which the market settles into a bottoming phase.

Host: Guo Kai, what is your take?

Guo Kai: This is how I see it. There is actually a great deal of disagreement about where the property market stands. Our judgment, as Zhu He has just said, is that this year, it will at least stop falling and stabilise. In other words, prices may still slip a little further this year, but once that happens, the decline should more or less be over. That is our broad assessment.

The most basic reason is that, compared with international experience, China’s property market correction has already been unusually large in both duration and depth. No market falls forever. Once a correction has run its course, it eventually stops.

Second, our view on property is tied to our judgment about the broader economic cycle. Of course, that raises a chicken-and-egg problem. But we are confident about economic recovery, and if the economy is recovering, that itself provides better support for the property market.

Third, even from an asset-pricing perspective, if PPI turns positive this year as we expect, CPI remains in positive territory, and the GDP deflator shifts from negative to positive, then changes in real interest rates should also provide support to housing prices.

So this is not a matter of gazing into a crystal ball and declaring that prices must stabilise. It is simply that when we put all these factors together, it seems more likely that the market will stop falling than continue to slide.

That said, we are not talking about a uniform nationwide stabilisation. China’s housing market is highly differentiated. Many third- and fourth-tier cities may not feel any stabilisation at all, because they still have a large inventory overhang and weaker population and employment fundamentals than first-tier and strong second-tier cities. But in some first-tier and stronger second-tier cities, we do think that stabilisation will become more visible.

Recently, for instance, the second-hand housing markets in Beijing and Shanghai have shown something of a spring pickup. I think that could be a positive sign. Why? Because this year there have been no significant new measures aimed specifically at stimulating property, and macro policy has remained relatively steady rather than highly expansionary. If, in that environment, the market is beginning to show signs of a spontaneous revival, that may suggest that households with rigid demand, or those who have been wavering between buying and renting, are starting, at the margin, to consider buying. That would be a healthy development. Of course, we still need a few more months of observation.

Host: That is a lot to digest. But what you are saying is that property will stop falling this year—in other words, the decline hasn’t stopped yet. But the broader economy has already begun to recover. For more than twenty years, real estate has dominated China’s economic cycle. Does this mean it is no longer the economy’s main pillar?

Zhu He: We previously did a study on this. Since real estate belongs to the service sector, we looked at how the service share of GDP evolves across countries. At least based on our findings, in major economies, real estate is both a pillar industry and a sector that plays an important role in driving the economic cycle.

In China, at least through 2025, real estate has remained a cyclical driver. From 2022 to 2024, was the economic cycle not largely shaped by property? The difference is that if you compare today with the past twenty years, and especially with the 2021 peak, the sector’s weight in the economy has clearly declined. That is an objective fact.

Even so, it remains a pillar industry. And if we take a longer-term view—five or ten years—as long as people’s demand for better housing remains unmet, and as long as the aspiration for a better life continues to include improved living conditions, then property will not become nearly as unimportant as some people now imagine. It simply will no longer occupy the kind of absolute, untouchable dominating position it held over the past decade or two. That era has passed.

Guo Kai: I see it this way. From the perspective of any household, among food, clothing, housing, and transport, the biggest expenditure is still housing. Under almost any set of conditions and in almost any country, housing is likely to be the largest item of household spending. If that is true at the household level, then for the national economy, real estate and related industries cannot possibly be small. They have to remain highly important.

Our own research and what Zhu He mentioned earlier suggest that this round of housing adjustment has gone very deep—so deep, in fact, that it may have overshot to the downside. Over time, it will have to move back towards a more normal level. As long as people aspire to a better life and families continue to want better homes, the spending base will always be there. So I think the property sector will eventually be bigger than it is today, and its position as a pillar industry will not change fundamentally.

The only difference is that the old growth model, which depended on rapid property expansion and property-led investment to sustain growth and drive the economic cycle, will likely undergo a significant shift. In the future, China’s growth is likely to come from a more diversified set of sources: technology investment, the development of other service industries, and stronger consumption. It will be a more diversified model, less dependent on real estate alone. This is actually a healthier development model that we hope to see.

Host: But that needs a bit more clarification. When you say property will “return”, what exactly do you mean? Last year, for instance, property sales were a little over RMB 8 trillion, while in earlier years the market was often described as a RMB 10 trillion market.

Guo Kai: Sales value is a bit more complicated, so let me answer in terms of floor space.

We have done some estimates. Every year, many older homes in China need to be demolished and rebuilt. Many families are restructuring. Younger people marry and have children; older generations age. There is also still a large rural population that will eventually move into cities and buy homes there. Once you take all those basic needs into account, China still needs something like 1 billion square metres of new housing supply a year to meet normal demand arising from depreciation, replacement, life-cycle change, and household restructuring.

Last year, however, new-home sales were only around 700 million square metres, and the area now actually under new construction is well below even that. That clearly does not line up with a steady level consistent with the normal housing needs of 1.4 billion people. So under normal conditions, I would expect building, demolition, renewal, and sales to return to a more reasonable pace.

The service sector as the engine of future growth

Host: I will leave the property discussion there. It is not an easy subject because it touches directly on people’s personal interests, and I think Guo Kai’s candour is no small thing. I won’t summarise the specifics here; those interested can listen to this segment again. But to be clear, CF40’s argument is an academic inference based on international experience and historical data, not investment advice. If you’d like to learn more about the detailed research, you are welcome to download the report from the CF40 app.

Returning to the main point: if real estate remains a pillar sector but is no longer the overwhelming engine of growth, what then are China’s new engines of growth? Zhu He, perhaps you could start.

Zhu He: From an industrial perspective, a modern economy really has two main pillars: manufacturing and services. Agriculture now accounts for only a very small share of output in modern economies.

Last year we did two studies, one on changes in manufacturing, one on changes in services, trying to use the experience of successful developed economies to think about what China’s manufacturing and service sectors should look like in future. The conclusions, I would say, are fairly clear.

China’s manufacturing sector is now genuinely formidable—stronger than we realised. China’s manufacturing output is equal to that of the United States, Germany, and Japan combined, plus several smaller economies. But building such a large and powerful manufacturing sector has also come with some efficiency costs, that is, the service sector has not developed fully over a very long period.

So what does “full development” of services look like? We examined that too. The key question is this: as a country becomes richer, where does demand growth actually come from? Just as Professor Guo said earlier, on a personal level, when incomes rise, do people really just keep buying more phones and more computers? Those are manufactured goods. You might buy more clothes, too, but there are clear limits.

If you look around, especially at younger people, what you find is that where the bulk of spending occurs, and where people are most willing to spend money, is on services—and often on very classic, emerging forms of service. Even tourism now looks relatively traditional. People are spending on concerts, comic cons, and all sorts of newer services. That, we think, is where the future lies.

Of course, in our report, we simply framed this at a broader level and identified several unavoidable areas. First, elderly care. Quite apart from the fact that ageing is already a major reality in China, the current elderly-care industry is still far from providing adequate services. Yet this is perhaps the most standard form of service demand one can imagine.

Closely related to elderly care is healthcare, where there is still enormous room for growth in spending.

Third is real estate, which Guo Kai has just argued may actually have overshot to the downside.

Taken together, all of these belong to the broad service sector. And beyond them, there will probably be more and more new service formats emerging over time. That will create more jobs, especially for young people. These are the sectors and directions that, in our view, can provide sustainable growth momentum for China over the longer term.

Host: Guo Kai, would you add anything?

Guo Kai: I think the framework here is actually very simple. It comes down to “the people’s aspiration for a better life”.

At the earliest stage of development, that aspiration is basically about food and clothing. That corresponds to agriculture, which is why agriculture was the earliest pillar industry and engine of growth. In many developing countries, early growth was driven largely by a green revolution.

Once basic needs are met, demand shifts towards manufactured goods—cars, computers, televisions, what Chinese people once called the “three big-ticket items”. But the demand for those goods has physical limits. You can buy a car, perhaps another car, but only so many cars. You can have a computer at home, one in the office, a laptop—but there is an upper bound.

As incomes continue to rise and living standards improve, demand naturally shifts towards the broad service sector. People want better education for themselves or their children. They want better health. They want care in old age. They want fine music, art, concerts, and emotional fulfilment. All of that is service demand. Even the simple desire to live in a better home is part of the service economy.

So if one thinks in terms of the natural progression of human aspirations, the end point is always service. If services lag behind—if China remains strong only in manufacturing while failing to provide adequate services—then people’s aspiration for a better life is plainly not being fully met.

If you look at the biggest complaints people have about daily life today, they are not about there being too few manufactured products or those products being too expensive. The complaints are about education, healthcare, elderly care, and housing. Demand is already there; supply needs to move to where demand is. From that perspective, the answer can only be the service sector.

There is one more point Zhu He did not mention. There’s another area in China’s service sector with enormous potential: so-called producer services. In other countries, producer services are huge and very profitable. Think of Amazon’s cloud business or the services Google provides to support business operations. In many cases, that is where these firms make the largest share of their money.

In China, by contrast, the profit pool and growth space in this segment are still relatively limited. From a business perspective, producer services can serve both manufacturing firms and service firms, which means they themselves have tremendous growth potential. However you look at it, the new engine ultimately leads back to services.

The oil shock: could it be a blessing in disguise?

Host: Alright, you have clearly outlined the future growth trajectory. And earlier, Guo Kai also shared a deeper insight: that China is going through a slow recovery after supply-side clearing. It certainly sounds like we’re on a healthier path of endogenous growth.

But just as the domestic economy has begun to show tentative signs of improvement, the external environment has become more turbulent again. As we record this episode, the U.S.-Israel conflict with Iran has entered its third week, and international oil prices have risen from $67 a barrel before the conflict to $100. Could these external shocks derail the recovery that is just beginning to emerge?

Zhu He: I think this has to be considered from both the domestic and international sides.

On the one hand, higher oil prices will weigh on global demand because they raise costs across the board. It is a classic cost shock, and China’s external demand could therefore face some pressure.

On the other hand, China’s own energy mix matters. More than half of China’s energy still comes from coal, while crude oil accounts for only about 18% of primary energy consumption. Compared with countries where oil makes up 70% or 80% of primary energy consumption, the same oil shock has a much smaller cost impact on China. As a result, China’s relative advantage actually increases.

You could see something similar after the outbreak of the Russia-Ukraine war in 2022. China’s energy costs became highly competitive, and the sharp increase in exports was not just related to weak domestic demand, but also to China’s relative cost advantage in production.

Therefore, from this perspective, the popular argument that “higher oil prices depress global demand, which in turn hurts Chinese exports” needs to be revised. China’s export market share could actually rise.

Host: But is that relative advantage still there, no matter how high oil prices go? And what about the consumer side, because the rise in retail fuel prices is very real?

Zhu He: I am not saying there is no downside at all. At current prices, China’s domestic retail mechanism already caps refined-product price adjustments at a crude price of $130 a barrel; the floor is $40. In industry, as we said, China relies mainly on coal, with oil making up around 18% of primary energy use. Around 70% of that oil is imported. If we simplify and say crude accounts for 20% of total energy use, and 70% of that is imported, then the direct exposure is roughly 14%. That is the part affected by the first-round price shock.

But if oil prices rise substantially, substitution will also increase. In many sectors, people will switch to alternatives, especially coal. In chemicals, for example, this is why coal-chemicals producers are becoming excited. If petrochemical production becomes more expensive because oil rises, but coal-based inputs remain relatively stable, then China’s coal advantage becomes more valuable. China has no shortage of coal.

Host: And then there is also new energy.

Zhu He: Exactly. This is just our perspective from the standpoint of the energy mix; we’re talking about a dynamic process. If crude prices keep rising, substitution effects will become stronger. And once you factor in new energy, it further dilutes the 14% figure we just calculated. In the end, the actual impact may be below that.

Guo Kai: That is right. You ask whether rising oil prices are a positive or negative development for the global economy and China’s economy. The immediate instinct is to see it as a negative for both the global economy and China. But then the question becomes: how negative, really? Once you analyse it carefully, there are many factors that may greatly limit the damage. In a dynamic sense, it could even become a positive development.

As Zhu He said, among the major economies, China has the lowest reliance on oil: about 18% for oil alone, around 25% for oil and gas combined. So the energy cost shock China faces is smaller than that faced by others.

Look back at 2022. After the Russia-Ukraine war broke out, many industries in Europe became uneconomic because of soaring energy prices. Production shifted to China, and Europe ended up importing more from China. That kind of effect cannot be ignored. It may well happen again, and the longer the episode lasts, the more important those second-order effects could become relative to the direct impact of oil prices.

The second point is new energy. As Zhu He wrote in an article, China’s new-energy sector has already reached a stage where it can sustain its own expansion economically. If oil prices rise sharply and stay high, demand for new-energy products will most certainly increase around the world. That demand may not surge instantly, but over the course of five months or a year, it is bound to rise. That, too, would work in China’s favour.

So I think we need to distinguish clearly between the short-term shock and the medium- to long-term implications. In the short term, China may be among the less affected economies. Over the medium-to-long term, this may turn out to be a blessing in disguise.

Host: So would it be fair to say this: if the war ends within four to six weeks, as Trump has suggested, then the negative impact on China would be limited; but if it drags on for three to five months or longer, China could actually end up in a better relative position than other economies?

Zhu He: First of all, nothing Guo Kai has said should be interpreted crudely as “China wins again”. That is not the point. The basic reality is that it is still very hard to know when Trump wants this to end, or how exactly it will end. It’s all very difficult to predict. All we are saying is that the impact needs to be assessed and analysed within a more comprehensive analytical framework.

Suppose oil prices stay around $100 for one or two years. How should we interpret that? Returning to your most basic question—whether it could derail China’s recovery—our answer at present is fairly clear: most likely it will not. And there are certain mechanisms through which China could even benefit.

The reason is that over the past few years, China’s main economic risk has been low inflation. The economy has been trying to work its way out of that. Think about Japan in 2022 and 2023. One reason it emerged from a long deflationary environment was precisely the outbreak of the Russia-Ukraine conflict, which caused oil and food prices to surge. After the price hikes, the data clearly shows that, while not overnight, but certainly within a few months, the Japanese’s expectations of deflation had reversed. Things that had not risen in price for twenty years suddenly looked as if they might keep getting considerably more expensive.

Of course, China is not in that exact situation. But if the policy challenge is to break low-inflation expectations, then a manageable supply shock that nudges some prices higher can create an interesting dynamic.

Guo Kai: This might be a more macro-level description, and it’s especially counterintuitive. How could higher prices possibly be good? For ordinary households, holding everything else constant, higher prices are obviously not a good thing. But in a macro setting, the mechanism is different.

Suppose the economy is stuck in a low-inflation, low-wage-growth, low-consumption-growth state. It might have been a relatively stable equilibrium. Because prices are low, it does not matter so much that wages are not rising. Because wages are not rising, consumption remains weak. Because consumption remains weak, prices do not rise. It becomes a self-reinforcing cycle with real inertia behind it. That kind of cycle is not easily broken overnight. Sometimes it takes an external force to break it; policy alone may not be enough.

Now, a supply-side-driven price increase is not the most desirable kind of price increase. But it is still an increase. And once prices start to rise, inflation expectations can shift. Once expectations shift, existing interest rates look lower in real terms, the pressure to raise wages can increase, and the whole cycle may begin to break.

If, on top of that, the broader underlying trend in China’s economy is already one of recovery, then the result can be deeply counterintuitive: a shock that initially appears negative may in fact generate a positive macro effect by helping the economy exit the low-inflation loop more quickly.

How should we think about the RMB and gold?

Host: Understood. Aside from oil, there are several other interesting developments in global markets. The dollar is strengthening, yet gold has fallen. The RMB has also remained relatively resilient against other non-dollar currencies, staying below 7 to the dollar. Guo Kai, how do you interpret the logic behind these dynamics?

Guo Kai: The dollar’s behaviour is fairly classic. Historically, it has been a safe-haven asset, especially during geopolitical conflict. When war risk rises, investors tend to feel that holding some dollar-denominated assets is safer, so a stronger dollar is easy to understand.

Gold is a bit puzzling. There are probably a number of market adjustments involved. Many institutions may be rebalancing positions, either taking profits on earlier winners or cutting exposure because of risk concerns. In that process, both long and short positions may be reduced. Since gold had previously been a crowded long trade, its price would naturally come under pressure. There have also been recent rumours that some central banks, including those of Poland and Russia, have begun selling gold, which may also be affecting market moves.

The RMB, I think, is a separate story. After several years of relative weakness, it has begun to strengthen as China’s economy recovers. The currency itself is cyclical, so it has a natural tendency to firm in that environment. And whether one looks at purchasing-power parity or at the size of China’s trade surplus, the RMB appears undervalued. That creates a natural force pulling it back towards fair value, which is also helping to drive its appreciation.

Then there is the impact of the Iran-related tensions. Europe is clearly more exposed than China. Japan is more exposed. South Korea is more exposed. The United States, as a participant, is obviously exposed too. Relative to all of them, China stands out as the one least affected—a very stable choice. In that sense, the RMB has taken on some safe-haven qualities of its own. Several forces are pushing in the same direction, so renminbi appreciation, to me, is both logical and expected.

Host: You mentioned the renminbi’s “safe-haven” qualities in this round. Foreign capital is also increasing its allocation to Chinese assets, and people are talking a lot about a “re-rating” of Chinese assets. How do you see the value proposition and attractiveness of Chinese assets now?

Guo Kai: I think Chinese assets, especially when measured in U.S. dollar terms, are too cheap. The best measure of that is the RMB itself. China’s real effective exchange rate depreciated by around 15% between 2021 and last year. That reflected insufficient confidence in the Chinese economy and geopolitical factors that discouraged some capital from entering China, leaving the RMB significantly undervalued.

Our view now is that as the economic cycle turns, the assets that were dragged down to overly low valuations should begin to return to more normal levels. That process is, by definition, a re-rating. In that sense, RMB assets may still have considerable room to run. Overall, the backdrop for RMB assets remains quite favourable.

When it comes to AI, action beats anxiety

Host: We have discussed the external environment, but there is also a deeper force reshaping the global economy: AI. How do you see AI affecting the macroeconomy?

Guo Kai: To be honest, I do not know. And I suspect nobody really does.

What makes AI so interesting is that its micro-level impact is very obvious. On the one hand, a great deal of work that used to take a long time can now be done much more quickly with AI, which clearly boosts labour productivity. On the other hand, it also means that the same amount of work may no longer require as many people. If firms across the economy start hiring fewer people, that has obvious implications for employment and income.

Wherever AI is already having an effect at the micro level, the impact is striking. But at the macro level, the interesting thing is that the effects are still surprisingly hard to see. Whether for the U.S. or China, the data has yet to show a dramatic surge in productivity or large-scale unemployment.

Take software engineers in the U.S. There are many reports about coders being displaced by AI. But if you look at the employment data, software engineering employment is still rising. One reason is that many firms are also hiring engineers to install, integrate, and run AI systems.

So the micro effects are very visible; the macro effects are much less so.

How should we understand AI’s macro-level impact? People can have different views. My own view is that nobody really knows. It may be one of those historical episodes in the history of humanity with no real precedent. For now, all we can do is keep observing.

What I would say is that economies that can adjust quickly and that have decent social protection are likely to adapt better. Ultimately, this is a question of adjustment. And one thing China does quite well is adjust quickly after a shock. In that sense, China may be relatively well placed to adapt to AI disruption. On that point, I remain fairly confident.

Host: And if we bring this back to each of us as individuals, is there anything either of you would like to share?

Zhu He: Let me answer from my own work experience. Guo Kai just said that an economy needs to adapt. I would go one step further: individuals need to adapt even earlier.

My strongest feeling is that I am trying desperately to keep up with the pace of AI development, and even then, I can only just about stay close. So for listeners, if there is already some part of your work where AI can be applied—and I think that is true of the vast majority of jobs—the earlier you start trying it, the more initiative you retain, and the more quickly you will find your own way of working with AI. At the micro level, it is going to reshape most forms of work.

Guo Kai: Faced with this AI disruption, I think anyone who claims they don’t feel a sense of urgency or anxiety is just lying. I, for one, am extremely anxious.

You suddenly realise that many of the moats you thought you had can disappear overnight. Skills that took years to build—language skills, for instance—can suddenly be outperformed by AI. In other words, a large part of one’s human capital can very quickly be devalued.

So what does one do? I think the only answer is to adapt and learn. One advantage of AI is that it is incredibly easy to get the hang of, provided you are willing to try.

In the end, this wave is going to affect different people very differently. If you are adaptable, willing to learn, and open to change, your anxiety will probably ease a little, and you will still be able to find the areas where you can make a greater contribution, areas that may, in fact, create a great deal of value for you. But if you refuse to change, refuse to learn, and remain rigid, then once the tide of the times comes in, it may be very hard to avoid being swept along by it.

So I think all of us could do with a certain degree of tension, enough to motivate change, but not so much that it paralyses us.

Host: A healthy sense of urgency, but not so much that it prevents action. That is very practical advice.

Listening to both of you, one thing has struck me in particular. Faced with AI, we do have to learn how to use it, to let it help us solve problems and improve efficiency. But there is another point that matters just as much: the more powerful the tools become, the more important it is not to lose our own judgment and capacity for thinking.

Thank you, Guo Kai, and thank you, Zhu He. We have covered a great deal today. The core judgment from both of you is that China’s economy is undergoing a mild but sustainable recovery, driven not by brute-force stimulus, but by internal clearing. The process may not be rapid, but it could turn out to be healthier and more sustainable for that very reason.

Whether that judgment proves correct, and whether China can truly move beyond demand deficiency this year, remains to be seen.

Thanks again to both of you, and thanks to everyone for listening. Economics is not boring; research can be fascinating. See you next time.

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The Iran crisis loomed large in discussions when Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the crown prince of Abu ‌Dhabi, and Spanish Prime Minister Pedro Sanchez met President Xi Jinping on separate visits to Beijing last week. Both meetings focused on the need for a comprehensive and sustainable security architecture for the Middle East.

This week, on a phone call with Saudi Crown Prince Mohammed bin Salman, Xi reiterated China’s support for an immediate and comprehensive ceasefire and for any disputes to be resolved through diplomacy. China, a long-time peace advocate in global politics, has advanced a four-point proposal for maintaining peace.

The first round of high-level talks between the United States and Iran in Islamabad ended without a breakthrough. It is clear neither side can impose its preferred outcome through sheer force.

The closure of the Strait of Hormuz affects everyone, with delays in its reopening increasing the pain even for those living well outside the conflict zone. This includes China, which sources 49.4 per cent of its crude and refined oil from the Middle East.

Reopening and stabilising this corridor is therefore not only in China’s interest. It would help major Asian importers, reduce pressure on Europe’s energy markets and ease inflationary strain far beyond the region. On this point, de-escalation is not a favour to one side; it is a genuinely shared interest.

Beijing has not stayed on the sidelines during this conflict. Beyond Xi’s meetings with leaders from Spain and the United Arab Emirates, Foreign Minister Wang Yi had made 26 phone calls with counterparts from relevant countries. China’s special envoy on Middle East affairs Zhai Jun has made several stops around the Gulf and the wider region.

Pakistan – China’s “iron brother” and close partner – hosted the US-Iran talks, and on March 31, the Chinese and Pakistani foreign ministers jointly issued a five-point initiative calling for a continued ceasefire, dialogue, protection of civilians, protection of civilian and commercial maritime navigation and a greater role for the United Nations in restoring peace and stability.

Beijing is positioned to support the process not as a power seeking to dictate terms, but as a participant with working ties across several camps and a strong interest in regional stability. In addition to China hosting the China-Arab States Summit this year and its continuing multilateral engagement through the China-Arab States Cooperation Forum, China and Pakistan have an all-weather strategic cooperative partnership rooted in friendship and mutual trust. With Iran, China has a strategic partnership and deep commercial ties.

However, China’s role should not be overstated. Beijing is not in a position to guarantee a final settlement in the military sense. What it can do is help create political conditions in which a settlement becomes easier to sustain: by supporting talks, by backing a broader multilateral framework, by mobilising reconstruction and trade-based incentives, and by giving all sides confidence that diplomacy will not simply collapse the moment pressure eases. That is a different model from the Western habit of equating influence with force projection.

There is precedent for taking that possibility seriously. China was the broker of the 2023 Saudi-Iran rapprochement, and today it remains a major economic partner for both Iran and the Gulf economies.

The wider lesson is that crises of this kind are increasingly exposing the limits of unilateral diplomacy. No single actor, including the US, can simply impose lasting order on a conflict of this complexity. Stabilisation now depends on coordination among major powers, regional actors and diplomatic intermediaries. If China’s diplomacy, working in parallel with Pakistan and alongside others, helps preserve a pathway back to talks, that will be another reminder that durable order now depends less on unilateral dominance than on negotiated, plural forms of coordination.

China’s assistance with the Iran crisis could provide a template for other contemporary conflicts where a single side cannot carry the day. In Russia’s invasion of Ukraine, the problem has long ceased to be how to convert battlefield momentum into victory. It is now how to convert stalemate into negotiation.

If the Islamabad process gains traction, even slowly, it will show that diplomacy backed by leverage, guarantees and reconstruction-minded statecraft still has room to operate in a fractured world.

In Iran, the logic of further negotiation is stronger than the logic of indefinite escalation. China has more reason than most to help ensure the process does not fail. In a crisis where force has proved costly and incomplete, the more important question is not who can dominate the battlefield but who can help hold together a path to settlement.

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CCG Update - Center for China and Globalization

Zichen in Foreign Policy: China Won’t Play Security Patron for Iran

Zichen Wang, deputy secretary-general of the Center for China and Globalization (CCG), published the following analysis in Foreign Policy on Friday, March 6, 2026…

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3 months ago · 16 likes · 4 comments · CCG Update

It is, in fact, an undergraduate admissions event: prospective high school applicants and their parents are allowed onto campus so they can speak with current students and faculty. Even on this exceptionally generous occasion, however, the university’s official notice makes clear what “open” means in practice: students and parents must enter on foot by swiping their government-issued ID documents, admission is limited to a single entry, and students must also bring their student IDs—provided, of course, that they were fortunate enough to secure a reservation at one of four designated times before all the slots vanished.

In other words, the annual “Open Day” does not so much demonstrate openness as commemorate its absence. It serves as a polite yearly reminder that Peking University, like Tsinghua University, remains closed to the general Chinese public.

This is now four years after the end of the COVID-19 pandemic. Yet the country’s two most prestigious universities—both overwhelmingly funded by taxpayer money—continue to cling stubbornly to the closed-campus habits of the Covid era, as though ordinary citizens wandering through a university quad posed an intolerable institutional threat.

There was, to be fair, a burst of public criticism in 2023. Chinese media voices called on these universities to reopen their gates and stop treating the public as an intrusive force from which higher learning must be protected.

Below are two such examples, one by Hu Xijin, a Chinese opinion leader and former editor-in-chief of the Global Times, and the other an editorial from Banyuetan/China. Commentary, a magazine published by Xinhua, China’s state news agency.

The calls changed little at PKU and THU. And so the spectacle continues: universities financed by the public, celebrated as national treasures, and invoked endlessly in the language of service to society remain, in practice, walled off from the society that pays for them.

大学的校门该打开了

University Gates Should Be Opened

by Hu Xijin on December 17, 2023

I strongly agree with Peking University Associate Professor Li Zhi’s call to open Peking University’s gates. It really is time for a change. Leading elite universities such as Peking University and Tsinghua University should take the lead in ending the rules requiring outside visitors to make reservations and even insiders to use facial recognition to enter.

People say that abolishing the reservation and identity-check system for entering campuses would affect school security, disrupt teaching order, and so on. But all of these are thoughts produced by a way of thinking that has become overly accustomed to control. One very simple fact is that before 2008, Peking University was open to everyone, and many schools allowed people to come and go freely for even longer. The requirement for outsiders to make reservations to enter campus was, for the most part, only added during the pandemic period. In past years, Old Hu often went to major universities in Beijing to give lectures and attend meetings. He could simply drive in by himself, and when leaving, all he had to do was pay the parking fee. Before the pandemic, I had never had the experience of making a reservation to enter a university. Back then, nothing particularly serious happened on campuses, and teaching was not disrupted either. So why have all these worries now suddenly appeared?

There is only one reason: controls have gradually increased over the years. Originally, a given measure was introduced for a specific situation, but after that situation passed, some of the added control measures could not be removed and instead became normalized. For example, the reservation system became widespread during the COVID pandemic. Now that the pandemic is over, all the control measures from that time should have been cancelled and things restored to how they were before the pandemic, but many institutions have kept the reservation system in place. In the past, ordinary employees at many state-owned institutions did not need to report when leaving their place of residence, but that reporting requirement began during the pandemic and has continued to this day. These are clearly inertial leftovers from the mentality of heavy control during the pandemic.

There are undoubtedly more security measures in society today than there were a few years ago. Back then, the rampancy of cult activity, the surge of violent terrorist activity in Xinjiang, and the COVID pandemic can be seen as the three major reasons pushing up security measures. But today, those three reasons have basically been removed, and from the perspective of the broader cycle, our public security situation has clearly been improving. Logically speaking, even if security and various control measures do not decrease, they should at least remain broadly stable; there absolutely should not be a trend of “becoming stricter and stricter.”

The gates of universities being controlled this tightly simply makes no sense, no matter how one looks at it. An environment like this implants in students an abnormal basic understanding of what security standards should be. They come to feel that a university is supposed to look like this: gates closed, facial recognition required to enter, relatives and friends needing reservations to visit. But schools were never supposed to be like this. Not only are universities around the world almost all open, our own universities were also open not long ago. Controlling campus gates was only the result of a special period and special circumstances. Once that period passed, the situation should have returned to normal, rather than turning closed campus gates into the new normal from then on.

Last week, Beijing Foreign Studies University, my graduate alma mater, announced the cancellation of its reservation system. Anyone can now enter the campus simply by presenting an ID card. This is a step forward toward fully opening university gates. Schools such as Peking University and Tsinghua University have a demonstrative significance for the whole country. I believe they should all the more set a good example in opening up their campuses.

Our society as a whole is safe, and universities are as well. Some of the sense of insecurity and anxiety comes from the fact that, as control measures have gradually increased, we have become dependent on those measures, and we ourselves have grown more fragile. If this trend continues, we will forever feel that things are not safe enough and that even more control measures are needed. That would be a vicious cycle. We practice a socialist market economy; there must be a necessary degree of social looseness under the constitutional order led by the Party, and free entry and exit at universities should be among the most basic standards of that looseness. Once campuses are open, whatever problems arise can be dealt with as they come. We must not, out of fear of possible problems, block off campuses one after another. Seeking safety through blockage must never become our habitual logic, nor should it become an option.

Back when campuses were all open, we got through things just fine. Now, in the name of safety and teaching order, universities are closing their gates. Universities ought to ask themselves: who exactly are they trying to guard against, what exactly are they guarding against, and is it really necessary? Do not use closed university gates to tell teachers, students, and the public that Chinese society today is less safe than it was more than ten years ago, or even less safe than it was three or four years ago, and that students today are more afraid of disturbance than students used to be. That is not the case, is it?

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大学校门，该打开了

University Gates Should Be Opened

Editorial by 半月谈 Banyuetan/China Commentary, a biweekly under Xinhua News Agency

September 20, 2023

With the autumn semester now beginning, the question of whether university campuses should be fully opened has drawn widespread public attention. Some universities have already announced that they will fully open their gates, but some others are still extending campus management policies adopted during the pandemic period. Although they have gradually relaxed restrictions on the “small gates” used by faculty and students, the “main gate” to the general public remains firmly shut, which is quite regrettable.

During the COVID-19 pandemic, it was understandable that universities across the country, out of concern for the health and safety of faculty and students, adopted the expedient measure of comprehensively restricting entry to and exit from campuses. But today, all walks of life have already returned to the normal state that existed before the pandemic. Cinemas, museums, tourist attractions and the like are once again teeming with crowds. Yet universities, which have always been expected to lead social trends, are still clinging to the expedient measure of closed gates when it comes to openness. That is inevitably disappointing.

The harms caused by keeping university gates fully closed to the public are obvious. Since the end of the pandemic, some alumni (or parents) returning to their alma maters to obtain transcripts or handle administrative matters have gone through great difficulty just trying to get through the gates. The difficulty of entering university campuses also affects free and smooth exchanges among scholars. More importantly, this sweeping, one-size-fits-all practice of closing campuses off isolates universities from society. It not only weakens the basic functions of higher education institutions in serving society, transmitting culture, and leading innovation, but also runs counter to the public’s broad expectation of experiencing the humanistic environment of universities, and goes against the university’s very genetic makeup of openness and inclusiveness.

Some argue that closed management can, on the one hand, improve the efficiency of school administration and reduce the likelihood of students encountering danger; and on the other hand, strengthen campus security, prevent wrongdoers from entering campus, and avoid disruptions to normal teaching order. Such views may appear self-consistent, but in substance they are the product of a lazy-governance mindset.

Before the pandemic, universities generally practiced an open-campus policy. At that time, the public could freely enter and leave universities, and nearby residents could freely go to campuses to take walks or play ball games. People were accustomed to this, and very few took a negative view of it. To be sure, fully opening campuses would certainly make campus management more difficult. But university administrators should have a sense of responsibility: they should use their minds and find ways to solve new problems, rather than simply relying on security guards to keep the public outside the gates.

Openness and inclusiveness are an indispensable part of the spirit of the university. As a public resource, the university campus is not only an important place for social learning, exchange, and cultural transmission, but also an important foundation for cultivating high-quality talent and promoting social progress. Therefore, opening university campuses to the public is of great significance. China’s Ministry of Education once issued a document stating: “Openness is a basic educational philosophy that universities ought to have.” A glance through the mottos of many universities shows recurring key phrases such as “embracing all rivers” and “inclusiveness and broad-mindedness.” Recently, an official from the Guangdong Provincial Department of Education publicly stated: “Universities should of course be open; schools cannot rely on being closed.” This statement was widely praised by the public and reflected the mainstream voice of society.

Universities have never been isolated, closed “ivory towers”; openness is part of their inborn character. Looking back at history, university campuses across China and abroad, in both ancient and modern times, have all had a tradition of openness. Openness has not brought more risks or trouble to schools; on the contrary, it has made them a beautiful calling card for their cities. History and present reality have repeatedly shown that openness is a win-win choice and the very source of the enduring vitality and charm of universities.

To let the greatness of universities merge into the greatness of society is a blessing for society as a whole. In any city, places where universities are clustered are often places with a higher cultural quality and better social order, and it is widely recognized that universities help drive regional economic development. A city with universities is often filled with youthful vitality, while universities gain a broader arena in which to play their role because of the city. In some cities, universities have already become local architectural and cultural landmarks. People travel from far away, drawn by admiration for universities and renowned teachers, simply to catch a glimpse of them and receive a kind of cultural baptism. Historically, among Peking University’s “auditing students” emerged such distinguished cultural figures as Qu Qiubai, Shen Congwen, and Ding Ling. In recent years, there have also been occasional cases of campus security guards striving upward and gaining admission to prestigious universities. Whenever such news appears, it inspires more people to strengthen themselves and move courageously toward a better vision.

Recently, Harbin Institute of Technology announced that it has decided to fully open its campus. Visitors do not need to make reservations, there is no limit on visitor numbers, and no institution or individual will be charged any fee for visiting. This has set a good example and established a model for other universities.

A new academic year should bring a new atmosphere. One hopes that more universities will open their campuses and open their arms, reactivating the genes of openness and inclusiveness. Openness and inclusiveness should not exist only in university mottos; they should be reflected in action as well.

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There, Zhu inscribed sixteen characters for Focus Report (焦点访谈）, the prime-time program that aired nightly: “media oversight, the voice of the masses, a mirror for the government, a vanguard of reform.” (舆论监督，群众喉舌，政府镜鉴，改革尖兵)

Zhu was not a man given to calligraphy for ceremony’s sake. He made an exception because, like countless Chinese viewers at the time, he was a loyal watcher of Focus Report, a program that had earned extraordinary public acclaim through its relentless exposure of official abuses and social wrongs.

He went further still, saying: “Focus Report, through its powerful impact, has won the support of the people across the country. Media oversight points out the problems on our path forward, reflects the sufferings of the masses, gives encouragement to the broad public, and lets the people see hope. Therefore, officials at all levels and all sectors of society should support media oversight.”

A few nights ago, for one fleeting evening, Focus Report seemed somehow to remember what it once was. No one is holding their breath for the next such moment of lucidity. But on April 14, 2026, this is what it broadcast.

In Junan County, Linyi City, Shandong Province, there is a project called the “Modern Agriculture Public Training Base,” with a total investment of more than 700 million yuan. Media reports once said that the project was “expected to serve 17,000 person-times annually,” that it would “make every effort to build a training base integrating agricultural varieties, technology, and services,” and that it was a “large-scale agricultural training base” capable of “simultaneously meeting the conference, training, dining, and lodging needs of more than 1,000 people.” Yet after this key project, once entrusted with great expectations, was completed, did it in fact fulfill its intended purpose? And was the huge investment really spent where it mattered most? Our reporters conducted an on-the-ground investigation.

Junan County is an agriculture-oriented county under Linyi City, Shandong Province. In the northern part of the county seat, a striking cluster of buildings covering nearly 140 mu and with a total floor area of more than 90,000 square meters stands out conspicuously.

According to official documents, this is the “Junan County Modern Agriculture Public Training Base Construction Project,” with a total investment of more than 700 million yuan. It was meant to make every effort to build a training base integrating agricultural varieties, technology, and services. However, when reporters entered the complex, what they saw was far removed from “agricultural training.”

The Modern Agriculture Public Training Base that Junan County built at a cost of more than 700 million yuan, judging from its project name and planning, should have been a place dedicated to modern agricultural training and the cultivation of agricultural skilled personnel.

But after investigating the site for several days, reporters found an auditorium

a hotel

apartments, small gardens,

a gym,

and even leisure and entertainment facilities such as a card room.

What they could not find was a single venue or piece of equipment related to planting, breeding, or agricultural machinery training. The only thing on the site that had anything to do with agriculture was a small signboard.

On the complex’s core buildings, signs reading “Qiushi Building” (Building for Seeking Truth); “Qiuzhen Building” (Building for Seeking Authenticity); “Yingbin Building” (Guest Reception Building); and “Yanbin Building” (Banquet Building) were large and unmistakable

standing in sharp contrast to the inconspicuous little sign by the side gate.

inside Yanbin Building (Banquet Building), reporters also noticed large private dining rooms that could accommodate more than 20 people at the same time.

There were many other settings here as well, all of which appeared completely unrelated to agricultural training.

Why, then, did an agricultural training base built with an investment of more than 700 million yuan not actually end up being used for agricultural training after completion?

Reporters reviewed the project filing documents, which clearly stated that the construction content should consist of three major training bases—agricultural technology, agricultural machinery training, and planting and breeding—along with related supporting facilities. Yet at the planning stage, all of these training bases and related supporting facilities were renamed, becoming entirely different from what appeared in the filing documents.

In the feasibility study report, the project clearly specified that it would mainly build training facilities, training support facilities, and business and technical facilities, including an underground breeding base. But none of these items appeared in the final plan; instead, additional construction content such as a hotel and a conference center was added. Why was there such a major discrepancy between the construction content in the filing documents and the planning and design? The construction side said that the final plan had been determined after multiple rounds of deliberation.

It is not hard to see that such planning and design were in fact intentional on the part of the county. The project, though called an agricultural training base, was planned to have an annual training capacity of as many as 17,000 person-times. But how much actual demand for agriculture-related training has there been in Junan County over the past two years?

Wang Shouhai, member of the Party leadership group of the Agriculture and Rural Affairs Bureau of Junan County, Shandong Province: “Based on what I learned earlier, for our annual vegetable and fruit training courses, including strawberry and blueberry training courses, plus aquaculture training courses, the total is only a little over a thousand trainees a year. A classroom that can hold more than 100 people would be enough.”

On one side was the actual demand of only around a thousand trainees per year; on the other, a grand project costing more than 700 million yuan and benchmarked against training tens of thousands of people. The construction scale far exceeded the county’s real agricultural training needs. According to materials provided by the local authorities, in the nearly two years since the base was completed, its training records show only 10 agriculture-related training sessions.

This means that if the project had only been built as a genuine agricultural training base, a large amount of space would have remained idle after completion. That is why, after round after round of deliberation, county leaders ultimately planned additional construction content such as a hotel and conference center.

Even more concerning than the “distortion” of the buildings’ functions is the source of the enormous funding and the associated risks. It is understood that of the project’s total investment of more than 700 million yuan, 368 million yuan came from government special-purpose bonds. Special-purpose bonds are issued for public welfare projects with a certain level of revenue generation and are supposed to be repaid with the project’s own income. In this project, those special-purpose bonds were all meant to be used for constructing agriculture-related training bases. As early as September 2023, the Junan County Finance Bureau had commissioned a third-party company to produce a performance evaluation report specifically for this project. The report clearly recorded problems such as “the use of part of the special bond funds not conforming to the contents of the feasibility study.”

Zhao Feng, deputy director of the Finance Bureau of Junan County, Shandong Province: “We followed up on it later, but because all of the project funds had already been invested into project construction, and construction had proceeded according to the earlier planning and design, no major adjustments were made.”

Although the performance evaluation report pointed out that the three agricultural bases originally intended for construction had not been built and that the use of special bond funds did not conform to the feasibility study, the special bond funds were not effectively supervised or adjusted and were still used in this project.

Zhao Feng: “According to the normal workflow for fiscal performance evaluation, once problems are found through performance evaluation, the finance department should immediately carry out rectification and verification, and then come up with a rectification plan. But at the time, this project was considered to have undergone only minor changes, so major rectification was not deemed necessary.”

Can a transformation from an agricultural training base into a comprehensive office building, expert apartments, a conference center, and other such buildings really be considered only a minor change? And what problems would result from the failure to rectify it in time? The performance evaluation report also mentioned that projects financed by government special-purpose bonds must rely on their own revenues for repayment.

According to the project’s original plan, it had been intended to cooperate with a local agricultural school in Linyi, with annual revenue expected to exceed 80 million yuan. In reality, however, the school’s total annual student tuition income was only a little over 10 million yuan. This huge numerical gap made the project’s basis for approval appear exceptionally fragile. After the project was completed, cooperation with the Linyi agricultural school was also shelved.

Zhao Feng: “Looking at it now, the project’s revenue has indeed deviated somewhat from the original idealized projections. The design at the beginning was idealized; there was no stress-tested design, including with regard to revenue.”

Such a massive construction project deviated seriously from reality in its planning and design, the use of special-purpose bonds, and revenue projections alike. Yet over the two years from project approval and the feasibility study report through planning, construction, and acceptance, it was completed smoothly under the “supervision” of all the relevant departments.

Zhao Feng: “Later, with regard to the project managing unit and the operating unit, namely the Finance and Economics Group, we have already issued written notices concerning this project’s low utilization rate and insufficient revenue, requiring them to quickly find ways to realize project income.”

In order to avoid idleness and generate revenue, two training buildings were rented out to the county Party School, and the original three student apartment buildings were leased externally to a hotel. Apart from a handful of agriculture-related training programs, the more than 90,000 square meters of space has been split up for a variety of different uses.

Because there has been very little agriculture-related training, the two “expert apartment” buildings within the complex have also been left idle. After considerable effort, reporters obtained several lease contracts. The contracts show that some of the apartments had been rented out to the Office of the People’s Government of Junan County.

Today, many spaces in this massive complex still remain vacant. The project’s own revenue has fallen far short of expectations, yet the 368 million yuan in special bond funds still requires the payment of more than 10 million yuan in annual interest, creating a heavy financial burden.

Pei Jiansuo, deputy dean and professor at the School of Applied Economics, Renmin University of China: “Local governments must clearly recognize that debt should not be used lightly; it has a cost. If funds are allocated, say, to a training base, but in the end the actual use is not for a training base, that means a large amount of capital has been tied up there, and ultimately the rate of return is not high. Good projects are in urgent need of resources and funding, but if bad projects occupy those resources, that creates a situation in which bad money drives out good, resulting in a misallocation of resources and a loss in the efficiency of capital.”

From what was promoted as a benchmark for agricultural training to what has in reality become a vast building complex with an ambiguous positioning and difficult operations, the gap embodied by this project exposes prominent problems in some places’ major investment decisions: emphasizing project approval while neglecting actual results, inadequate scientific demonstration, and the absence of supervision throughout the entire process. People’s livelihood projects should be people-centered, and funding should seek real results. Planning divorced from reality and execution lacking oversight cause not only enormous waste of resources, but also aggravate local debt risks and overdraw the government’s credibility. Spending money where it matters most and getting things done in ways that truly reach the hearts of the people—this is the proper underlying character of any people’s livelihood project, and it is also the bottom line of duty performance that governments at all levels must uphold.

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On KMT Chair Cheng Li-wun’s recent visit to the Chinese mainland, some commentary has moved beyond interpretation into claims that the available record does not support.

Brian Hioe, a commentator, recently titled his analysis in his co-founded New Bloom on Cheng Li-wun’s visit to the Chinese mainland as Cheng Li-Wun Redefines 1992 Consensus, Calls for United Front Against Independence in Xi Meeting, where Hioe argued (all emphasis below are ours)

Before Cheng’s meeting with Xi, Cheng had already made a major policy address in Nanjing, at Sun Yat-Sen’s Mausoleum. Notably, Cheng advocated commitment to the 1992 Consensus, but this was framed as “One Country, Oppose Taiwanese independence” rather than “One China, respective interpretations.”

Cheng’s shift in her framing of the 1992 Consensus was rapidly noted by analysts in Taiwan. During the comments by Xi Jinping that did, in fact, occur in full view of the media, Xi echoed this framing.

…To this end, Cheng called for the establishment of an institutionalized mechanism for cross-strait exchanges, on the basis of the 1992 Consensus and One China Principle…

As such, it is possible that, with Xi echoing her language on the 1992 Consensus being “One China, Oppose Taiwan Independence,” Cheng has accomplished what previous KMT leaders failed to do. Namely, if such language continues to be used, Cheng may have successfully redefined the 1992 Consensus.

Hioe repeated those assertions several days later in a piece in The Diplomat

Cheng’s comments at the Sun Yat-Sen Mausoleum were also notable because of how she framed the 1992 Consensus. The 1992 Consensus has historically been referred to as the consensus that there is “One China,” with “different interpretations” of that “One China” between the ROC and PRC. In past years, the CCP has been criticized for dropping the “different interpretations” aspect of the 1992 Consensus, to only emphasize “One China.”

Cheng, however, phrased the 1992 Consensus as “One China, oppose Taiwanese independence.”…

Cheng’s meeting with Xi mostly took place behind closed doors. Media heard Xi’s opening remarks – which included framing the 1992 Consensus as “One China, oppose Taiwanese independence”

The problem is Hioe’s central factual claim about what Cheng actually said is not supported by the public record.

On Cheng’s speech at the Sun Yat-Sen Mausoleum in Nanjing, we published the full transcript based on a full videotape and the KMT’s transcript of Cheng’s speech. Not once did “One Country, Oppose Taiwanese independence,” as Hioe alleged in his co-founded New Bloom, or “One China, oppose Taiwanese independence,” as Hioe alleged in The Diplomat, come up in her speech.

In other words, Cheng did not say “One Country, Oppose Taiwanese independence” or “One China, oppose Taiwanese independence” at the Sun Yat-Sen Mausoleum in Nanjing.

On the 1992 Consensus, what she said in Beijing to Xi was, according to the KMT-provided transcript, which hasn’t been disputed:

在堅持九二共識、反對臺獨的共同政治基礎上

On the shared political foundation of adhering to the 1992 Consensus and opposing Taiwan independence

She later went on to explain the content of the 1992 Consensus in full terms:

1992年兩岸雙方授權機構達成各自以口頭聲明方式表達堅持一個中國原則的共識，同時求同存異，成為兩岸協商與聯繫機制的政治基礎。

In 1992, the authorised bodies of both sides reached a consensus that each side would respectively express verbally its adherence to the one-China principle, while seeking common ground and setting aside differences. This became the political foundation for cross-Strait consultation and communication mechanisms.

She also noted:

臺灣曾在九二共識的基礎上，以適當方式參與世界衛生大會、國際民航組織大會，但是得而復失。

On the basis of the 1992 Consensus, Taiwan once participated, in an appropriate capacity, in the World Health Assembly and the International Civil Aviation Organization Assembly, only to lose that opportunity later.

Xi Jinping also did not frame “the 1992 Consensus as ‘One China, oppose Taiwanese independence’,” as Hioe alleged. Xi said, as live video showed [2:24:44-2:24:58]

我们愿在坚守九二共识、反对台独的共同政治基础上

We are willing, on the common political foundation of upholding the 1992 Consensus and opposing Taiwan independence

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In the German Marshall Fund of the United States (GMF)’s latest Global China Podcast, Bonnie S. Glaser and Amanda Hsiao, director in Eurasia Group's China practice, had this exchange in a chapter called “Shifting Positions on the 1992 Consensus”

Bonnie S. Glaser

So I’m going to ask you about the 1992 Consensus because I think there’s an interesting, maybe, debate that’s emerging among experts in the immediate aftermath of this meeting.

So, of course, during Ma Ying-jeou’s period in power, the 1992 Consensus was often referred to as “一中各表 One China, respective interpretations”, meaning we Taiwan will call our One China the Republic of China, and the other side is going to call One China the People’s Republic of China. But we just won’t emphasize our differences. We will just say “respective interpretations.”

And Cheng Li-wun, in her definition that she gave to Xi Jinping that was quoted in the public part of the meeting, she quoted, I believe, the definition of the 1992 Consensus that was actually given in 1992, long before the phrase “1992 Consensus” existed. But the understanding that she referred to did not use the phrase “respective interpretations.” It just says “One China.”

Some people are saying that Cheng Li-wun is trying to change the 1992 Consensus to mean “One China and opposition to Taiwan independence.” So she’s not talking about “respective interpretations.” She is emphasizing “One China”, and she may be saying “One China, Opposition to Taiwan Independence,” and not really tying this to either the Republic of China or its constitution.

So do you think that she has this intention, and was this signal sent during the visit?

Amanda Hsiao

I don’t know what Cheng Li-wun’s intentions are or her definition of the 1992 Consensus and whether it deviates from that of her party’s. What I did notice was that in her press conference following the meeting, she said that she reiterated the full content of the 1992 Consensus and she explained very clearly during the talks with Xi what that content was.

Of course, the problem here is that the two sides of the Strait have never—or rather, the KMT and Beijing—have never fully agreed on the exact content of the 1992 Consensus. And so, I do think there is some risk to leaving that to ambiguity.

I don’t think it’s surprising that she didn’t say the words “一中各表” [Zichen’s note: One China, respective interpretations] in this meeting. I highly doubt that the Chinese would have accepted the meeting if she had said it. And I sense that much of the speeches and the engagements were highly coordinated. One had this sense of extreme alignment, let’s say, in messaging, right? So there was a sort of carefulness in how both sides spoke about the more sensitive issues. So I’m not surprised she didn’t say that exact phrase.

This exchange is more nuanced than Hioe’s, in our view baseless, summary. But, with all due respect to Glaser and Hsiao, it’s still highly misleading.

As I have recorded above, the KMT-provided transcript showed Cheng saying

1992年兩岸雙方授權機構達成各自以口頭聲明方式表達堅持一個中國原則的共識，同時求同存異，成為兩岸協商與聯繫機制的政治基礎。

In 1992, the authorised bodies of both sides reached a consensus that each side would respectively express verbally its adherence to the one-China principle, while seeking common ground and setting aside differences. This became the political foundation for cross-Strait consultation and communication mechanisms.

Contrary to what Glaser and Hsiao characterized, Cheng did not just say “One China.” Her 各自 respective(ly) is right there. Importantly, Cheng’s wording 求同存異 seeking common ground and setting aside differences means there are differences between the two sides’ respective adherence to the one-China principle.

Hsiao’s assertion “I highly doubt that the Chinese would have accepted the meeting if she had said it” is hence simply wrong.

Hsiao was correct in observing Cheng, in her televised press briefing after meeting Xi, “said that she reiterated the full content of the 1992 Consensus and she explained very clearly during the talks with Xi what that content was.”

A truly rigorous tea leaves reading into Cheng’s public, if not proud, announcement would require me to circle back to one correct sentence Hioe wrote

the Chinese government has increasingly dropped the “Respective Interpretations” aspect of the 1992 Consensus, to only refer to “One China”–what is also known as the “One China Principle.”

So, in fact, Cheng Li-wun not only made no concession on the 1992 Consensus; she defended the KMT’s own formulation of it directly to Xi Jinping, clearly and to his face.

That is, in no small part, why I bothered to write this piece. Instead of backing down, Cheng succeeded in fostering a friendly atmosphere and then, at the very heart of cross-Strait relations, reaffirmed the KMT’s version of the 1992 Consensus—even though the party, after a decade out of power, holds few cards.

She is a hell of a politician.

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Hioe also alleged in his co-founded New Bloom piece

Cheng denied having shifted the contents of the 1992 Consensus from “One Country, Respective Interpretations” to “One Country, Oppose Taiwanese Independence”, suggesting that “enemies of peace” were distorting her words. Cheng went on to state that “Taiwan will lose nothing” in adhering to “One China, oppose Taiwanese Independence.”

Cheng’s words were, as reflected in the KMT press release, available in English in our transcript

關鍵其實很簡單，就是「九二共識、反對台獨」；台灣不必犧牲任何事情，也不必放棄任何事情，就有機會重新開啟交流對話。

It is simply this: the 1992 Consensus and opposition to Taiwan independence. Taiwan has sacrificed nothing, Taiwan has given up nothing

So Hioe himself distorted Cheng’s words.

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Well, since I’ve already offended people tonight, I might as well add one more to the list: The Long Handshake: Xi’s Quiet Grip on Taiwan’s Soul, the latest WSJ China newsletter

The last time a leader from this camp sat across from Xi, back in 2015, the vibe was one of cautious parity—a meeting of equals held on the neutral turf of a Singapore hotel. Back then, Xi and the KMT leader, Ma Ying-jeou, even swapped their official titles for a simple, mutual “Mister” to maintain the appearance of balance.

A decade later, the power balance has changed as much as the scenery.

Cheng’s trip had every look of a pilgrimage to the imperial heart of Beijing. There were no neutral hotels or balanced protocols this time. Instead, Cheng was received beneath the high, gilded ceilings of the Great Hall, framed by the rigid hierarchy of the Chinese state.

The last time a leader from KMT meeting Xi was not in 2015. It was 2016 between then KMT chair Hung Hsiu-chu and Xi.

When Ma Ying-jeou met Xi Jinping in Singapore in 2015, then KMT leader was Eric Li-luan Chu, who never met Xi.

The meeting between Ma and Xi took place in Singapore with under the title of “Mister” was because at the time Ma’s official title was the President of the Republic of China, and Xi was the President of the People’s Republic of China. They were not there as the respective top leaders of their respective political parties.

This time, Cheng and Xi were meeting as party leaders.

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Lastly, let’s get back to the 1992 Consensus that Cheng said to Xi

1992年兩岸雙方授權機構達成各自以口頭聲明方式表達堅持一個中國原則的共識，同時求同存異

In 1992, the authorised bodies of both sides reached a consensus that each side would respectively express verbally its adherence to the one-China principle, while seeking common ground and setting aside differences.

Many people do not actually understand what “seeking common ground while setting aside differences” means in this context. It is often treated as a vague and generic slogan, as if it simply meant being flexible or agreeing to disagree. But here it has a much more concrete and substantive meaning.

The “common ground” is that both sides adhere to one China. The “differences” are over what exactly “one China” means. In other words, the phrase points to a very specific political arrangement: affirming a shared one-China position while leaving the two sides’ differing interpretations unresolved.

Zhang Ronggong, a former KMT vice chairman, offered a clear explanation after accompanying Cheng to Beijing:

It was always about seeking common ground while setting aside differences. When the 1992 Consensus was reached, it was Taiwan that proactively offered this formulation to the mainland: “Both sides of the Strait adhere to the one-China principle, but they differ in their understanding and interpretation of what ‘one China’ means.” That was our own proposal. That is precisely what it means to seek common ground while setting aside differences.

The “common ground” is the “one-China principle”; the “differences” concern the meaning of “one China.” We then set those differences aside.

If Taiwan rejects the common ground and keeps wrangling over the differences, then cross-Strait relations become a matter of political confrontation. That is exactly the situation we are in now. That is why the Kuomintang must step forward to help avert a crisis in the Taiwan Strait.

The East is Read

Full text: Cheng Li-wun's speech at the Sun Yat-sen Mausoleum in Nanjing

Cheng Li-wun, chair of Taiwan’s opposition Kuomintang (KMT), visited the Sun Yat-sen Mausoleum in Nanjing on Wednesday, retracing a stop made on Lien Chan’s landmark 2005 “Journey of Peace” and using the occasion to pledge cross-strait reconciliation and peace as part of Sun Yat-sen’s unfinished mission…

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2 months ago · 12 likes · Yuxuan JIA

The East is Read

Full Transcript of Xi Jinping and Cheng Li-wun's Remarks and Cheng's Press Conference

Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, met Kuomintang Chair Cheng Li-wun in Beijing on Friday, the first meeting in a decade between the leaders of the two parties, with both sides centring their public message on peace across the Taiwan Strait…

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2 months ago · 20 likes · 1 comment · Yuxuan JIA