The Thinker | No. 04/2026

Whatever the root causes of the controversies surrounding Lord Mandelson’s recent security vetting and diplomatic appointment, His Majesty’s (HM) Government must not miss the broader lesson: a lack of clear strategic thinking regarding the United Kingdom’s (UK) relations with the People’s Republic of China (PRC) continues to compromise national security.

It is notable that recent public scrutiny of Lord Mandelson’s vetting – and the past PRC-related client roster of Global Counsel, the advisory firm he co-founded, which has entered administration – coincided with a tribunal ruling on the case of Imagination Technologies. Ron Black, its Chief Executive Officer (CEO), blew the whistle on an operation to transfer sensitive technology to the PRC, after HM Government had allowed a Chinese venture capital company, Canyon Bridge, backed by a state-owned company, China Reform, to buy Imagination Technologies in 2017.

This is a prime example of how the Chinese Communist Party (CCP), through its companies – both state-owned and private – sets about filling important gaps in its technology inventory. The threat is not just the acquisition of dual (military) use technologies, but also forcing British, American, and European competitors from the market, thus creating long-term and dangerous dependencies.

The controversial transfer of assets belonging to Imagination Technologies, Britain’s second largest microchip design company, was carried out under the eyes of HM Government. To help navigate the UK’s regulatory and political landscape, Canyon Bridge engaged the services of Global Counsel to reassure British stakeholders and smooth the process.

Details of the Imagination Technologies case are laid out in an excellent report and follow-up article published by UK-China Transparency, an organisation that has exposed a number of instances of CCP interference in Britain. In essence, HM Government allowed Chinese investment in Imagination Technologies on the condition that Intellectual Property (IP) and accompanying know-how remained in the UK. The United States (US) Government had already specifically withheld this technology from the PRC. It had also banned Canyon Bridge from acquiring an American technology company.

Black became worried about what he perceived to be attempts to get around the conditions set for the deal, including using British engineers to train Chinese engineers in the PRC, effectively axing their own jobs, and moving the company and its technology to the PRC. When he concluded that internal argument and resistance were not succeeding, he blew the whistle, was sacked, and launched an employment tribunal case.

When seeking to build influence in British governance, state-backed entities often leverage the legitimate channels established by international businesses and lobbying firms. High-profile advisory firms can find themselves operating at the volatile intersection of corporate advisory and geopolitical risk. The UK’s historically permissive regulatory environment has allowed foreign-backed entities to engage well-connected British consultancies in order to advocate for their interests.

Before its collapse into administration in early 2026, Global Counsel’s client roster is alleged by a British public relations expert (then also advising China Reform) to have included China Reform. Other companies included Wuxi App Tech, a company the US Government claims is a national security risk. As highlighted in Martin Thorley’s All That Glistens: Chinese Party-State Influence in Britain, the methodology by which foreign state interests exploit these legitimate corporate and lobbying channels represents a systemic vulnerability. The CCP does not always need to establish covert channels; it can simply leverage the access provided by existing channels. Any government official working on the PRC who has not read Thorley’s account is remiss.

In sum, the Imagination Technologies story represents a case study in how the CCP sets out to acquire sensitive technology. HM Government should use the case as the basis for reinforcing and drawing up measures which would prevent recurrence.

Lessons and recommendations from the Imagination Technologies acquisition

HM Government should quickly ensure that a working committee – with outside advice and involvement – covers a minimum of seven areas:

1. A clearly articulated strategy for UK-PRC relations: This must set out how to balance (realistically assessed) opportunities against threats to national and economic security. The 2025 ‘China Audit’ provided no clarity within government, business, academia, Parliament, or society. David Lammy, then Foreign Secretary, insisted that the contents must remain secret. Since very few civil servants are vetted to secret level, most policymakers remain in the dark. Without overarching guidance, unity of government purpose will continue as a mirage in the Gobi Desert.

2. Establish a centre for countering disinformation and interference: This would ideally be modelled on the lines of the Australian Counter Foreign Interference Coordinator’s office. While it may carry out some activities that are withheld from the public, its default position should be openness. Currently, the Joint State Threats Assessment Team lies buried in the bowels of the Security Service. No one outside HM Government – and few inside – are aware of its existence. It should come out from the shadows.

3. List the PRC on the ‘enhanced’ tier of the Foreign Influence Registration Scheme: Under the National Security Act (NSA), this would hinder illicit CCP attempts to acquire technology and – equally important – the CCP’s aims of exporting its technologies with a view to creating monopolies and dependencies. Linked to this, there should be an obligation for CCP members in Britain to declare this as a conflict of interest when assuming a public position (e.g., at universities, when conducting sensitive scientific research, or in politics). Anyone inclined to doubt the need for this declaration should first read the oath taken by CCP members on joining the party.

4. More rigorous monitoring and implementation of existing legislation: The NSA, National Security Investment Act (NSIA), and the Procurement Act are fine laws, but only to the extent to which they are properly implemented. For example, so far, no Chinese companies have been put on the debarment list under the Procurement Act. Yet, particularly in the field of Cellular (IoT [Internet of Things]) Modules (CIMs), the dangers of allowing Chinese connectivity through CIMs have received increasing publicity. HM Government should carry out a regular, holistic review of measures designed to protect economic and national security. Its next iteration should use the Imagination Technologies acquisition – and the ease with which foreign-backed entities utilised elite British advisory networks – as a baseline for testing the system of defence.

5. Instituting more rigorous oversight of revolving doors: In October 2025, HM Government abolished the Advisory Committee on Business Appointments, a largely toothless organisation whose purpose had been to ensure that ministers and officials were not influenced in decision-making by the prospect of being hired at lucrative salaries upon retirement. Under the new system, an Independent Adviser on Ministerial Standards will rule on jobs for former ministers, while the Civil Service Commission will do so for senior civil servants. The involvement of high-profile advisory firms in transactions like the Imagination Technologies buyout underscores exactly why strict oversight of this revolving door is needed. So too does the recent scrutiny surrounding diplomatic appointments, such as the request from 10 Downing Street that Matthew Doyle be found an ambassador’s post. Whether the new system is sufficiently strong requires regular evaluation. It may also require underpinning by legislation.

6. Legislation to curb SLAPPs should be tabled urgently: ‘Strategic Lawsuits Against Public Participation’ are an iniquitous practice whereby rich companies and individuals kill knowledge, transparency, and public interest by threatening lawsuits they know they may not win, but which their targets do not have the financial means to defend against. It is increasingly being used by the CCP and its foreign representatives in ways deleterious to national security in free and open nations, especially the UK. Additionally, beyond a Chinese context, the benefits would be broad.

7. An inquiry into the PRC’s use of science and technology as a geopolitical weapon: The CCP is clear that it is in a ‘struggle’ with free and open countries and that the main battlefield is in science and technology. Using the Imagination Technologies acquisition and the corporate mechanisms that facilitated it as case studies, an inquiry should report on necessary measures for protecting Britain’s national and economic security.

Conclusion

It would be wrong to suggest that HM Government has ignored the issues raised here. Compared to the so-called ‘golden era’ of UK-PRC relations and even to more recent times, progress has been made. But too much remains to be done. Technology moves in months, governments in years. That gap must be closed. The CCP system moves in concert; more planned and more consistent. Democracies must speed up their reaction times, but also anticipate and implement prophylactic measures against hostile actors.

Charles Parton OBE is Chief Adviser to the China Observatory at the Council on Geostrategy, and Senior Research Fellow in International Security at RUSI.

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‘A war over Taiwan will drag the Philippines, kicking and screaming, into the conflict’, Ferdinand Marcos, President of the Philippines, stated last summer. His incendiary remarks resurfaced this week as Manila and Washington conduct their annual wargaming exercises in the Indo-Pacific.

The defence drills aim to prepare both militaries for two of the region’s most likely future conflict zones: the Taiwan Strait, and the South China Sea. For the Strait, the drills are taking place north of the Philippines, facing the Taiwan Strait, fewer than 120 miles from the island’s coast. In the South China Sea, they are near a province which has seen repeated escalation of conflict between Philippine and Chinese forces and fishermen in recent years.

For the first time ever, Japan has joined these drills, days after signing a US$7 billion (£5.18 billion) deal with Australia, which will see the construction of 11 warships – Japan will build three, and Australia eight. Canberra is also participating in the aforementioned military drills, as it has done previously.

Guess which country feels targeted by all this?

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This is the 11th Tangram from Observing China, where the leading China experts give a diverse range of succinct responses to key questions on the development of the People’s Republic of China (PRC).

The near-closure of the Strait of Hormuz due to the United States (US)-Israel-Iran conflict caused considerable disruption to the global economy, highlighting the fragility of international maritime trade. As one of the world’s most critical strategic choke points, there has been a severe impact on the global flow of commercial goods and oil supplies. For the People’s Republic of China (PRC) – the world’s largest importer of crude oil – the restriction of this vital artery could pose a challenge to both its national energy security and its heavily export-reliant economy. While the country has invested heavily in both strategic reserves and diversification, challenges remain.

The near-closure also forces diplomatic choices. In recent years, the PRC has increasingly sought to position itself as a responsible global actor and a stabilising diplomatic force. Indeed, at the end of March, Pakistan and the PRC released a five-point peace plan for ending the conflict in the Middle East, further underlining Beijing’s peaceful credentials in contrast to Washington. While a ceasefire was negotiated, action is still occurring, including an American blockade, and the future of the US’ presence in the region is not yet entirely clear.

Regardless of the immediate fallout, the fact remains that this crisis served as a stark stress test for the PRC’s economic resilience, as well as its broader geopolitical vision. How Beijing adapts its foreign and security policy in the wake of this vulnerability requires investigation.

This forms the basis of this month’s Tangram. In this article, five experts weigh in with their observations to answer the following question: What has Beijing learnt from the near-closure of the Strait of Hormuz?

George Magnus

Member of the Advisory Council of the China Observatory, Council on Geostrategy

Iran’s ability to exploit the Strait of Hormuz choke point may have left Beijing feeling smug about its own energy self-sufficiency policies over the medium term – including green tech and electrification – the advantages of stockpiling, and the US being drawn into a new crisis far away, but also at odds with some of its allies. Nevertheless, the PRC will need to weigh much more than this in assessing the lessons to be learned from Hormuz.

Beijing’s unwillingness, or inability, to use its own navy to secure distant waterways may not apply closer to home, but it reflects the PRC’s maritime capacity limitations. Building more solid regional relationships with countries that have vested interests in freedom of navigation would seem appropriate, although inconsistent with Chinese policy in the South China Sea.

The vulnerability of important geographic and waterway choke points to asymmetric conflict and a relatively modest cache of enforcement capabilities has been clearly demonstrated. Beijing will want to minimise the harm that others could inflict on it by blockading or restricting access through the Malacca and Taiwan Straits.

The PRC, which gets over 40% of hydrocarbon imports, or close to a quarter of consumption, from the Gulf, will have become more choke point-conscious. It might need to switch steadily to increasing its imports from Russia, Central Asia, and perhaps the Myanmar corridor if practical, while encouraging overland and choke point-bypass supplies from Gulf Cooperation Council (GCC) countries.

The economic damage done by the de facto closure of the Strait of Hormuz in terms of higher energy prices, disruption to supply chains (in this case also fertilisers and petrochemicals, for example), and the hit to global demand comprise a salutary lesson for the world’s biggest export nation and centre of global supply chain networks. The PRC’s craving for stability in the Middle East, as well as in a broader geography, is much less a yearning for peace than a strategic asset cutting to the heart of its commercial interests.

Militarily, Beijing will certainly want to digest the details of the conflict, in particular the success (broadly speaking) of the defensive hardware employed to restrict the damage and disruption intended by Iran’s arsenal of ballistic missiles and drones. As these figure prominently for the People’s Liberation Army (PLA) – the PRC’s armed forces – Beijing would undoubtedly want to assess this in its Taiwan strategies, as well as the difficulties encountered by ships in approaching – not to mention challenging – mobile and often hidden coastal defences in and around the Straits of Hormuz and the Persian Gulf would also feature in the context.

Andrew Yeh

Executive Director, China Strategic Risks Institute

The PRC’s most critical lesson from the US-Israel-Iran conflict is the inherent fragility of the global shipping ecosystem. The Hormuz crisis has demonstrated that you do not need to sink a fleet to stop trade; you only need to break one link in the chain of owners, crews, insurers, and financiers. If any of these actors thinks that the risks of damage, crew injury, detention, or confiscation are too high, the entire chain falls apart.

This has profound implications for a potential ‘quarantine’ or partial blockade of Taiwan. A targeted Chinese ‘stop and search’ operation on Liquified Natural Gas (LNG) tankers could create an increasingly difficult risk profile for commercial insurers to stomach. Even if Washington or Taipei offered naval escorts, the reluctance of shipping companies to enter actively contested zones – as seen with the lack of enthusiasm for the Trump administration’s offer in Hormuz – suggests that trade could grind to a halt long before a shot is fired. As previous analysis from the China Strategic Risks Institute (CSRI) has found, for Taiwan such a scenario could exhaust energy stockpiles in a matter of weeks, placing immense pressure on its government and economy.

Furthermore, the rapid depletion of American munitions in the Middle East – expending hundreds of Tomahawk cruise missiles and interceptors against asymmetric threats – has exposed an industrial gap that Beijing is uniquely positioned to exploit. In the first six days of the Iran conflict, the US expended over 300 Tomahawks. Last year, it manufactured a total of just 72 such missiles. The PRC will be content to watch the US exhaust its own ‘deterrence’ in a secondary theatre, while maintaining a stranglehold on the rare earth elements, such as gallium, that are essential for a range of defence technologies.

Ultimately, the inconclusive and protracted nature of the conflict reinforces the wisdom of Beijing’s current sub-threshold strategy against Taiwan. Rather than risking an existential and costly full-scale invasion – not to mention potential failure – the PRC is learning to slice away at Taiwan’s autonomy incrementally. The goal is to stay below the threshold of conflict, using maritime pressure, lawfare, and information operations to win the war without ever having to fight it. Until His Majesty’s (HM) Government becomes serious about helping Taiwan counteract all aspects of sub-threshold warfare – military, cyber, legal, and cognitive – it is failing to defend Britain’s interests in the Taiwan Strait.

Owen Au

Independent Researcher

The ongoing crisis in the Strait of Hormuz does not offer a new lesson for Beijing so much as reinforce an existing playbook: reduce external vulnerabilities and strengthen supply chain self-reliance.

In Chinese policy discussion, the Hormuz crisis is not seen as an isolated episode, but as part of a broader structural shift in global power dynamics, often described as a ‘once-in-a-century transformation’. As the external environment becomes increasingly volatile, uncertain, and even hostile, Chinese leadership has consistently drawn the same conclusion to reduce reliance on external supply and strengthen self-reliance.

This is particularly evident in the energy sector, where Xi Jinping, General Secretary of the Chinese Communist Party (CCP), has repeatedly emphasised that ‘the rice bowl of energy must be held firmly in one’s own hands’. The near-closure of the Strait of Hormuz represents one of the most significant shocks to global energy supply in decades. With over 40% of its imported oil transiting the Strait prior to the crisis, the PRC remains exposed to such choke point disruptions.

While stockpiling and import diversification (especially towards Russia since 2022) in recent years have helped to cushion the immediate impact, these are at best short- to mid-term mitigations. Over the longer term, this would only reinforce Beijing’s sense of urgency to accelerate energy transition as a more durable solution.

In the PRC’s context, energy transition goes far beyond climate and net zero goals. It serves a strategic purpose in reducing dependence on imported oil. After decades of state-led investment, the PRC now dominates key segments of the global renewable energy supply chain, from critical minerals processing to battery production.

This industrial position essentially allows Beijing to anchor its energy system more firmly in supply chains under its own control, while gaining leverage over others that depend on them. In this sense, energy transition functions as a de-risking strategy for the PRC’s energy security, while also strengthening its position within its broader self-reliance agenda and global supply chains.

The crisis in the Strait of Hormuz is therefore not an anomaly, but the latest validation of Beijing’s risk perception. It strengthens the belief that such disruptions would only recur in an increasingly volatile external environment. If there is a lesson for Beijing, it is that it must move faster to reduce external vulnerabilities while reshaping interdependence in its favour.

Grace Theodoulou

International Fellow, Council on Geostrategy

The main lesson that Beijing has learned from the near-closure of the Strait of Hormuz is something it already knew: the importance of courting key trading partners who may help you through tough times.

For many, the reduced access to oil is the principal blow that is delivered by the near-closure. While the PRC has a crude reserve of 1.7 billion barrels, enough for several months, Beijing knows that it does not have long-term immunity.

Perhaps this is why energy cooperation was high on the agenda during the recent state visit to the PRC of Sheikh Mohamed bin Zayed Al Nahyan, president of the United Arab Emirates (UAE) and ruler of Abu Dhabi. There were high-level meetings of executives in each side’s energy industry, and both parties agreed to increase trade on clean energy and petrochemicals. The UAE is a growing supplier of oil to the PRC and is a key re-export hub for the PRC; approximately 60% of Chinese exports to the UAE are re-exported onward globally.

The near-closure of the Strait has re-affirmed to Beijing that it can also wield itself as a rescuer, which is particularly useful for its geopolitical positioning among countries who have grown more hawkish on the PRC in recent years. As the Philippines declared a state of national energy emergency due to oil supply disruptions, Beijing sent 260,000 barrels of diesel, marking some of the small exemptions to its tight fuel export controls that had recently come into force. Earlier this month, Beijing also held talks with Canberra about increasing cooperation on energy security in light of the ongoing war in the Middle East. The PRC is a significant source of aviation fuel for Australia and is also a large importer of Australian LNG.

The domestic picture is also important. On 6th April, Xicalled for the acceleration in the planning and construction of a new energy system, particularly hydropower development and nuclear power. As the report confirmed, the PRC recognises its need for ‘a strong guarantee for energy security’ because, as the world’s largest beneficiary of globalisation, its long-term prospects as a manufacturing powerhouse are not so bright if the conflict in Iran continues.

William Freer

Research Fellow (National Security), Council on Geostrategy

The first military lesson Beijing will have drawn is how easy it is to unnerve international shipping to the point that shipping companies will not sail through an area they deem dangerous. The American and Israeli air campaign delivered overwhelming destruction on Iran’s naval forces, as well as much of its other capabilities that could contribute towards an interdiction effort in the Strait of Hormuz. Only a handful of ships came under attack, and most of these attacks were limited, yet transits mostly stopped, falling 91% from normal levels. Amid the background of such uncertainty, insurance reset and shipping companies held back their people and assets from risk; unlike with the Red Sea, there are no alternative routes.

This shows how easy it could be to shut shipping to Taiwan, an island deeply reliant on maritime trade for survival. Yet, it also shows the challenges in keeping shipping going to and from the PRC in the event of a Western Pacific conflict. The ‘Malacca dilemma’ – the PRC’s vulnerabilities to distant blockade of energy supplies – is well known, but this also extends to broader maritime trade, accounting for around a third of Chinese Gross Domestic Product (GDP). Shipping avoiding the PRC for any period of time would be an economic catastrophe, but, unlike for Taipei, not fatal. The PRC will have taken reassurance that its efforts towards material autarky at home and redundancy in trade routes are a prerequisite to any effort to use force against Taiwan.

The next lesson Beijing might draw is twofold. Firstly, conflicts like this, and their potential economic disruptions, are likely to proliferate. Secondly, it is challenging to project power. Although the PRC’s military capabilities have grown considerably in recent years, it would struggle – for now – to maintain a large naval force at distance to secure its interests.

This raises an interesting question: to what extent will conflicts in geopolitical crunch zones begin to distract Beijing from its main goal of unification with Taiwan? Is there a point at which, when Chinese interests are hit further afield, Beijing decides to use military force to secure said interests? It took Adm. Sergey Gorshkov, Commander of the Soviet Navy, almost 20 years from 1956 to develop the Soviet fleet to the point it could and would contest distant seas.

Although 21st century Beijing has a number of differences to Soviet Moscow, we should not act surprised if we see Chinese naval forces more regularly on deployment far from home; building on their recent circumnavigation of Australia.

If you would like to explore any of the Council on Geostrategy’s PRC-focused research papers, click here to visit the China Observatory.

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Heads of state or foreign ministers of Spain, Russia, North Korea, the United Arab Emirates (UAE), and Vietnam have all flocked to Beijing in the past week. The density of foreign dignitary visits, although notable, is not as out of the ordinary as another visit that took place in the past few days – that of Cheng Li-wun, Chairwoman of Taiwan’s opposition party the Kuomintang (KMT).

‘Opposing Taiwan independence’ can help keep war at bay, she opined after meeting with Xi Jinping, General Secretary of the Chinese Communist Party (CCP). Taiwanese security officials claim that while Cheng was in Beijing – the first such meeting between the two nations in a decade – the People’s Republic of China (PRC) nearly doubled the number of military vessels in the East and South China Seas that it usually has – a statement which Beijing denies.

The KMT have stalled the ruling Democratic People’s Party’s (DPP) efforts to increase Taiwan’s defence budget by US$40 billion (£30 billion), which would include substantial purchases of American weapons to develop its asymmetric advantage. Her trip to the PRC reportedly coincided with crucial defence budget talks in Taipei, with her absence drawing further annoyance from some of her opposition peers.

Cheng has stated that she does not believe her pursuit of ‘reconciliation’ across the Taiwan Strait should come at the expense of necessary support from Washington. In any case, Xi will be hopeful that the timing of her visit to Beijing – just one month before Donald Trump, President of the United States (US) is due to visit – will give him leverage.

The KMT in Taipei and the CCP in Beijing are mulling the implementation of a number of measures in the aftermath of the meeting, such as the establishment of a regular communication channel between the two parties, and pushing for the full resumption of flights between Taiwan and the PRC, which have been disrupted as relations deteriorated in recent years.

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The Thinker | No. 03/2026

With Washington’s decision to attack Iran, it has become easier for the People’s Republic of China (PRC) to present itself as a force for peace and stability on the world stage. Wang Yi, Minister of Foreign Affairs of the PRC, has positioned his country as an opponent of chaos and a champion of de-escalation. ‘Might’, he has said, ‘does not make right’.

Such talk is not just opportunism. Rather, these messages are part of a longstanding attempt to present the PRC as a moral actor and the architect of an alternative model to the United States (US)-led liberal international order.

Efforts to woo Europeans with promises of peace and economic stability began almost immediately after Donald Trump, President of the US, returned to the White House. Meanwhile, talk of sovereignty and multilateralism has long been used by Beijing to win over countries in Africa and Asia. Such concepts also underpin the Global Security Initiative of Xi Jinping, General Secretary of the Chinese Communist Party (CCP), while also promising an order that: ‘peacefully resolv[es] differences and disputes between countries through dialogue and consultation’.

Yet, this is just one face of Chinese foreign policy. The other is more threatening. Indeed, it has been argued that the PRC has multiple, competing personalities.

This other face includes Beijing’s support for its partners’ expansionist and destabilising activities. The fuelling of Russia’s full-scale invasion of Ukraine is well known, while the PRC’s decision to provide satellite and missile technology to the Iranian regime is beginning to receive greater attention.

At the same time, Beijing goes about coercing and harassing its neighbours, especially Japan and the Philippines, to name its nearest. Yet, as concerning as this regional bullying is, the ultimate litmus test for the PRC’s peaceful global narrative lies just across the Taiwan Strait. Far from pursuing dialogue and consultation, Beijing continues to threaten and practise for its own war of conquest against Taiwan.

If followed through, a Chinese invasion or blockade of Taiwan would have catastrophic consequences for the rest of the world. Recent events in the Strait of Hormuz have already given a foretaste of what happens when global shipping is disrupted. Imagine this on a larger scale. Bloomberg estimates that a conflict over Taiwan could cost the global economy US$10 trillion (£7.9 trillion).

Such severe worldwide consequences ought to make Beijing’s claim that Taiwan is an internal affair redundant, even if this mantra had legs to stand on (which it does not – the PRC has never ruled Taiwan, and the legal basis for its sovereignty claims are contested). However, this will not stop Beijing from arguing this point ahead of or during a crisis. Indeed, at last year’s Munich Security Conference, Wang Yi perversely stated that ‘respect for all countries’ sovereignty and territorial integrity should mean support for China’s complete reunification’.

Is it not now time that this two-facedness is challenged? Rather than simply calling out its hypocrisy, the PRC should be urged to practise what it preaches. Britain and its partners, chiefly the Group of Seven (G7) nations, should call on Beijing to promise not to use force against Taiwan.

Currently, the PRC is repeatedly able to refuse to rule out the use of force, as if this was normal or internationally acceptable behaviour (its additional line that peaceful unification remains its preferred method provides little consolation). Meanwhile, the G7 simply calls ‘for a peaceful resolution of cross-Strait issues’, without attempting to hold Beijing accountable as the primary source of military tension, nor demanding a concrete commitment to non-aggression.

Such a demand could be developed into a more serious proposal that takes into account the PRC’s red lines – that is, committing to peace on the condition that Taiwan does not declare independence (essentially the PRC’s own 2005 Anti-Secession Law, barring the deliberately vague provision that non-peaceful means could be used if the ‘possibilities for a peaceful reunification should be completely exhausted’).

Of course, it is not strictly necessary to get into these details. The expectation here would not be that Beijing would agree to such a commitment. The PRC is unlikely to move closer to renouncing what it believes to be its sovereign right. Even Jiang Zemin’s declaration in his 1995 ‘Eight Points’ that ‘Chinese should not fight Chinese’ was swiftly followed by: ‘We do not promise not to use force.’ After all, deterring Taiwan independence depends on the barrels of many guns. In fact, given trends in Taiwanese public opinion on identity and independence versus unification, Beijing cannot achieve ‘reunification’ without force or the threat of it.

This raises a separate point about the futility of sincerely seeking a peace pledge. Even if Beijing made such a promise, much like the Seventeen Point Agreement of 1951 and the Sino-British Joint Declaration of 1984, in which Tibet and Hong Kong respectively were promised autonomy, the PRC would not honour it.

The point of pushing Beijing to rule out the use of force against Taiwan is to expose the gap between its rhetoric, which presents itself as a promoter of stability, and reality; that the regime is readying itself for war. In refusing to commit to pursuing only peaceful means, Chinese leaders will make clearer to the world their willingness to tank the global economy so they can seize and occupy territory.

Greater clarity on this point will diminish Beijing’s ability to capitalise on the current crisis for free and open nations, and diminish the appeal of its alternative model for global governance. It may also encourage others in the international community, currently sanguine about Chinese intentions, to take a more active role in restraining the PRC, while at the same time pre-emptively confronting Beijing’s attempt to shift the onus for further escalation across the Strait off their own shoulders.

Gray Sergeant is Research Fellow in Indo-Pacific Geopolitics at the Council on Geostrategy.

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Following on from last week, leading officials around the world continue to beat a path to Beijing. Pedro Sanchez, Prime Minister of Spain, will visit the People’s Republic of China (PRC) from 11th-15th April for his fourth visit in as many years.

François-Philippe Champagne, Minister of Finance of Canada, concluded his visit to the PRC last week, aimed at fostering a ‘pragmatic approach’ with Canada’s second-largest trading partner after the United States (US). Champagne met with He Lifeng, Vice Premier of the PRC, where both sides agreed to increase cooperation on financial services and hold a strategic financial dialogue later this year.

Champagne’s visit follows that of Mark Carney, Prime Minister of Canada, in January, wherein a strategic partnership was signed between Ottawa and Beijing. This marks rapid progress in relations; before Carney’s visit in January, the last such Canadian visit to the PRC was in 2017. Relations deteriorated after Beijing detained two Canadian nationals in response to Ottawa’s extradition of a Chinese national to the US.

In March, a Canadian senator and Liberal Member of Parliament (MP) visited the PRC on a bridge-building mission, where, in light of improved bilateral relations, Beijing expressed its wishes that Ottawa will back its bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP); a major Free Trade Agreement (FTA) between 12 economies in the Indo-Pacific region and beyond.

Meanwhile, officials in Kabul have thanked the PRC for its mediation efforts in the conflict between Afghanistan and Pakistan. Beijing is also extending its diplomatic outreach to engage other partners in its peace efforts for Iran, as officials in Tehran assert that the PRC pushed them towards accepting the ceasefire deal agreed with the US.

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Last week, I wrote about how the Ministry of Foreign Affairs of Pakistan had engaged the British High Commissioner and the Chinese Ambassador to Islamabad to discuss the ongoing war in its neighbour Iran.

Then, it made an impression that this statement made the news. But a week later, this makes sense. Earlier this week, Ishaq Dar, Deputy Prime Minister and Foreign Minister of Pakistan, visited the People’s Republic of China (PRC) for the second time in three months.

The two sides released a joint statement outlining what has been described as a five-point peace plan for ending the conflict in the Middle East. Some analysts suggest that it was Islamabad which approached Beijing, also with the possibility of sounding out the PRC’s willingness to act as a guarantor in a peace deal. The latter would be to make the deal more palatable to Iran, which is close to the PRC. Islamabad is unlikely to have done this without some prior behind-the-scenes conversations with Beijing, Washington, and other important powers, which possibly explains the diplomatic outreach Islamabad has done recently, including with Britain.

This is a complicated situation for Beijing. On the one hand, the PRC would delight in having the opportunity to present itself as the more conciliatory and diplomatic of the two global superpowers in its great power competition with the United States (US). But precisely because of this potential advantage it would gain, Washington may be reluctant to support a significant involvement of Beijing in such a deal.

And also, Beijing’s hitherto cautious response to the conflict has not gone unnoticed, particularly in the Middle East when many of its close partners (not just Iran) have been battered by the conflict. So a prominent role in a peace deal would help the PRC save face. Especially as for years now, Beijing has promoted itself as a more reliable and peaceful partner than Washington to countries around the world.

An offshoot of Beijing’s efforts in mediation has received less media attention than the potential Iran peace deal. A senior Pakistani official announced that, during Ishaq Dar’s trip to the PRC this week, a delegation met with Afghan officials of the Taliban regime in Urumqi, the capital of the PRC’s Xinjiang province. Pakistani officials suggested that it was Beijing that requested the two sides meet. Although a mere initial meeting, the Pakistani officials hope it will set a basis for a ‘full-scale dialogue’ to end months of conflict between Kabul and Islamabad.

Beyond arms sales, the PRC does not typically offer the same level of expeditionary military security guarantees as the US. Beijing plays a different tactic. A crisis hits, and Beijing can paint itself as the sage, diplomatic counterpart to Washington.

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The China Development Forum concluded on Monday in Beijing. The annual two-day forum is when the People’s Republic of China (PRC) presents its economic priorities and investment opportunities to foreign business leaders as well as Chinese officials, economists, and academics.

During the forum, Li Qiang, Premier of the PRC, announced that Beijing intends to increase its imports of high-quality foreign goods in order to promote more balanced trade after a record trade surplus in the PRC’s favour. In January, Beijing noted the world’s largest-ever trade surplus, at an eye-watering US$1.19 trillion (£890 billion) for 2025.

The record proved that the PRC managed to divert its goods away from the United States (US), with whom it was embroiled in a trade war for most of last year. But Beijing managed to soften the blow of the trade war by diverting many of its goods to Latin America, Europe, and Africa, and now many governments in these regions are facing pressure from local manufacturers to decrease imports from the PRC in specific sectors. This spurred Li Qiang to address the trade balance at the global-facing forum in Beijing.

Other news over the past week on the PRC’s foreign policy largely feature Iran and amendments to the National Security Law (NSL) in Hong Kong, which I discuss below. However, an amendment was also made to the equivalent NSL in Macau, which local lawyers claim goes against the Sino-Portuguese Joint Declaration that saw Macau handed over to the administration of the PRC in December 1999.

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The Investigator | No. 07/2026

What the 300 pages of the reports and the 15th Five-Year Plan (FYP) emanating from meetings of the National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) do not highlight – and sometimes do not say – is often more interesting than the positive messages the meetings aim to promulgate. This piece amplifies the messages of this article, issued on the eve of the ‘Two Sessions’, and is a companion to this piece on the NPC.

The problems

Although now shorter than in the past, the ‘problem page’ of a report is often the most revealing. Xi Jinping, General Secretary of the Chinese Communist Party (CCP), has long talked about the external storms and waves that affect the People’s Republic of China (PRC) internally. Problems, as laid out in the National Development and Research Commission (NDRC) report, centre on weak investment, sluggish growth in consumption, ‘rat race competition’ between commercial enterprises, a slowdown in traditional growth drivers with emerging industries yet to replace them, weak employment and public services, environmental problems, local government debt, and a real estate market yet to pick itself up from the floor.

The ‘metadata’ of the reports not only illuminates the extent of these threats, but also raises others that are equally – or more – serious.

Threats to stability and to the CCP

The CCP’s primary aim is to stay in power: losing it would be existentially and personally dangerous. Remaining in power demands a lack of popular protest, alongside social stability and a measure of legitimacy to underpin the CCP’s monopoly on power. This notion has become commonplace, and for good reason.

Party legitimacy stems primarily from the promise of ever-growing prosperity. ‘Solidly Advancing Common Prosperity for all the People’ forms part of the title of section XII of the 15th FYP. ‘Chinese modernisation is characterised by common prosperity for all’, states the Work Report of Li Qiang, Premier of the PRC. But this is not a recent emphasis: for over a decade, Xi has made much of the concept of ‘common prosperity’. It loomed particularly large in 2021.

Furthermore, poverty and prosperity are as much relative terms as they are absolute. Inequality gaps cannot be allowed to grow too big, as Xi made clear in a speech in January 2021, in which he stated: ‘Realising common prosperity…is a major political issue that bears on our Party’s governance foundation…We cannot permit the wealth gap to become an unbridgeable gulf’.

Regional, urban-rural, and income disparities had to be resolved, as Xi said in a politburo study session in January 2021. Polarisation of the rich and poor and common prosperity were linked to maintaining social harmony and stability, as an October 2021 article in Qiushi, the CCP’s ideological magazine, stressed.

‘Common prosperity for all’ is a difficult target. In 2020, then-premier Li Keqiang revealed that 600 million people lived on less than CN¥1,000 (US$140; £110) per month, insufficient to cover rent in many cities. Since then, Covid-19, economic malaise, and rising unemployment will not have helped. Tackling unemployment is a particular concern for the CCP, given the more than 12 million graduates entering the job market each year – to say nothing of the 300 million rural migrants looking, with increasing difficulty, to earn a living.

Food, energy, and resource security also deeply concern the CCP, as the FYP and NPC reports emphasise. Beyond the immediate worries about local government debt and the real estate market are the problems of demographics, water shortages, and a mismatch of education and skill levels to meet the demands of a high-tech economy.

The reform agenda: What happened?

Dealing with these threats to stability was what lay behind the third plenum reforms of October 2013. A year earlier, Beijing announced a Gini coefficient of 0.474 (a measure of inequality, where 0.4 is considered a warning line). Xi, echoing ex-premier Wen Jiabao in 2007, declared the Chinese economic and social model to be ‘unbalanced, uncoordinated, and unsustainable’, hence the need for 380 reform measures.

Yet, almost 13 years later, progress on the backbone reforms has been glacial. Those include deepening reform of the household registration system and the provision of basic public services at the place of permanent residence (there were promises in 2021 and there are promises now in the 15th FYP); changes to the tax regime (particularly real estate tax) and personal income tax (the section on tax reform in the 15th FYP is thin); and changing the balance of local and central government shares of revenue and responsibilities (local governments receive around 50% of the former, while paying for over 80% of the latter).

‘Reform’ in the 15th FYP centres on the need to establish a unified national market, aimed at breaking down provincial and county barriers to company growth, and helping to deal with ‘involution’ or ‘rat race competition’, as the FYP puts it. Noticeably, it is the only reform objective that makes it into the ‘Overall Requirements, Main Objectives, and Policy Orientations for Economic and Social Development in 2026’. Breaking down internal market barriers has been a theme for over 40 years, indicating the difficulties of implementation and the need for a realignment of officials’ incentives.

The unacceptability of the 2013 reform programme

Although Xi was General Secretary at the time, in 2013 he had yet to consolidate his power. In essence, the 2013 reforms contradicted his vision of how to achieve his goal of the ‘great rejuvenation of the Chinese nation’.

He required the economic and political system to devote itself to the struggle with the United States (US). This meant the CCP retaining control so that resources could be devoted to maintaining and modernising industrial production, winning the science and technology struggle, and avoiding dependencies on free and open nations while creating dependencies on the PRC. These priorities are explicit in recent Five-Year Plans.

Moreover, the path to economic prosperity – rebalancing the economic model from reliance on investment and exports to consumption – would mean empowering the private sector and giving choices to the people. Not only would this be deleterious to the pursuit of the CCP’s geopolitical aims, but economic power tends also to lead to demands for political representation and power – ‘no taxation without representation’. That might become an existential threat to the CCP’s monopoly on power. Political reform cannot be on the agenda.

While the ‘Two Sessions’ talked of devoting more resources to raising consumption, by using greater welfare spending to rein in the propensity of the Chinese people to save for rainy days, the actions proposed hardly match the rhetoric. The basic pension, already very low, particularly in rural areas – around CN¥200 (US$29; £22) monthly for farmers – was increased by 2%; under half the projected Gross Domestic Product (GDP) growth. A raise of CN¥20 (c. US$3; £2) per month for minimum old-age benefits for rural and non-working urban residents will shift no dials.

According to the Ministry of Finance report, ‘Basic medical insurance subsidies for rural and non-working urban residents and basic public health service subsidies were raised to CN¥700 [US$102; £76] and CN¥99 [US$14; £11] per person per year, respectively’.

Many fewer households than in the past receive the CCP’s minimum living standard guarantee (dibao). At CN¥400 (US$58; £44) – although the sum varies by area – it is well below Li Keqiang’s CN¥1,000 poverty line. Prioritising social security expenditure would move resources away from the priority areas outlined in the FYP, which are crucial to Xi’s vision of the great rejuvenation of the Chinese nation.

Making the PRC’s rise sustainable

Xi’s answer to staying in power and to resolving the ‘unbalanced, uncoordinated, and unsustainable’ economic and social model is fourfold:

1. ‘Security is a prerequisite for development, and development provides a guarantee for security’: They are ‘two wings of one body’. Security covers 20 areas, but the main ones are political security (the CCP staying in power), food, energy, and resources. These feature heavily in the reports and the FYP. It is worth noting the renewed emphasis in the FYP on civil-military fusion; a policy aimed at the sharing of developments in both spheres.

2. Domination of the sciences and technologies, and of the industries dependent on them: This will reinforce ‘self-reliance’, not only avoiding dependencies on the US and its allies, but also creating dependencies on the PRC by others, which, as in the case of rare earths, has been shown to be an effective method for fighting back against unwelcome foreign measures. Central budget spending on science and technology is set to rise by 10%. Programmes to attract talent are an integral part of the policy.

3. Increased social controls: Building technological totalitarianism progresses. ‘Improving the social governance system’ – a euphemism for control and maintaining the CCP’s power – mandates ‘improv[ing] the grassroots governance platform based on grid management, refined services, and information technology support’; building up the CCP’s presence in ‘emerging areas’; and maintaining social safety and stability.

4. Mobilising culture and ideology in support of the CCP: For the Party, culture is first and foremost about ideology. This is evident in part X of the FYP, where the first chapter is about CCP ‘ideals and beliefs’, and where, behind all sections, the assumption is that the Party will lead. If the going gets tough, ideology and patriotism are there to help.

Conclusions

In the ‘Two Sessions’ and the FYP, Xi is promising the PRC and the world more of the same. The political, economic, and social model will not change substantially. Instead, Xi will tighten existing systems, seek more efficient implementation, and appeal to ‘Party spirit’.

Above all, his gamble is that by modernising traditional industries and dominating new technologies and industries, he can cut the Gordian Knot, which the failure to implement the reforms of the 2013 third plenum has left intact. Internally, if the gamble pays off, the troika of ‘unbalanced, uncoordinated, and unsustainable’ will lose the negative prefixes.

Externally, this industrial modernisation and mastery of science and technology will reduce dependencies on the US and its allies, while increasing theirs on the PRC. For Xi, this is a win-win.

There will be no let-up in the pressure imposed on Europe and developing countries by Chinese exports. The conflict between good relations with the PRC, particularly in trade and investment, and security will sharpen. Governments that view their countries’ growth and investment as dependent on the PRC – the United Kingdom is an egregious example – will be disappointed.

Decoupling is a CCP concept and aim – policies such as ‘Made in China 2025’, self-reliance, dual circulation, and the creation of dependencies should have made it clear that hopes of growth by alignment with Beijing will wither on the vine. Read the FYP and the ‘Two Sessions’ reports: foreign countries have been warned.

Charles Parton OBE is Chief Adviser to the China Observatory at the Council on Geostrategy.

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The Investigator | No. 06/2026

At the National People’s Congress (NPC) earlier this month, the Chinese Communist Party (CCP) set out its economic goals for 2026, and for the period of the 15th Five-Year Plan (FYP) – 2026-2030. The customary reports and speeches, presented after protracted and detailed drafting, are tightly scripted. It is not surprising therefore that barely a week after the outbreak of hostilities surrounding Iran, some of the messaging at least appears anachronistic.

There were no formal references to the aggravation of geopolitical tensions, and the challenges to the People’s Republic of China’s (PRC) interests in the Middle East. There was no mention of the important economic threats that the PRC could face in the coming year regarding energy security, the significance of exports to the rest of the world, and the impact of higher cost inflation on under-pressure consumers. No one acknowledged that the CCP’s best-laid economic plans could be blown off course by a long and costly conflict, or how important it was for Beijing to prepare for such risks. Instead, the content of the NPC and the new plan, as one would expect, had a predominantly domestic, Pollyanna-ish focus.

The reports and speeches, however, do recognise gathering, domestic problems – including overproduction and deflation; fiscal, local government, and real estate dislocations; and protectionism and the weaponisation of trade and finance. Yet, official policy prescriptions are unlikely to be effective if leaders persist in setting economic growth targets that are too high, and in not acknowledging the policy contradictions regarding the laser focus on industry and manufacturing on the one hand, and the larger 85-90% of the economy on the other.

This article examines the economic implications of the NPC and the 15th FYP, and is a companion to this piece.

Industry and manufacturing in pole position

No one was surprised that the PRC’s priorities would continue to emphasise industrial policy, advanced manufacturing, and self-reliance. ‘New productive forces’, which Xi Jinping, General Secretary of the CCP, first referred to in public in 2023, and which are straight out of the writings of Karl Marx, were formalised as the PRC’s foremost priority a few months later by Li Qiang, Premier of the PRC, at the 2024 NPC.

For Xi, whose ambition is for the PRC to dominate the so-called ‘fourth industrial revolution’, these new forces are the sectors now in the vanguard of scientific and technological development, including alternative energy, electrification, semiconductors, robotics, life sciences and biotechnology, and, above all, Artificial Intelligence (AI). These – AI especially – and other industries figure prominently in the FYP.

While the PRC has been pursuing the development of strategic emerging industries for over 15 years, this year brought a shift in focus, spurred perhaps by the authorities’ angst about ‘involution competition’ – including in Electric Vehicles (EVs) – in which aggressive competition has destructive rather than generative outcomes – for example, overproduction and the destruction of prices and profits. Since the CCP itself is also an agent in this process, it is not clear to what extent curbing involution will succeed.

Now, the PRC wants to accelerate the development of the ‘smart economy’, in which advanced technologies such as AI, sensors, robots, and the ‘Internet of Things’ (IoT) are deployed to augment and improve the digital economy of connectivity. The latter, accounting for 10.5% of Chinese Gross Domestic Product (GDP), is targeted to expand to 12.5% by 2030. Activities such as integrated circuits, aerospace, biopharmaceuticals, and the low-altitude economy have been elevated to pillar industries, and industries for the future include hydrogen and fusion energy, quantum technology, embodied AI, brain-computer interfaces, and 6G technology.

Macroeconomic shadows

Compared to the industrial agenda, the Work Report’s economic focus for 2026 looks rather tame, and in many ways vulnerable. With conflict raging in the Middle East, the surge in oil and gas prices, and the shipping traffic standstill in the Straits of Hormuz – through which the PRC gets up to half of its oil imports – the CCP’s forecasts and projections could already be out of date. The major risks relate to an adverse hit to growth, higher inflation, and weaker demand for Chinese exports as higher energy prices ‘tax’ demand in other countries. Much depends on how long current dislocations persist.

To nobody’s surprise, the main 2026 forecast for real GDP was confirmed at 4.5-5%, and other forecasts were unremarkable. Even so, setting and then meeting a target growth rate significantly higher than the PRC’s underlying economic growth (itself closer to 2-3%) is the source of many of the problems running through the arteries of the Chinese economy.

The Work Report acknowledged that the PRC was experiencing supply and demand imbalances, which are contributing to falling prices and other dislocations, more problematic employment and income growth conditions, tensions in local government fiscal accounts, and a still-adjusting real estate sector. The National Development and Reform Commission (NDRC) report, by contrast, did not mince its words, stating that:

The imbalance between strong supply and weak demand is acute; real-estate development investment continues to decline; infrastructure investment growth has turned from positive to negative; manufacturing investment growth has slowed further; overall investment faces mounting downward pressure; consumption growth lacks momentum; and the price level continues to run low.

These problems are, in many respects, the outcome of slowing economic growth and productivity, but they also derive from the CCP’s handling of the downturn in the real estate sector and, more generally, from the economic model in which Beijing prioritises the industrial and manufacturing sectors over consumption and services.

Limited policy responses

Monetary policy options are, and have been, limited for a considerable time. Lower interest rates and bank reserve requirements mean additional reductions will have limited effectiveness. The problem, instead, is a financial system that is poorly capitalised, allocates capital poorly, is not profitable, and lends mainly to local governments and state enterprises for fiscal purposes.

Fiscal policy offers more scope, but while the bias is towards ease, the CCP’s approach remains conservative. The general budget shortfall is predicted to remain at 4% of GDP, but adding in transfers from and deficits of other funds, and off-budget local government liabilities, the general governmental deficit is almost 14% of GDP.

Despite this, the CCP will issue – as it did last year – CN¥6 trillion (£65.5 billion) of special purpose bonds (for infrastructure and local governments) and ultra-long treasury bonds (including for bank recapitalisation and national projects). Additionally, there will be an assortment of other facilities to fund consumer subsidies, financing guarantees, and more consumer trade-in programmes, and new policy financial instruments to spur the flow of equity capital into the digital economy.

Social policy gets extra emphasis. This is not only because of the low employment intensity of advanced manufacturing and the otherwise weaker economy, but also anxiety about the structural consequences of automation and AI. The Work Report highlights an emphasis on vocational retraining programmes, social safety nets for gig or flexible workers, and a range of pro-family policies, including subsidies for medical care and public health, long-term care, pre-school education, childcare, and pensions. These payments will support consumption to a degree, but they fall well short of what is required to change under-consumption in the Chinese economy.

The consumption perennial

For some time now, the rhetoric on the need to raise consumption has been pronounced. There had been speculation that the new FYP might include a target to raise the consumption share of GDP – 40% for private consumption – by up to ten percentage points, but no such reference was made. The rhetoric remains, but in practice, the CCP’s initiatives have not really moved the dial, and do little to suggest the consumption share of GDP will rise a lot. Proposals include extending the consumer subsidies for the trade-in of goods, minor increases in welfare payments, and policies to boost the supply of (not the demand for) consumer services – for example in culture, tourism, sports events, and healthcare.

One of the biggest drags on consumer confidence and spending has been the continuing real estate downturn, which seems likely to linger for some time yet. Another more deeply embedded problem is the political reluctance to reverse an array of policies for fear that the benefits to households will have to entail disadvantage for firms and the state sector. These would include higher wages, interest rates, social welfare payments and the exchange rate, and private sector-friendly changes in financial policies.

Five-year guidelines and faultlines

The FYP details 109 projects, of which nearly three quarters are designed to enhance industrial capacity and strength (especially in and around the use of AI), modernise infrastructure, expand rural-urban development, and promote green and low carbon growth. There are 20 measurement indicators, most of which comprise economic development, security and resilience, urbanisation, Research and Development (R&D), emissions, and the digital economy, but seven relate to employment, incomes, education, and healthcare.

Recognising the new emphasis on people’s livelihoods, these span things such as average life expectancy, the share of nursing care beds in long-term care, the pre-school enrolment rate for under-3s, the number of practising doctors and registered nurses, average years of schooling for the labour force, coverage of unemployment and work-related injury insurance, and basic pensions.

There is no GDP target for the plan period, but there will be targets set annually. The plan’s goal is defined as doubling GDP per capita between 2020 and 2035 to about US$21,000 (£15,800), or roughly where countries such as Turkey and Romania are now. This means compound growth from 2026 of about 4.2% per year. Such growth is still high relative to the PRC’s trend growth rate, suggesting that, absent more radical change, reforms to rebalance the economy will remain elusive.

While the PRC’s technology, science, and innovation can boast startling and enduring successes, it is important to remember that modern manufacturing and technology comprise a relatively small proportion of its US$20 trillion (£15 trillion) economy. Even within the modern and dynamic sector, inefficiency, large subsidisation, and waste exist in a paradoxical parallel.

Two other major constraints are also factors. Firstly, it is highly improbable that the PRC can continue to sustain or increase its already high share of global manufacturing and generate large trade surpluses based on exports without rising levels of trade conflict, as an increasing number of nations – including those in the so-called ‘Global South’, which Beijing wants to court – fear for their own competitiveness and industrialisation programmes. Secondly, the modern sector can probably fare well, but is not going to be able to compensate nor address the big problems in the much larger remainder of the economy.

Fundamentally, the PRC is compromised by a regressive fiscal system that does not raise enough tax, soft budget constraints in local governments and firms that perpetuate inefficiency and loss-making, and a financial system that does not recognise losses adequately or allocate capital efficiently.

The International Monetary Fund (IMF), in its recently published annual report on the Chinese economy, called on the CCP to scale back distortionary industrial policy; adopt a comprehensive and more forceful policy response to boost consumption and resolve deflationary and trade pressures; and act to ensure fiscal sustainability and bolster financial sector resilience. If and how Beijing addresses these issues will tell us more about the PRC’s future prospects than simply checking industrial policy boxes in the Five-Year Plan.

George Magnus is a member of the Advisory Council of the China Observatory at the Council on Geostrategy.

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In an attempt to coax Beijing to pressure Tehran into opening the vital trade route, Washington claims that 90% of the People Republic of China’s (PRC) oil supplies pass through the Strait of Hormuz. In reality, the Strait only accounts for approximately 40% of Beijing’s oil supplies.

While Donald Trump, President of the United States (US), has been stealing the limelight over the past few weeks – most recently by requesting a delay to his state visit to Beijing over the conflict in Iran – the PRC has been doing some important foreign policy work of its own in the background.

The PRC will now provide solar energy to Cuba as the Latin American country faces total power outages, and has also offered emergency humanitarian assistance to a number of Middle Eastern countries affected by the ongoing strikes in Iran and Lebanon. Meanwhile, last week, I wrote that direct trains will resume from Beijing to Pyongyang after a six-year hiatus – this will now be matched by a direct flight between the two capitals.

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As the United States (US) and European nations send warships to the Middle East, Beijing is perched on a hill far away like a lofty older cousin looking down at the playground squabbles unfurling before it. Wang Yi, Minister of Foreign Affairs of the People’s Republic of China (PRC), called for an ‘immediate ceasefire’, stating that Beijing supports the Gulf countries in ‘taking the future of the region into their own hands’.

For the PRC, its stance on Iran fits into its discourse on Taiwan – the definitive issue in its foreign policy, and a country which the PRC considers its own. Beijing expects reciprocity on this issue when it says ‘the sovereignty, security and territorial integrity of the Gulf Arab countries should be respected’.

Interestingly, the two issues recently converged; the PRC claimed it helped to repatriate 93 Taiwanese who were stranded in Turkey, unable to catch their connecting flights to return home as conflict raged in the Middle East. But Taiwan’s Ministry of Foreign Affairs stated it was not made aware of this specific incident by any of its representative offices (de facto embassies) abroad. Is one side being entirely dishonest, or is the truth muddled somewhere in between the two?

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The Investigator | No. 05/2026

One casualty of the strikes on Iran should be the ugly acronym ‘CRINK’ to refer to the People’s Republic of China (PRC), Russia, Iran and North Korea. Although the four countries share an opposition to the United States (US) and its allies and partners, there is little that unites the PRC to the others beyond the Chinese Communist Party’s (CCP) solipsistic pursuit of its own interests.

To the extent that such descriptions matter, Beijing describes relations with Iran as at the lower level of ‘comprehensive’ rather than as an ‘all-weather’ strategic partnership. The CCP has no inclination to venture out into the current storm. Overall, the scorecard of war is always negative, but not uniformly so – there are both upsides and downsides for the PRC.

The upsides

There are upsides which are already visible, and there are potential upsides.

The former include:

1. A propaganda gift: In its efforts to gain international support in its ‘struggle’ with the US, particularly with so-called ‘Global South’ nations, the CCP presents itself as a force for peace in contrast with a disruptive America. If Venezuela was exhibit number one, Iran and the resultant wider conflict in the Middle East allows the CCP to point out the contrast even more strongly: the US’ destructiveness is not just a phenomenon confined to its own hemisphere.

2. A disruption of unity between the US and its allies: America’s allies fail to see the rationale for the strikes on Iran, and resent the lack of warning and economic fallout. The attacks made by Donald Trump, President of the US, on Sir Keir Starmer, Prime Minister of the United Kingdom (UK), are the most obvious symptom.

Potential benefits to the CCP include:

1. A possible reduction in attention towards the Indo-Pacific: As well as this, there is the possibility of reduced resources for America in the region.

2. A possible reduction in arms for Taiwan: If the US gets bogged down in the Middle East, this may reduce the availability of arms for Taiwan – as well as undermine the willingness of the American people and US Government to defend Taiwan in the event of a crisis.

3. Economic opportunities: When the conflict ends and reconstruction in Iran and the Middle East commences, Chinese companies will gain considerable business.

The downsides

1. Energy supplies and prices: The PRC imports around 13% of its oil from Iran. US sanctions have meant a cheaper price, and trade is conducted in Chinese yuan – both to the PRC’s benefit. Around 54% of the PRC’s oil and gas comes from the Middle East via the Straits of Hormuz. If Iran continues to block those shipments, Beijing will eventually face an energy crisis, even if it has been wise in building up reserves.

2. Decrease in exports: While the Iranian market for Chinese goods is not enormous, perhaps around the equivalent of US$9 billion (£6.7 billion) in 2025 (although given shipments via third countries and measures to get around American sanctions, the figure is likely to be higher than official statistics report), exports will be down in 2026.

3. Threats to investments: While Chinese investments in Iran are relatively small – between US$2-3 billion (£1.5-2.2 billion) out of a promised US$400 billion (£297.2 billion – those in Saudi Arabia and the Gulf states are not. Iran’s attacks on Gulf states threaten these investments.

4. Decline in international image: Since the commencement of strikes by the US and Israel, the PRC has been shown not to be the influential global player it likes to portray itself as.

Consequences yet to be determined

Longer-term consequences of the conflict will only emerge later. Beijing will be worried about:

1. Whether the conflict will weaken or strengthen American power in general: It must hope for the former, but cannot rule out the latter.

2. The possibility of revolution in Iran leading to the establishment of a pro-‘Western’ government: This seems unlikely, but again cannot be ruled out.

Two other effects

Two other potential long-term effects are worth noting:

1. The US-Israel-Iran conflict benefits Russia and hurts Ukraine: A rising price of oil helps the Russian economy to finance its war effort. Close though the alignment of Chinese and Russian interests are, who wins in the invasion of Ukraine is not of overwhelming importance to the CCP, although it would prefer that a Ukrainian victory does not lead to its acceptance into a more unified European Union (EU). What matters in the longer term is continued cheap energy from Russia; food, minerals and other resources from a peaceful Ukraine; and involvement in post-hostilities reconstruction on both sides.

2. Taiwan’s energy problem (it imports almost all of its oil and gas) and the effect on semiconductor and component manufacture is a potential longer-term worry: The PRC’s economy is still deeply dependent on these areas. A long blockade of the Straits of Hormuz by Iran could lead to a semiconductor crisis, affecting both the Chinese and the global economy.

Finally, it is worth stating that there is no evidence to suggest that the US began the conflict with Iran in order to hamper the PRC’s development. This may be an effect, but it was not the cause. Beijing hopes to win the long-term struggle with Washington by winning what it sees as the science and technology, economic systems, and ideology and global opinion wars. Current events in the Middle East may represent a setback in that aim, but not a big one for the CCP.

Charles Parton OBE is Chief Adviser to the China Observatory at the Council on Geostrategy.

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The People’s Republic of China (PRC) is the world’s largest oil importer, sourcing approximately half of its crude oil from the Middle East.

In a prescient move, Chinese oil refiners purchased record amounts of Iranian (and Russian) crude oil before the outbreak of conflict in the Middle East, while the Chinese Communist Party (CCP) also stockpiled significant amounts of resources. The United States (US)-Israel-Iran conflict has cut off nearly all shipping in the Strait of Hormuz, a conduit for 20% of global oil supplies.

Although the PRC has, in recent years, been the largest purchaser of Iranian crude oil, it buys even more from Saudi Arabia. Beijing’s investments in Riyadh and the United Arab Emirates (UAE) also far exceed those in Tehran.

Onto more fiscal and less fiery matters, the CCP has just set its lowest economic growth target since 1991. The target of 4.5-5% Gross Domestic Product (GDP) growth was announced at this year’s ‘Two Sessions’ series of meetings.

Every year, the National People’s Congress (NPC) – the CCP’s legislative body – and the Chinese People’s Political Consultative Conference (CPPCC) – an advisory body – hold concurrent but separate meetings to outline the key points of focus for the party over the next year, known as the ‘Two Sessions’. Legislation is typically ratified in these meetings, alongside personnel changes and setting the budget.

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The Investigator | No. 04/2026

The 15th Five-Year Plan (FYP) will be approved at the end of the National People’s Congress (NPC), which begins on 5th March. Chinese Communist Party (CCP) reports on last year’s adoption of a draft at the Fourth Central Committee plenum have set out its general measures.

It is a commonplace saying that foreign policy is domestic policy carried out abroad – but for the CCP, the inverse is true. Chinese foreign policy, whose mainspring is an abiding anti-Americanism, is steering domestic policy.

Certainly, this claim is exaggerated: it is easy to point to purely domestic concerns – such as local government debt, the real estate market, unemployment and a mismatch of skills, and a long term water shortage (most the result of an economic model described by Xi Jinping, General Secretary of the CCP, in 2013 as ‘unbalanced, uncoordinated and unsustainable’ – all adjectives which remain relevant). Nevertheless, the FYP and future domestic policies will be heavily influenced by foreign policy considerations.

The ‘struggle’ against America and the ‘West’

As the ‘Recommendations’ for formulating the 15th FYP stressed:

Unilateralism and protectionism are on the rise, and hegemonism and power politics pose greater threats. The international economic and trade order is facing grave challenges, and global economic growth lacks steam. Major-country rivalry is becoming more intricate and intense than ever.

The perception that the United States (US) is out to repress and contain the People’s Republic of China’s (PRC) rise has been a leitmotif of past decades. On coming to power, Xi wasted no time in emphasising the struggle with America and the free and open nation successors to the Western bloc. It was the backdrop to his first Politburo speech, where he set out how to avoid falling into the trap which led to the fall of the Communist Party of the Soviet Union.

Three months later, the CCP promulgated ‘Document No. 9’, an ideological screed excoriating the political, economic and social values of the free and open nations. Since then, there has been plenty of talk of an economic systems war, a governance systems war and, above all, a science and technology war.

Xi has also made clear that the battlefield for that war is the so-called ‘Global South’. It is towards those countries in particular that the CCP has constructed its foreign policy architecture of a ‘community of shared future for mankind’ supported by the four ‘Global Initiative’ pillars (Development, Security, Civilisation and Governance).

Seven areas in the 15th FYP where ‘struggle’ with the US affects policies

The political purity of the CCP

This is always top priority. Internally, its essence is strict obedience to the demands of ‘Xi Jinping Thought’. The reverse of that coin is a full rejection by CCP members of free and open nations’ ‘universal values’ in favour of 12 ‘core socialist values’, whose detailed definitions are the party’s prerogative.

‘Promoting and practicing the core socialist values’ are sufficiently important to earn their own heading in the ‘Recommendations’ for the 15th FYP. Externally, the four Global Initiatives emphasise ‘common values’ (peace, development, fairness, justice, democracy and freedom), first enunciated by Xi in his speech to the United Nations (UN) General Assembly in 2015. ‘He [Xi] has since made profound expositions on the common values of all mankind many times.’ Unsurprisingly, such expositions condemn the values behind ‘Western’ actions.

The importance of security

The concept that ‘development is the foundation of security, and security is the condition for development’ – as described in an article in the People’s Daily, the official newspaper of the CCP, and of course attributed to Xi – was born in April 2014, when he ‘creatively proposed the overall national security outlook at the first meeting of the Central National Security Commission’.

It has since climbed higher in the firmament of CCP policy: it became ‘a major principle of the party’s governance’ at the 19th Party Congress in October 2017. In October 2020, the fifth plenum included it in the guiding ideology for the 14th FYP. Two years later, the 20th Party Congress wrote it into the CCP’s constitution. It has figured in top level meetings and documents ever since.

While ‘build[ing] a solid security baseline in development’ means solving pressing economic and social threats to stability emanating from within the PRC, the 15th FYP Recommendations give very considerable emphasis to threats coming from outside the country. The order of topics in CCP documents matters, and it is important to note that the backdrop to the two priorities given pride of place is the need to avoid dependencies on the US and its allies and partners.

Modernisation and reinforcement of the industrial base

The PRC will continue to strengthen its manufacturing base by upgrading traditional industries, ‘ensur[ing] that China’s industrial chains become more self-supporting and risk-resilient’. Fostering emerging industries and industries of the future means developing ‘pillar industries’ and ‘extensively apply[ing] new technologies’.

A high-quality service sector is envisaged, while new types of infrastructure are to be integrated with modernised traditional infrastructure. The Recommendations call for enhancing ‘the diversity and resilience of international transportation routes. It is not hard to see these measures as aimed at avoiding dependencies on ‘hostile foreign forces’.

Domination of the new sciences and technologies, and emerging industries

The priority awarded second place is ‘Achieving greater self-reliance and strength in science and technology and steering the development of new quality productive forces’. This covers ‘original innovation and breakthroughs in core technologies in key fields’, with an emphasis on long-term support for ‘basic research’.

The call is for ‘strengthening self-sufficiency in scientific and technological infrastructure’, and ensuring that advances and innovations quickly enter practical application by supporting leading companies. The education system and immigration of global talent are also to underpin this aim. Data and Artificial Intelligence (AI) must be fully integrated into economic development. The CCP sees self-reliance and self-sufficiency in the technologies and industries of the future as essential for avoiding dependence on the US.

Modernising the PRC’s national security system and capacity

The national security system merits its own chapter heading in the Recommendations. The emphasis is more on the international aspects of security than CCP control of domestic threats to its continued rule. The first section talks of refining mechanisms for ensuring national security in foreign affairs and stepping up the fight against ‘foreign sanctions, interference and long-arm jurisdiction’.

When it comes to key sectors for building national security capacity, the priority areas include food; energy and resources; key industrial and supply chains and major infrastructure; strategic mineral resources; the security of strategic corridors; and developing a strategic hinterland and ensuring backup plans for key industries. Emerging domains include cyberspace, data, AI, biology, ecology, nuclear energy, outer space, deep sea, the polar regions and low-altitude airspace.

Most of these areas are foreign-facing. For example, food security and avoiding reliance on foreign supplies of seed has long been a top priority for the CCP. Grain can be bought on the international market at prices lower than in the PRC, but doing so would mean a greater reliance on free and open nations – something to be minimised, even if it cannot be entirely avoided.

The contrast with the ‘Proposal’ for the FYP from the 2020 plenum is stark. There, international concerns hardly figured, with the focus being on domestic challenges to security. Five years later, the CCP is clear that major challenges are exogenous, and that domestic policies must be aligned with that reality.

A more open call for military-civilian fusion

A striking feature of the 2025 Recommendations is the emphasis on military-civilian fusion, something which, in recent years, the CCP had gone quiet after it aroused ‘Western’ disquiet. No longer, it would seem. The CCP is increasingly conscious of, and confident in, its ‘struggle’ with other powers:

We should deepen military-civilian reforms and establish a well-regulated, orderly framework where both sides fulfil their respective functions and work in close concert with each other. We should move faster to develop strategic capabilities in emerging fields and work toward effective integration between new quality productive forces and new combat capabilities so that the development of one helps drive that of the other.

This section also talks of promoting interoperability between military and civilian standards, enhancing military-civilian alignment and ensuring that all major infrastructure facilities meet national defence requirements so strategic needs are better fulfilled in advance.

Internationalisation of the renminbi

Internationalisation of the renminbi (RMB) has been talked of for many years. In a speech to high-level officials in January 2024, Xi said that for the PRC to realise the ambition of becoming a financial powerhouse, it must ‘have a strong currency, widely used in international trade, investment, and foreign exchange markets, and holding the status of a global reserve currency’. The Recommendations call is more modest:

…advance the internationalisation of the RMB, pursue greater openness of RMB capital accounts, and build a homegrown, risk-controllable cross-border RMB payment system. We should promote reform in global economic and financial governance…

The CCP has seen the damage which the US can inflict through ‘foreign sanctions, interference and long-arm jurisdiction’, hence its desire to move away from a US dollar-dominated international financial system. However, progress is likely to remain limited. Fully opening the capital account and other measures run contrary to the party’s devotion to control.

The other side of the coin: Creating dependencies

Most of the measures discussed above are motivated by a desire to avoid dependencies on ‘hostile foreign forces’. However, they also make foreign countries dependent upon the PRC. The processing of rare earths is the most egregious example, but increasingly areas such as solar and wind energy, electric vehicles and batteries, and telecommunications equipment and cellular modules are dominated by Chinese companies.

This gives the CCP considerable geopolitical leverage. In many cases, it would bestow the ability to disrupt or destroy critical national infrastructure in the event of hostilities, as well as allow the harvesting of vast amounts of data.

Conclusion

The reports to the National People’s Congress in March and the new FYP will cover all aspects of governing the PRC. Even if the space devoted to foreign affairs is usually short, behind the emphasis on self-reliance and ‘development and security’ lies an eye fixed firmly on an unstable external environment and the blurring of internal and external security.

The CCP sees the global future as one of ‘struggle’; of self-reliance and decoupling; of a fading distinction between military and civilian technologies and industries; of creating dependencies; of an identity between national and economic security. Free and open countries need to see this clearly and react accordingly.

That does not mean ceasing to pursue trade and investment, no longer working with the PRC on climate change and other global problems, or discouraging academic and cultural exchanges. It means engagement with eyes wide open.

In the cases of the United Kingdom (UK) and some European countries, it means considering whether it is wise to allow Chinese companies to be involved in critical national infrastructure, such as wind energy and power grids – particularly when, in Britain’s case, security concerns ruled out Chinese participation in the nuclear industry – or whether it is wise to welcome Chinese investment in the vehicle sector, if the connectivity involved in modern cars and trucks would render a country’s logistics system dependent upon the CCP’s goodwill and even make it inoperable during a time of hostilities.

The 15th FYP is a massively important document. It requires study by foreigners. Behind its many targets and aspirations lies great geopolitical significance. Xi has been clear since he came to power that there is a clash of systems and values, and that the PRC must attain the ‘dominant position’.

The FYP gives pointers as to how that is to be achieved. Ignore them, and free and open countries may find that, under CCP suzerainty, they become less free and less open.

Charles Parton OBE is Chief Adviser to the China Observatory at the Council on Geostrategy.

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During the past week, the United Nations (UN) has been a prominent forum for Beijing’s foreign policy, from nuclear arms control talks with Washington and Moscow, to its denial of any involvement in Russia’s full-scale invasion of Ukraine, on the four-year anniversary of the invasion.

But perhaps the most colourful comments of them all were made at the UN Human Rights Council by Wang Yi, Foreign Minister of the People’s Republic of China (PRC). In a thinly veiled attack at the United States (US), he warned against any single country assuming the role of a ‘human rights teacher’, further elaborating that these rights should not be used to ‘whitewash hegemony’ or be ‘exploited to adorn democracy’.

Tensions between the PRC and the US are now taking on additional dimensions. Human rights and tariffs have long been bones of contention, but Beijing’s nuclear arsenal is increasingly in the spotlight – as is its logistical support for other authoritarian regimes around the world.

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The Investigator | No. 03/2026

In Tokyo, Sanae Takaichi, Prime Minister of Japan, has begun her term by explicitly casting the People’s Republic of China’s (PRC) behaviour as a campaign of ‘coercion’, using her first post‑election policy speech to warn that Japan faces its ‘most severe and complex security environment since World War Two’, as well as promising a sweeping overhaul of defence and economic security policy. Her ruling coalition’s landslide victory, securing well over two thirds of the Lower House, gives her unusual latitude to accelerate defence spending, relax export controls on military equipment and harden critical supply chains against external economic pressure.

Beijing has responded in kind at the rhetorical level. At the Munich Security Conference, Wang Yi, Minister of Foreign Affairs of the PRC, portrayed Japan’s Taiwan policy as a dangerous departure from past commitments, castigating Takaichi’s framing of a Taiwan contingency as a ‘survival-threatening situation’ and accusing Tokyo of challenging the PRC’s sovereignty and the post‑war settlement. He further suggested that efforts to ‘turn back the clock of history’ would lead Japan down a path of self‑destruction, underscoring how tightly Beijing now links Tokyo’s stance on Taiwan to its own narrative of national rejuvenation.

Against this backdrop, the big picture of Japanese-Chinese relations looks set to remain frosty at best. Takaichi’s agenda to revise Japan’s core security documents, double defence spending and entrench closer alignment with like‑minded partners, combined with Beijing’s sharper warnings over Taiwan and its revived toolkit of economic coercion, point towards a prolonged period of strategic distrust, in which both sides treat economic ties less as a stabilising ballast and more as instruments of leverage.

Sectors under pressure

The current coercive campaign concentrates on three clusters of sectors.

First, marine and aquatic products have again become a primary target. The PRC imposed a blanket ban on imports of Japanese fishery products in 2023 following the release of treated water from the Fukushima Daiichi nuclear plant – a measure later echoed by Hong Kong and Macau. Although partial relaxation followed, Beijing reimposed a suspension of Japanese seafood imports in November 2025 amid diplomatic tensions sparked when Sanae Takaichi, Prime Minister of Japan, remarked that a Taiwan contingency could trigger Japan’s right of collective self-defence.

Second, Beijing has tightened controls on dual-use exports and critical minerals, especially rare earth elements. On 6th January 2026, the PRC’s Ministry of Commerce announced a ban on exports to Japan of all dual-use items for military end-users or end-uses that could enhance Japan’s military capabilities, explicitly justified in terms of national security and non-proliferation. State-affiliated outlets simultaneously indicated that Beijing was considering stricter licensing for certain medium and heavy rare earths already under control since April 2025, with delays and de facto curbs affecting rare earths, magnets and other critical inputs.

Third, the PRC has deployed pressure in tourism, education and cultural industries. Since Takaichi’s speech in November, Chinese authorities have advised citizens to reconsider travel and study in Japan, reduced flights and quietly constrained Japanese cultural and media products in the Chinese market. These measures fall short of formal sanctions, but nonetheless target Japan’s services sector and people-to-people ties.

Motives and sector choice

Beijing has formally justified these measures with reference to Fukushima-related food safety and national security export-control obligations. In reality, the timing, scope and signalling make it clear that the proximate trigger has been Japan’s perceived ‘interference’ in the ‘Taiwan question’ and its broader security realignment.

The seafood bans are framed domestically as necessary to protect Chinese consumers from ‘nuclear-contaminated’ products, despite the International Atomic Energy Agency’s (IAEA) assessment that Japan’s discharge plan complies with international safety standards. Chinese state and social media have continued to amplify alarmist narratives about Fukushima water, often repeating or adapting disinformation that has already been debunked.

The choice of fisheries, rare earths and tourism reflects a logic of targeted salience and reversible pressure. Beijing can utilise these disruptions to achieve high impact to signal displeasure, but can stop the economic pain easily should its demands be met.

Continuity and change in Chinese coercion

There is clear continuity in the use of informal or semi-formal trade tools by the PRC – including blanket import bans, opaque customs procedures, unofficial travel advisories and ‘safety’-based regulatory measures – to punish political decisions in other states. This pattern has also characterised Beijing’s coercive campaigns against South Korea over its Terminal High Altitude Area Defence (THAAD) capabilities, Australia over foreign policy disputes and Lithuania over Taiwan representation, confirming that economic statecraft has become a normalised instrument of Chinese foreign policy.

What is new is the explicit linkage to Taiwan and to Japan’s evolving defence posture. Chinese official statements and state-linked media have directly cited Takaichi’s comments about a potential military response in a Taiwan contingency as the trigger for dual-use and rare earth measures, arguing that Japan has violated the PRC’s core security interests. Rare earth controls in particular are now framed as part of a broader dual-use export control regime rather than a one-off leverage play.

This ‘second generation’ of coercion is also operating in a context in which Japan is no longer the heavily exposed actor it was in 2010. Japan’s reliance on Chinese rare earth imports has fallen from around 90% in 2010 to roughly 65% by the mid-2020s, as Tokyo has diversified suppliers, invested in recycling, and supported domestic and third-country production.

Japan’s response

Japan’s response to the latest measures builds directly on the institutional architecture described in its Economic Security Promotion Act and related strategies.

Politically and diplomatically, Tokyo has characterised the seafood bans and dual-use controls as forms of economic coercion, raising them at the Group of Seven (G7) and other fora, and signalling readiness to challenge at the World Trade Organisation (WTO). The 2025 Diplomatic Bluebook devotes significant space to economic security, and explicitly links coercive practices to the need for international coordination and resilience.

On the economic security front, Japan’s Ministry of Economy, Trade and Industry (METI) and Cabinet Office have accelerated efforts to incorporate undersea cables, satellites and other critical infrastructure into the economic security framework, while tightening monitoring of rare earths, magnesium and other vulnerable inputs. Tokyo has expanded strategic stockpiles, supported alternative supply projects with partners such as Australia, and backed Research and Development (R&D) into substitution and recycling to reduce exposure to new Chinese controls.

Domestically, the Government of Japan has provided financial support and market diversification assistance to fisheries and coastal communities hit by the seafood bans, seeking to ease distributional impacts and blunt Beijing’s ability to generate political backlash in affected constituencies. At the same time, the unfolding crisis has reinforced calls in semi‑official Japan-Taiwan economic security dialogues for closer collaboration, including joint research on the risks of Chinese economic coercion and supply‑chain disruption, and has strengthened arguments for embedding economic security more firmly in broader alliance planning with the United States (US) and free and open European nations.

Lessons for other countries

Several lessons from this episode are directly relevant to the United Kingdom (UK) and other free and open allies and partners of Japan.

First, the PRC’s coercion is increasingly multi-dimensional and explicitly tied to Taiwan-related and security issues. Governments should expect measures to be justified in legal or technical terms, while in practice responding to political triggers. Preparing for coercion therefore requires not only trade law expertise, but also careful mapping of political red lines and likely pressure points.

Second, resilience must be built in peacetime. Japan’s experience shows that diversification of critical inputs, investment in domestic capacity and stockpiling can significantly reduce the shock value of coercive measures, even if they do not eliminate vulnerability. For Britain, this underscores the importance of early action on critical minerals and strategic infrastructure, including telecommunications and undersea cables, rather than waiting for a crisis.

Third, institutionalised economic security pays dividends. Dedicated economic security units, clear legal mandates and established channels for engagement with the private sector have allowed Tokyo to respond in a more coordinated and strategic manner than in 2010. The UK would benefit from similarly integrated structures that connect trade, security, industrial strategy and intelligence in a single economic security framework.

Finally, Japan’s case highlights the value and limits of multilateralism. Efforts to frame Chinese actions as economic coercion in G7 communiqués and economic security statements have helped to socialise the concept, raise reputational costs for Beijing and embed ‘de-risking and diversifying’ as shared goals. However, concrete solidarity in moments of acute pressure has often lagged behind the rhetoric: coordination has focused on generic commitments to resilience and critical minerals cooperation rather than visible, Japan-specific countermeasures.

As well as this, bilateral bargains with Beijing, including recent US-PRC understandings on rare earths, risk diluting the deterrent value of a collective line. Until systemic diversification reduces the PRC’s market power meaningfully, and G7 members are prepared to absorb short‑term economic costs on each other’s behalf, economic coercion will remain an attractive tool for Beijing.

Athena Tong is a Visiting Researcher in the Economic Security Intelligence Lab (ESIL) at the Research Centre for Advanced Science and Technology (RCAST) at the University of Tokyo. She is also a Research Associate and Programme Lead at the China Strategic Risks Institute (CSRI) and a Non-Resident Vasey Fellow at the Pacific Forum.

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This is the tenth Tangram from Observing China, where the leading China experts give a diverse range of succinct responses to key questions on the development of the People’s Republic of China (PRC).

At the end of January, two generals of the People’s Liberation Army (PLA) – the armed forces of the People’s Republic of China (PRC) – were purged. Gen. Zhang Youxia was the PRC’s top general and vice-chairman of the Central Military Committee (CMC); the group responsible for controlling the PLA and headed by Xi Jinping, General Secretary of the Chinese Communist Party (CCP). Gen. Liu Zhenli was head of the CMC’s Joint Staff Department. Their dismissal – on grounds of ‘serious violations of discipline and law’ – has left the CMC reduced to two members from seven; now consisting solely of Xi and Gen. Zhang Shengmin.

The opacity of the inner workings of the PRC has led to inevitable speculation about Xi’s leadership. There have been suggestions that January’s purges resulted from power struggles, but also that they neither strengthen nor weaken his position.

Regardless of the theories as to why the purges occurred, the fact remains that they are a demonstration of Xi exercising his power; a move to exert further control over the PLA. This forms the basis of the first Tangram of 2026, in which four experts weigh in with their observations on the removal of the two generals to answer the following question: What do the recent military purges say about Xi Jinping’s leadership?

Charles Parton OBE

Chief Adviser, China Observatory, Council on Geostrategy

The first thing the purges say is that Xi is very much in charge. Of PLA Central Committee members, over three quarters of the 44 officers have been removed or are missing from meetings. Early in his tenure, Xi cut the CMC from 11 to seven; of those, five are no longer in post. The PLA is the guarantor of power – it has the guns – so Xi has left it to last, after dealing with civilian opposition figures and the security services.

Second, the purges underline his determination to dig out corruption. Xi has continually emphasised that leaders must set an example and be held to account, but he must have known that all current officers above the rank of colonel rose when promotion through payment was the norm, and that other forms of corruption will have affected all senior officers. Purging corruption is only part of the story.

Third, corruption weakens sinews, the ultimate props for power. Xi has said that one reason for the fall of the Communist Party of the Soviet Union was not exercising proper control over the Red Army. His, and the CCP’s, survival depends on not making the same mistake.

Fourth, and linked to the above, corruption leads to political and ideological deviation. Money sets up unseen links between officers, promoting loyalty to others rather than the CCP and CMC chairman. Hence, an editorial in the PLA Daily, the official newspaper of the Chinese military, fulminates that those purged had:

…seriously trampled upon and undermined the CMC Chairman Responsibility System, fuelled political and corruption issues that affect the Party’s absolute leadership over the military and endangered the Party’s ruling foundation…seriously impacted the political and ideological foundation of the unity and forge-ahead spirit of all officers and soldiers.’

This smacks of factionalism, and must be ruthlessly crushed.

Fifth, corrupt leadership detracts from Xi’s demands for greater professionalism. If the PLA is to fulfil its appointed tasks, it must be ruthlessly efficient and not distracted. In the words of the PLA Daily, the generals’ actions had ‘caused immense damage to the military’s political construction, political ecology and combat capability construction…’ Xi does not appreciate subordinates who fall short in their mission.

Finally, the rectification and corruption battle is not over yet. It will be interesting to see whether the purges are a prelude to a big change of having no PLA representation in the Politburo. A PLA which is more thoroughly under Xi’s control, and less politically powerful, may be something Xi sees as important for the next five years as he prepares to hand over power. The last thing he needs is an alternative focus of influence.

In sum, the party must command the gun…well, not exactly. The PLA must ‘resolutely obey Chairman Xi’s command, be responsible to Chairman Xi, and set Chairman Xi’s mind at ease’. Amen.

Willy Lam

Senior Fellow, Jamestown Foundation

The announcement of investigations into the alleged ‘serious violations of discipline’ on the parts of Gen. Zhang and Gen. Liu was made by the PRC’s Ministry of National Defence on 24th January. However, up to now, no officer from any PLA division has stood up to second the decision by Xi to sack the two generals.

A meeting of the Standing Committee of the National People’s Congress (NPC) – the PRC’s parliament – held on 4th February to examine the credentials of NPC delegates revoked the membership of three senior members of the defence and nuclear research establishment. However, Zhao Leji, NPC Chairman and a member of the CCP Politburo Standing Committee, did nothing to Zhang and Liu. Zhang, a longstanding foe of Xi’s, has remained on the CCP Politburo. This event revealed hitherto undisclosed ‘disagreements’ between Xi and NPC Chairman Zhao.

In late January and early February, the PLA Daily made reference in various commentaries to the sacking of the generals as evidence of the CCP’s commitment to rooting out corruption. However, it also admitted that the party was facing challenges coming from ‘complex and deep-rooted changes on the international and national fronts as well as the fronts of party and military [affairs].’ ‘The military faces interlaced and complex tests on the political front,’ said one commentary on 9th February.

While their fathers were close comrade-in-arms in the 1940s and 1950s, Xi and Zhang have been foes particularly since 2022. In October 2025, Zhang is believed to have engineered the fall of three formerly Fujian-based PLA generals: CMC Vice-Chairman He Weidong, CMC member Adm. Miao Hua and Commander of the Eastern Theatre Command Gen. Lin Xiangyang – all of whom were close friends of Xi when the latter was rising up the hierarchy in the same province.

Even though on the diplomatic front, Xi is basking in the limelight during well-publicised meetings with several European leaders, the failure of the 72-year-old ‘princeling’ to orchestrate broad support for the removal of Zhang and Liu points to his lack of thorough control of the military.

Despite Chairman Mao’s famous dictum that ‘power grows out of the barrel of a gun’, the PLA lacks the means and resources to run the country in a way that military juntas are ruling in Myanmar or Thailand, for example. However, as the PRC’s top leader, failure to exercise full control over the PLA shows fundamental flaws in Xi’s leadership. This could also affect the legitimacy and quality of the Chinese administration through to 2032, when Xi is expected to step down after 20 years at the helm.

Helena Legarda

Head of Programme, Foreign Relations, Mercator Institute for China Studies (MERICS)

Xi’s purges of Gen. Zhang and Gen. Liu were surprising to many observers. Beyond who was taken down, the most unusual aspect of these purges was the speed and the timing. Xi chose to move against the generals just a few weeks after the sweeping PLA purges in October 2025, and without waiting until a more politically opportune moment, such as an upcoming plenum of the CCP Central Committee or next year’s Party Congress, to let them exit quietly.

China watchers do not know the precise reason why Xi might have felt the urgency to act now. Theories abound, ranging from Xi’s dissatisfaction with their failure to deliver results on the 2027 and 2035 modernisation goals to Zhang’s opposition to Xi – and especially his approach to Taiwan.

What is clear, however, is that these purges were largely political in nature. Official Chinese state media outlets have published several commentaries since the investigations were announced, calling for the military to be put under the ‘absolute leadership of the party’. They have also criticised the two generals for ‘trampling on and undermining the Chairman Responsibility System of the CMC’, which dictates that all decisions related to the military lie with the CMC Chairman; that is, Xi himself.

This is not the first time that Xi has purged top military leaders. In his roughly 13 years in power, he has removed several members of the CMC and two consecutive ministers of defence, as well as the commanders of the PLA Rocket Force and other military services. The constant cycle of purges and investigations throws into question Xi’s approach to personnel appointments. Many of the purged generals were officers who had been promoted by Xi and who were considered loyalists.

But, despite all of this, Xi seems to remain firmly in control of the levers of power. While internal opposition to his leadership cannot be discounted, his ability to turf out even the most senior of the PLA’s leaders highlights the success of his long-running campaign to centralise power and take out any alternative power networks.

This personalisation of power, however, can be risky. It removes other voices from decision-making processes, potentially increasing the risk of miscalculation and conflict. And it leaves Xi as the one person ultimately responsible for all decisions. A failed military operation against Taiwan, for example, would therefore have profound implications not just for the PRC, but also for Xi personally, and likely for his ability to stay in power.

Grace Theodoulou

International Fellow, Council on Geostrategy

It is hard to see how the recent purges are a sign that Xi is concerned about a challenge to his authority, even though that might make for a more interesting headline. It is also unlikely that the purges were entirely without reason, which is the logic that gives way to the theory that Gen. Zhang and Gen. Liu were removed simply for being a threat to Xi’s power.

The grounds used for the purges – ‘serious violations of discipline and law’ – are a euphemism for corruption. The more pertinent question to ask might be: in Xi’s PRC, is the meaning of corruption still limited to fraudulent or dishonest behaviour, or has it expanded to encompass any behaviour which could be considered even a minor deviation from Xi’s prescriptive doctrine?

Xi has made the rooting out of corruption within the PLA one of the key tenets of ‘Xi Jinping Thought on Strengthening the Military’. It is true that the PLA is riddled with corruption – which, if nothing else, leads to reduced productivity and efficacy. Xi has made it clear that this cannot be afforded: the PLA must be ‘able to prepare for wars, fight wars, contain wars and win wars’.

Some of the procurement arms of the PLA are notably corrupt, which means that at times, inefficient or subpar components are embedded into the military machine. Authoritarian regimes foster a culture of cover-ups, where a high-ranking official may conceal incompetencies of a subordinate for fear of being exposed themselves. This coping mechanism is then adopted and passed down as officials climb the ranks.

So, it is possible that the ‘serious violation of discipline and law’ refers to Xi’s dissatisfaction with the generals’ handling of corruption among their own subordinates. Another key tenet of Xi’s military thought emphasises the need for the CCP to have absolute leadership over the PLA. The foundation of military cohesion and political reliability is loyalty to the party leadership, i.e., to Xi. If Zhang and Liu are unable to exert discipline, what would that say about Xi himself?

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While the world’s biggest annual migration, which took place in the People’s Republic of China (PRC) during the travel rush of the Lunar New Year – celebrated on Monday – may have captured global headlines, significant geopolitical developments took place behind the scenes. At the Munich Security Conference, Marco Rubio, Secretary of State of the United States (US), and Wang Yi, Minister of Foreign Affairs of the PRC, gave their speeches, in which they tried to reassure the European Union (EU) that they had not forgotten Brussels.

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Beijing didn’t take too well to the United Kingdom’s (UK) expansion of a visa scheme that opens the door for many Hong Kongers to live and work in Britain. In a statement issued by the Chinese Embassy, a spokesperson claimed that many of the Hong Kongers who relocated to the UK over the past few years have found themselves treated as ‘second class citizens’, facing discrimination and difficulties in making ends meet.

As illustrated in the statement, the People’s Republic of China (PRC) interprets the British National Overseas (BNO) visa scheme as a manipulation in its internal affairs, which will ‘only bring shame’ to the UK and cause it to ‘suffer the consequences of its own actions.’

The change to the visa scheme comes after Beijing sentenced Jimmy Lai, one of the world’s most well-known pro-democracy activists from Hong Kong – and a British citizen – to 20 years in prison.

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