Yesterday, two important measures came into effect regarding the People’s Republic of China (PRC), which I have covered over the past few months. First is the Ethnic Unity and Progress Promotion Law, which Beijing adopted in March this year.

The Chinese Communist Party (CCP) says it is ‘to further strengthen [sic] the unity and cohesion of the Chinese nation’, and that the PRC’s ethnic minorities will benefit from it. However, human rights experts outside the PRC warn that it aims to erode their rights and rituals, with a view to forced assimilation.

The other, less controversial (to some) measure that came into effect was the tax on small packages entering the European Union (EU) from third countries, in a move seen to be targeting the PRC. According to the EU, 91% of all parcels valued at less than €150 (~£130) – and thus eligible for not paying tax – which entered the largest multi-country single market in the world in 2024 were from the PRC.

Meanwhile, a high-level business delegation from the PRC is in the UK, with the aim to launch a platform to help British businesses expand in the Chinese market.

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‘We live in a world ​of wolves now. We no longer live in a world of pink ponies and rainbows’, one European Union (EU) diplomat told Reuters last week, as Brussels’ goods trade deficit with Beijing surpassed €1 billion (approximately £900 million) per day.

As Brussels becomes increasingly tough on Beijing’s trade practices, what will this mean for the successor of Sir Keir Starmer, who resigned as Prime Minister on Monday? Andy Burnham, Member of Parliament (MP) for Makerfield, is tipped to succeed Sir Keir. Given his previous position as Mayor of Manchester for nine years prior to returning to Parliament, we do not yet have significant insight into his foreign policy – although he does boast trade negotiation experience with Beijing.

What we do know is that Sir Keir’s successor will inherit the delicate reconstruction of the fragile relationship between London and Beijing forged by Starmer. Besides domestic debates about the prudence of this decision, Brussels’ increasingly tough trade stance on Beijing, along with the intensifying competition between the United States (US) and the PRC, will be additional obstacles to navigate.

Last October, Xi Jinping, General Secretary of the Chinese Communist Party (CCP) and Donald Trump, President of the US, reached a trade truce with some trepidation. Despite some recent trampling over the truce, Trump appears eager to continue meeting Xi, and this year may see up to four in-person talks.

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Without naming any names, the Group of Seven (G7) countries laid out a plan this week during the annual summit in France to reduce their reliance on the People’s Republic of China (PRC) for critical minerals. In a joint statement focusing exclusively on building resilient supply chains in this sector, the leaders stated:

In so doing, we aim to significantly reduce [sic] our dependencies on a single supplier outside the G7 and partner countries for rare earths and permanent magnets to under 60% by 2030 and continuing to decrease further over time, with an ambition to reach 50% as soon as possible.

Additional steps to reduce reliance on the PRC – which manages over 90% of the world’s rare earth processing – include a digital platform which will track supply chain vulnerabilities and predict potential market distortions in the industry.

Naturally, the preliminary deal to end the war in Iran and reopen the Strait of Hormuz signed by Washington and Tehran stole the spotlight in the coverage of the summit. However, several other key geopolitical issues were raised at the G7 summit, where the PRC’s critical role was discussed with varying levels of overtness.

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The Investigator | No. 09/2026

On 6th June, the People’s Republic of China (PRC) launched what it called a ‘special maritime traffic law enforcement’ operation in the waters east of Taiwan. The operation was organised by the Chinese Ministry of Transport, rather than the People’s Liberation Army Navy (PLAN) or even the China Coast Guard (CCG), although the latter provided support. It involved the Fujian Maritime Safety Administration, the Guangdong Maritime Safety Administration, the East China Sea Navigation Support Centre, and the East China Sea Rescue Bureau.

Beijing claimed that the action was designed to strengthen deep-sea patrols, regulate traffic in key waters, ensure maritime safety, and protect national rights. However, this was not a normal maritime safety operation. It was a carefully staged act of sub-threshold statecraft.

The context: Japan and the Philippines

The immediate context is crucial. On 28th May, Japan and the Philippines elevated their relationship to a Comprehensive Strategic Partnership, brought into force a Reciprocal Access Agreement, signed an Acquisition and Cross-Servicing Agreement, and began discussions on classified military information protection. Japan is also strengthening the Philippine Coast Guard and discussing defence equipment transfers.

The two countries announced the launch of negotiations on the delimitation of their Exclusive Economic Zones (EEZs) and continental shelves. These concern the unresolved maritime seam between Japan’s southwestern islands and the northern Philippines: Japanese islands, such as Yonaguni and Hateruma, and Philippine islands, such as Mavulis and Itbayat, generate maritime entitlements which may overlap because the distance between relevant coastlines is less than 400 nautical miles. Under the United Nations Convention on the Law of the Sea (UNCLOS), each coastal state may claim up to a 200 nautical mile EEZ and continental shelf, making delimitation necessary where entitlements overlap.

The complication is that this prospective Japanese-Philippine boundary lies east of Taiwan, and overlaps significantly with Taiwan’s own EEZ. This explains why the issue is legally sensitive. Tokyo and Manila are not negotiating sovereignty over Taiwan, nor can any bilateral agreement bind third parties. However, by drawing a line between their own maritime entitlements, they could still affect Taiwan’s fisheries, seabed interests, and long-term legal position. Taipei has therefore welcomed peaceful dialogue under international law while asking both governments to ensure that its rights and existing fisheries mechanisms are not threatened.

Beijing condemned the move as a unilateral infringement of ‘Chinese sovereignty and maritime rights’. Its subsequent operation east of Taiwan should therefore be read less as a safety patrol than as a coercive response to Tokyo and Manila, and as an attempt to erase Taiwan as an independent maritime actor.

Examining the operation

The location of the patrol reinforces this interpretation. The Chinese vessels’ route passed approximately 40 nautical miles from Lanyu (Orchid Island), 51 nautical miles from Taiwan’s eastern coast, 35 nautical miles from Japan’s Ryukyu Islands, and 56 nautical miles from Itbayat in the northern Philippines.

This was not random movement. It placed Chinese state vessels near the maritime boundary linking Taiwan, Japan, and the Philippines, and directly within the area under discussion in the Japanese-Philippine talks.

The formation itself was equally revealing. Taiwan identified four major Chinese vessels: Haixun 09, a 10,000 tonne maritime safety ship operated by the Guangdong Maritime Safety Administration; Haixun 06, a roughly 6,000 tonne large patrol and rescue vessel under the Fujian Maritime Safety Administration; Haixun 08, a 7,500 tonne deep-sea hydrographic survey vessel operated by the East China Sea Navigation Support Centre; and Donghaijiu 113, a professional maritime rescue ship of roughly 3,500 gross tonnes, or close to 5,000 tonnes at full load, under the East China Sea Rescue Bureau. The operation was also supported by several CCG vessels in the 3,000-4,000 tonne range.

The presence of individual Chinese vessels near Taiwan is not new. Haixun 06 was already the lead vessel in a 2023 joint patrol operation in the central and northern Taiwan Strait. In December 2025, it also participated with the East China Sea Rescue Bureau in the PRC’s first search-and-rescue emergency drill in the Taiwan Shoal. Donghaijiu 113 has an even longer cross-strait history: in 2011, during a warmer period of cross-strait relations under the presidency of Ma Ying-jeou, it visited several Taiwanese ports and was opened to the public. CCG vessels, meanwhile, have appeared in major People’s Liberation Army (PLA) exercises around Taiwan, including the Joint Sword series, as well as in continuing pressure operations around Kinmen.

What is distinctive this time, therefore, is not that Chinese government vessels appeared near Taiwan. It is that four large vessels, belonging to four different Ministry of Transport bodies, were deployed together east of Taiwan in a formation whose functions were mutually reinforcing.

Beijing did not dispatch small patrol craft to perform local traffic management. It assembled a maritime governance task group. Each vessel involved has a nominally civilian or administrative function. Together, however, they create a paramilitary law-enforcement fleet able to sustain presence, collect data, support Command and Control (C2), conduct rescue-justified operations, and impose psychological pressure.

Haixun 09 is especially important. As one of the PRC’s most advanced maritime safety vessels, it is not merely a patrol ship, but a floating command node, equipped for long-range operations, maritime data processing, C2, and inter-agency coordination (or as the PRC calls it, the ‘integrated land, sea, air, and space maritime transport safety security system’).

Haixun 08 is no less significant. Hydrographic survey data may be collected in the name of navigation safety, but bathymetric, acoustic, and seabed information has obvious value in waters where submarine operations and access to the Western Pacific are central to military planning. Meanwhile, Donghaijiu 113 and Haixun 06 give the formation a humanitarian and rescue veneer while still contributing to the PRC’s ability to maintain a persistent state presence.

During the operation, Chinese vessels also contacted at least three foreign-flagged merchant ships by radio, asking them to provide information on their port of departure, destination, and crew numbers. This was not a routine safety measure, instead amounting to unwarranted questioning and harassment of civilian shipping. The wider effect was to signal to international shipping that vessels transiting waters east of Taiwan may face additional political and operational risk. Even without physical interference, such behaviour can affect route planning, insurance calculations, and commercial confidence, thereby contributing indirectly to Taiwan’s strategic isolation.

Taiwan monitored the operation, deploying coast guard vessels in response, and has rejected Beijing’s claim to any sovereign rights in waters east of the island. Contrary to earlier impressions that Chinese ships had remained outside Taiwan’s restricted waters, the four Chinese vessels entered them at 14:05, roughly southwest of Eluanbi. Taiwan’s Coast Guard Administration responded by deploying vessels, including the Kaohsiung, to shadow them on a one-to-one basis and broadcast warnings demanding their departure.

By 17:30, the four Chinese vessels had been expelled from Taiwan’s restricted waters at a position approximately 33 nautical miles southeast of Eluanbi, although the two sides continued to confront each other at sea. However, this limited restraint should not obscure the operation’s strategic purpose. Beijing did not need to cross a legal threshold to make its point. The purpose was to perform jurisdiction, test Taiwan’s response, and normalise Chinese state presence east of the island.

Consequences for Taiwan

This is how sub-threshold coercion works. The PRC first makes a claim, then performs that claim through patrols, surveys, rescue exercises, safety warnings, traffic-control operations, or inspections. Repetition creates familiarity, which in turn becomes the basis for a ‘new normal’. Over time, a political claim is converted into an administrative fact.

For Taiwan, the stakes are high. Its eastern waters are not peripheral. They are central to the island’s strategic depth and wartime survivability. In a crisis, Taiwan’s eastern ports and sea lines of communication would be vital for humanitarian assistance, evacuation, military logistics, and external support. They also connect to the Miyako Strait and Bashi Channel; two critical maritime gateways between the First Island Chain and the wider Pacific Ocean. If the PRC can impose pressure east of Taiwan, it can begin to threaten the island’s external lifelines and move Taiwan towards strategic isolation.

This should also be viewed against the wider military picture. Around the same period, the PLAN’s Carrier Strike Group (CSG) headed by the Liaoning was operating in the Philippine Sea, conducting intensive flight operations east of the Philippines. Although there is no clear public evidence that the CSG formed part of the Ministry of Transport-led operation, its presence still matters.

The combination of maritime governance vessels closer to Taiwan and a CSG further out in the Philippine Sea suggests an emerging pattern of inner and outer pressure: administrative control, inspection and traffic management functions near Taiwan, reinforced by naval denial and deterrence on the outer perimeter. In effect, Beijing is seeking to incorporate waters east of Taiwan into a broader model of ‘near-seas governance’, expanding the practical meaning of the PRC’s near seas while placing PLA forces beyond the First Island Chain to shape the wider operating environment.

The operation also creates a dangerous dilemma. If Taipei responds weakly, Beijing gains space. If it responds forcefully, the PRC can accuse Taiwan of escalation. By using Ministry of Transport vessels rather than overt naval assets, Beijing sharpens this dilemma. These ships appear civilian-administrative, but their tonnage, endurance, and inter-agency role give them clear paramilitary utility.

The Chinese operation east of Taiwan was not an isolated patrol. It was a demonstration of how Beijing can use civilian, law enforcement, rescue, and survey assets to compress Taiwan’s strategic space while warning Japan and the Philippines. For Britain, the lesson is clear: preserving a free and open Indo-Pacific requires recognising Chinese ‘law enforcement’ for what it increasingly is: coercion by administrative means.

Zack Liao is a Research Associate at the China Strategic Risks Institute (CSRI) and holds an MA in War Studies from King’s College London, with a research interest in strategic sealift. He is also the leading political risk consultant on the PRC at a private intelligence company in London.

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Last week, the Five Eyes intelligence alliance – consisting of Britain, Australia, Canada, New Zealand, and the United States (US) – issued a joint bulletin warning of sophisticated campaigns by the Chinese Communist Party (CCP) to solicit classified information on military and intelligence matters.

Much of the content is similar to a warning issued by MI5 last year, whereby the British intelligence services stated that state-sponsored operations from the People’s Republic of China (PRC) saw attempts to recruit Britons with useful or classified information through professional networking sites such as LinkedIn.

But the warning issued last week elaborates on the details of these operations, such as advertisements of fake employment opportunities, with the purpose of extracting sensitive information from applicants during each subsequent interview phase.

The joint warning was published as Yvette Cooper, Foreign Secretary, visited Beijing to hold the 11th UK (United Kingdom)-PRC Strategic Dialogue in the PRC, prompting defensive remarks from Whitehall.

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The Thinker | No. 05/2026

There is a parallel between the 1924 Mallory-Irvine Everest expedition and the recent visit of Donald Trump, President of the United States (US), to Beijing. Trump reached the summit after a delay of six weeks. The outlines of topics discussed are known, but much of the detail remains shrouded in cloud.

Yet, one development stands out. Wang Yi, Minister of Foreign Affairs of the People’s Republic of China (PRC), claimed that a ‘most important political understanding’ was reached: a new characterisation of relations as a ‘constructive relationship of strategic stability’.

Whether this typically clunky phrasing will come to symbolise US-PRC relations in the next few years will only become apparent with the passing of time. However, it is highly revealing of how the Chinese Communist Party (CCP) intends to proceed.

First, however, to clear the decks…

The American shopping list

Understandably, Iran was a top concern. Given the PRC’s oil imports from the Gulf region, as well as its considerable investments there, Trump will have wanted Xi Jinping, General Secretary of the CCP, to lean on Tehran to raise the blockade of the Straits of Hormuz. Trade, in the form of purchases of Boeing aircraft, agricultural goods, and petrochemicals, was an important area, success in which would allow Trump to play up his deal making abilities – and, with an eye on the November midterm elections, to claim a victory that would impress voters. The establishment of boards for trade and for investment was also on the agenda. On a personal level, Trump relishes the chance to be in the limelight.

The Chinese shopping list

The CCP habitually declares Taiwan to be the core of its core interests. Xi began his exchange with Trump with Taiwan: ‘Handled well, the overall stability of the bilateral relationship can be maintained. Handled poorly, the two countries will collide or even come into conflict, pushing the entire China-US relationship into a very dangerous situation.’ This was echoed by Wang Yi at a press conference after the visit had concluded: ‘…the Taiwan question is the most important issue between China and the US; one that affects the entire relationship.’

Preserving as much access as possible to the American market and to technology will surely have been a major Chinese aim. For example, Chinese vehicles are currently banned from the US. The PRC seeks access to the highest grade of semiconductors that Washington will allow to be exported. Pressure to relax restrictions in such areas must surely have been on the CCP’s agenda.

Agreement to agree – but on what?

A clearer outline of the summit may emerge over the next few months as specific measures are announced – or not announced. Xi, unsurprisingly, talked of the need to open the Strait of Hormuz, but will he – indeed, can he – do anything to bring that about? There is a parallel with the Taiwan Strait, which the CCP claims is its to control.

This makes it more difficult for Xi to put pressure on the Iranian regime, which claims the same for Hormuz. Maintaining good relations with Tehran now might also be useful for maintaining cheaper oil supplies later, even if at present oil flows are curtailed. However, even if Xi were to apply pressure, it is doubtful that the Iranians would yield: they currently have a powerful weapon in the fight against the US, and they will not abandon it lightly.

Finally, while Xi may have promised Trump not to send arms to Iran – a promise easily given, since proof of delivered weapon systems would blow up Beijing’s claims of being an agent of peace – there is every likelihood that the supply of Chinese components and resources (as opposed to the weapons themselves) will continue, thus helping the Iranian war effort. Even if the CCP is not encouraging the supply, there are few incentives to police it out of existence. Compare Ukraine.

How Trump will react to Xi’s broadsides on Taiwan may become evident from whether he gives the green light to the US$14 billion (£10.4 billion) arms sale to Taiwan currently awaiting his signoff. However, he is unlikely to do this soon after the summit, which would explode whatever good will has been built up.

Trump could divide the sale into smaller packets – not that the CCP would be fooled, but they might choose to make less of a fuss. If he has made approval contingent upon the PRC not supplying Iran with weaponry – although it feels unlikely that Xi would sit down to negotiate around such a proposition, given denials of arming Iran – the definitions of what constitutes ‘weaponry’ and ‘verification’ might lead to considerable friction. Yet, putting weapon supplies to Taiwan into the negotiation basket with the PRC would be an enormous break in the American stance hitherto. It seems unlikely, even if Trump prides himself on his unpredictability.

In the technology sphere, the coming months will show whether the US will put further restraints on Chinese access to American chips, and also on allowing goods with Chinese technology, particularly relating to internet connectivity, into the American market. The summit made no mention of these areas, where in the past there has been some ambiguity. For example, granting access to Nvidia H200 chips contrasts with the Federal Communications Commission putting Chinese drones and routers on its prohibited lists.

Both sides agreed to the establishment of boards to discuss trade and investment. Here, the devil is in the details – or in what counts as sensitive goods and technology. Electric Vehicles (EVs) and green energy are obvious areas for investment given Chinese technological leadership, but automobiles and the automotive industry are emotive subjects for Americans, and Trump favours oil and gas over hydrogen and solar energy.

There will also be bitter arguments between those who worry about the energy supply needed to power Artificial Intelligence (AI) and data and those for whom security is the top priority. Tariff regimes may be relaxed on non-technological goods – Scott Bessent, US Secretary of the Treasury, referenced the import of fireworks (perhaps not the most tactful of choices given the recent explosion in a Hunan factory, which caused many deaths) – but which tariffs and by how much?

Progress in other areas was similarly hazy; AI governance for one. Bessent said that the US and the PRC would ‘set up a protocol in terms of how we go forward with best practices for AI to make sure non-state actors don’t get a hold of these models’. This sounds as though talks are at a very preliminary stage.

‘Strategic stability’ – the CCP’s real aim

In what Wang Yi described as, ‘the most important political understanding they [the two leaders] reached’, Xi, ever the theorist and thinker, introduced a new concept to describe relations with the US: a ‘constructive relationship of strategic stability’. He defined its four pillars as:

1. Positive stability with cooperation as the mainstay;

2. Sound stability with moderate competition;

3. Constant stability with manageable differences; and

4. Enduring stability with promises of peace.

This is a highly revealing move. Most surprising is that a Chinese academic should spell out why. Wu Xinbo, Director at the Centre for American Studies at Fudan University, candidly wrote that: ‘If over the next three years we can realise a relationship of constructive strategic stability between China and the US, then for China, it extends our period of strategic stability and wins time and space for our development (emphasis added).’

The CCP does not trust Trump, regarding him as inconsistent at best, and a leader who will be out of power in under three years. It knows that, apart from the President and a few of his inner circle, there is bipartisan support in Washington for a harsher line on the PRC. It has noted an increasing turbulence in international relations, and has been consistent in a belief that American policy boils down to one of repressing and restraining the PRC’s rise.

A clear strategy has emerged in what the CCP sees primarily as a science and technology struggle or war: build self-reliance, particularly in these fields; avoid dependencies on the US and its allies; and, where possible, create American dependence upon the PRC. This is the underlying logic of the 15th Five-Year Plan, promulgated in March, in which the first two main targets are:

1. Significant progress in high-quality development (i.e., modernisation of existing industries and development of ‘new-quality productive forces’ through science and technology progress); and

2. Substantial improvement in the level of self-reliance and self-strengthening in science and technology.

So a major CCP aim – if not the major aim – of the summit was to continue the current truce in otherwise hostile relations, which resulted from the PRC’s successful strategy of withholding rare earth supplies. The longer that truce lasts, the greater will be Beijing’s development and power, and the less it will have to bow to American pressure.

There is a further gain to the PRC from Xi’s new contribution of ‘strategic stability’ to great power politics: in turbulent times, the concept portrays the country as the force for stability. It also allows the CCP to define any future measures taken by Washington which it dislikes as blatant disregard for an agreement freely entered into.

Not only does this reinforce the current propaganda theme (i.e., that the US is a force for disruption in the world, in contrast to the PRC standing for peace and stability), but it would also give the CCP a stick with which to beat the US; that of failure to adhere to agreements. This helps in the battle for the allegiance of the so-called ‘Global South’ and other countries.

Plenty to fight over

Apart from the issues already outlined, there remain plenty of others which could lead to tension or worse between the two powers: control of the Panama Canal and ports; support for countries such as the Philippines (a large joint military exercise with the US has just concluded); freedom of navigation and flight in the South China Sea; espionage and interference in the US, where new cases are increasing in frequency; and media freedom cover just a few. The CCP’s recent assertiveness will not disappear, although it may be tempered in pursuit of buying ‘strategic stability’ to achieve self-reliance.

Friendship

Still, asked to name the summit’s most important achievement for the United States, Mr Trump told Fox News’ Bret Baier: “I think the most important thing is relationship. It’s all about relationship.”

“It sounds like something that doesn’t mean anything, but it’s everything,” Mr Trump said.

If Trump truly believes this, he joins a long line of leaders who have excelled in self-deception. Chinese leaders do not have personal relationships with foreign counterparts. They are, however, masters of hiding a ruthless pursuit of interests underneath the rhetoric of friendship and an overwhelming display of precision protocol, pomp, and pantomime. Allowing for introductions and formalities at the start and end of meetings, interpretation that halves the time, photographing and more, the leaders will have exchanged views for less than four of the nearly nine hours they were together.

These are formal occasions and formal exchanges in the presence of delegations or interpreters, hardly conducive to the establishment of personal relations. It is true that occasionally the personal chemistry between leaders can make a difference. Margaret Thatcher and Ronald Reagan, for example, clearly liked each other. But they shared a language, both literally and politically, as well as many aspects of culture. The same cannot be said of Xi and Trump – nor of Xi and Vladimir Putin, President of Russia.

If, as Trump says, at the meeting in Beijing the personal relationship was everything, the free world should be worried. Will anything else emerge from the clouds of hype? Nobody should hold their breath: oxygen can be thin at summits.

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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This is the 12th 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).

In mid-May 2026, Donald Trump, President of the United States (US), conducted a highly anticipated state visit to the People’s Republic of China (PRC), marking the first such visit by a sitting American president since 2017. Characterised by significant pomp and ceremony – including tours of the Temple of Heaven and Zhongnanhai – the summit intended to project a notion of strategic stability.

Yet, beneath the veneers, the geopolitical reality remains complex. The summit occurred against the backdrop of the ongoing US-Israel-Iran conflict, which has severely disrupted global energy markets, alongside continuing friction over trade tariffs, Artificial Intelligence (AI), and the status of Taiwan.

Both the US and the PRC have claimed provisional diplomatic success. Washington highlighted immediate economic dividends, including Chinese commitments to purchase American beef, soybeans, and Boeing planes, while simultaneously seeking Beijing’s leverage to help manage the conflict in the Middle East. Conversely, Xi Jinping, General Secretary of the Chinese Communist Party (CCP), utilised the visit to underscore the PRC’s diplomatic parity, explicitly warning against continued US arms sales to Taiwan and seeking to forestall further economic decoupling in the technology sector.

International observers remain divided on whether these tactical agreements signify a genuine bilateral reset or merely a temporary, transactional truce. As such, for this edition of the Tangram, we asked four experts to evaluate the strategic and economic outcomes of the summit, posing the following question: What did Trump achieve in his visit to China?

George Magnus

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

Trump arrived in Beijing more or less empty-handed, having already played his now rather compromised tariff cards. Furthermore, he already folded last year when Xi played his own rare earth export control cards. In Beijing, both leaders were after a ‘timeout’ – for however long it lasts, which may not be long – to manage systemic US-PRC conflict rather than resolve it. The same goes for other possible meetings between them this year.

Trump should extricate the US from the ongoing Iran conflict, and focus on improving his own worst ever approval rating, managing the American economy, and bolstering Republican chances in November’s midterm Congressional elections. Xi too needs a stalemate. The Chinese economy is fragile, foreign pushback against the PRC’s huge trade surplus is rising, and the industrial ecosystem heralded in the recently approved 15th Five-Year Plan requires stability at home and abroad, not conflict and tension.

Xi wants ‘strategic stability’, or, less clunkily, managed competition. However, Trump only brought home a problem in this respect. Strategic stability means status quo rules of engagement, and Xi’s insistence that the top issue in US-PRC relations, on which collaboration or conflict hinges, is Taiwan means that Trump has to tread carefully. Indeed, the White House readout did not even refer to it.

After he was home, Trump spoke unclearly about the issue of arms sales and about getting involved in a conflict 9,500 miles away, and he seemed to presume there were ‘negotiables’ – a point which Beijing refutes unequivocally. Trump will either have to accept there are no transactions to be made here, or be shamed into making unilateral concessions.

There were some ‘commercial deliverables’ that the President took home, but as always, only time will tell if substance follows. Beijing committed to purchase more planes, agricultural produce, and energy products. The PRC has accepted proposals to institutionalise very limited amounts of bilateral trade and investment transactions through the Boards of Trade and of Investment. In what looks like an own goal, Trump confirmed earlier approval to allow Nvidia’s H200 chips to be sold to designated Chinese firms, but so far, Beijing has not given its own permission to import them. However, these commercial issues are almost incidental.

On Iran, cyber attacks, nuclear weapons, and other substantial issues, the summit was unremarkable. Likewise, there was little movement on more commercial and economic matters such as export controls, market access, and the global effects of the PRC’s economic model.

Trump got a truce extension on his visit, with lots of photo ops and some trade sweeteners, but also confirmation that rather than being his good pal, Xi is a serious adversary.

Dr Scott Moore

Practice Professor of Political Science, and Director of China Programmes and Strategic Initiatives, University of Pennsylvania

The first thing to say is that it is hard to tell what exactly Trump achieved in his visit to the PRC. This is because there was not only no joint statement or communiqué, but the readouts shared by both sides differed noticeably on key issues.

That being said, each side scored one or two notable accomplishments that bolster their domestic standing. According to American officials, Beijing agreed to some high-profile purchases of agricultural products, satisfying an important domestic constituency for Trump. Xi, for his part, landed a messaging coup by publicly warning the President that refusing to abide by the PRC’s red lines on Taiwan could cause conflict between the two powers – arguably the most provocative thing a Chinese leader has said to an American one in modern history, and one that will doubtless thrill the PRC’s growing ranks of nationalists.

It also should be noted that the initiation of dialogue on AI safety is a very important sign that – against all expectations, in some ways – both sides have not entirely given up on such discussions on shared global challenges and global public goods. While exactly how much this dialogue can accomplish is in doubt, agreeing to talk is an important first step.

Finally, there is one very important thing that the summit did not clearly achieve: stabilisation of a relationship that has been searching for its bottom for years. Certainly, the fact that Trump and Xi have apparently agreed to more meetings suggests that both sides want to avoid further confrontation for the foreseeable future. However, without a real deal on trade and public statements on the fundamental issues in the US-PRC relationship – like Taiwan – the two sides will remain deeply wary rivals.

Laura Bonsaver

Director, London China Watchers, and Taipei-based research consultant

When it comes to Taiwan, what has Trump achieved with his visit to Beijing? The President may have put on a great show, rubbing shoulders with one of the world’s most powerful leaders and returning with a few promises from the PRC to purchase beef, soybeans, and Boeing aircraft. He may also have helped to stabilise relations with Beijing in the short term through his flattery towards Xi.

Yet, this flattery could prove short-lived, and may come at a great cost to Taiwan. The island remains the central sticking point in US-PRC relations, with both sides holding fundamentally incompatible positions.

For the US-Taiwan relationship, one thing that Trump has achieved is stoking concern in Taiwan and across the region. Since the summit, he has shown little effort to demonstrate support for Taipei, referring to Lai Ching-te, President of Taiwan, as ‘the person who is running Taiwan’, and stating that he did not want ‘to have somebody go independent’.

While this language is not entirely dissimilar to previous statements by the US on not supporting Taiwanese independence, Trump’s tone appears to reinforce Beijing’s preferred narrative that Taiwan is the destabilising actor in the Strait while overlooking the PRC’s growing military pressure in the region.

It is worth noting that the vast majority of Taiwanese are not calling for formal independence, but instead support maintaining the status quo, which many, including Lai, already view as de facto independence given that Taiwan operates separately from the CCP government.

Trump has also achieved what many in Taiwan feared: creating the impression that arms sales could depend, at least in part, on Beijing. He stated ‘I’m holding it in abeyance, and it depends on China.’ Despite the ‘Six Assurances’, which state that the US does not need Beijing’s approval for arms sales to Taiwan, his remarks suggest that the timing and scale of arms sales could become tied to broader US-PRC engagement.

The idea of treating arms sales as a negotiating chip would mark a significant shift in American policy. After decades of carefully calibrated Taiwan policy – whereby Washington sought to balance relations with Beijing while supporting Taiwan’s self-defence through cautious language and communiqués – Trump risks undermining that balance.

As for cross-strait relations, Trump may have ultimately heightened tensions rather than easing them. His language may embolden Beijing to increase pressure on Taiwan through both disinformation and military activity, further raising the risk of miscalculation or confrontation in the Taiwan Strait.

At the end of the day, a leader’s rhetoric may still differ from how the US ultimately moves forward. In the coming months, close attention should be paid to how Washington’s approach to Taiwan and arms sales develops.

Dr Andrea Ghiselli

Lecturer in International Relations, University of Exeter, and Head of Research, ChinaMed Project

That American and Chinese priorities differed vastly was evident well before Air Force One landed in Beijing. While the former focused on Iran and on getting the PRC to help achieve a resolution to the ongoing conflict, the latter was all about Taiwan. Unsurprisingly, many observers feared a Faustian bargain, in which Beijing would exert some pressure on Iran in exchange for a change in Washington’s position on Taiwan, especially as Trump has a large arms package on his desk awaiting approval. These fears were made worse by an interview with Fox News, during which Trump warned Taipei not to expect a blank cheque of American military backing if it triggers a war, and accused the island of ‘stealing’ the chip industry from the US.

Yet, it is far from clear that such a bargain is actually on offer.

On the one hand, Beijing wants the conflict to be over, but does not want Iran to be the loser. Its actions fully reflect this. During the summit, all Xi had to offer was opposition to a nuclear-armed Iran and refusal to contradict American claims that Beijing is ‘not in favour of militarising the Straits of Hormuz’ and ‘not in favour of a tolling system.’

The former of these is a longstanding Chinese position. The latter costs Beijing nothing. Following the summit, as Trump was on his way back home, Ambassador Fu Cong, Permanent Representative of the PRC to the United Nations (UN), made clear that his country opposed a new Bahrain-led UN resolution on the Strait of Hormuz calling for an end to Iranian attacks on its Gulf neighbours. In other words, Beijing did not wait even a second to signal that its position had not changed. Whether this reflected confidence, poor coordination, or both does not alter the ultimate message.

On the other hand, among Trump’s unorthodox statements, he also said that he sees arms sales to Taiwan as a ‘very good negotiating chip’. As noted, many interpreted this as a threat to ‘sell’ Taiwan. Yet, if American officials manage to make Trump aware of the substance of the PRC’s position, or if he realises it on his own, that statement is as much a threat to Beijing as it is to Taiwan.

American officials stated that Trump and his team held off on deciding how to proceed with Tehran during his visit to Beijing, and the President’s warning that ‘the clock is ticking’ for Iran is indicative of his frustration with the conflict, possibly made worse by the meeting with Xi.

Ultimately, it remains too early to say whether the Trump-Xi summit produced any sort of breakthrough. Current evidence, however, suggests that it did not.

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The Investigator | No. 08/2026

In the past decade, the United States (US) and the People’s Republic of China (PRC) have defined their competitive relationship in various styles. The world got an update on the latest framing of the most important major power competition as Donald Trump, President of the US, wrapped up the first American state visit to the PRC in nine years. Xi Jinping, General Secretary of the Chinese Communist Party (CCP), wants a competition with proper limits, entailing controllable differences and expectable peace, and later emphasised as ‘non-zero-sum’.

Xi summed up the competition as unfolding within a state of constructive strategic stability, allowing the Asian export powerhouse to continue its rising trajectory, with the CCP controlling and minimising ruptures if they are unavoidable. The PRC sets its goals and strategy clearly while preparing to weather interruptions by deploying self-sufficient solutions as well.

A face-to-face meeting – and one full of pomp – between the two leaders, which provides a prime opportunity to influence Trump and even nurture sympathy, is the way to manage US-PRC competition for at least the remaining years of Trump’s tenure. The other two or three occasions for the two leaders to meet in this year will certainly serve the same purpose for the PRC. It is likely that purchases of American Boeing planes, beef, and soybeans may come out, and be fulfilled in phases in order to manage image and draw reciprocity.

In comparison, Trump’s notion of the competition is less clear. During the preceding Biden administration, the ‘small yard, high fence’ approach was the core of the strategy of the competition with the PRC. By contrast, Trump seems to focus on re-shoring, re-industrialisation, and tariff revenues. Yet, after being hit with retaliatory tariffs and export control on rare earths, he was forced to reach a truce in November 2025. His loosening export controls on Artificial Intelligence (AI) chips weakened the ‘high fence’, once core to American strategy.

‘Friendly competition’ is how Trump described it before his departure for the summit. It is probably fair to say that the rare earth card and his lighthearted approach to AI competition helped him to reach the decision to lift export controls on H200 chips manufactured by Nvidia. Trump’s strategy in this competition appears to be to deploy his so-called friendly competition to buy time until his administration’s efforts, along with those of the US’ allies who are also aiming to build alternative rare earth supply chains, can disarm Beijing’s stranglehold.

Some of Trump’s comments on Taiwan also reflect his flawed grasp of the AI competition. Here, Taiwan’s importance as a linchpin is rightly pointed out by American lawmakers and policy analysts, yet remains under-appreciated by the President. Safe to say, the PRC would like it to remain that way.

Downsides of strategic ambiguity in Taiwan policy

According to Trump, Taiwan was a focal topic during the summit. Biden administration officials previously said that Beijing had asked Washington to change its declaratory and arms sales policy towards Taiwan. The lack of depth of Trump’s understanding of the US’ established Taiwan policy worries the Washington policy community and Capitol Hill. While the President has largely adhered to the longstanding approach of strategic ambiguity on Taiwan, he seems to leverage decisions on arms sales to Taiwan as a bargaining chip, which diverges from Ronald Reagan’s 1982 ‘Six Assurances’.

Although Trump made no commitment on the arms sales issue to Xi, viewing it as a negotiating chip is a non-starter. There should be no deal to be made on Taiwan with Beijing. Suggesting the possibility of a deal undermines the keystone of America’s Taiwan policy, which holds no position on Taiwanese sovereignty or the acceptance of a peaceful resolution agreed by Taipei.

Deploying strategic ambiguity is never easy, and can be an intense job. Trump played his hand better when he deployed it to deter Chinese aggression against Taiwan, but played it poorly in checking Taiwan by saying the quiet part out loud. He repeatedly described American military aid to Taiwan in the event of a Chinese invasion as a difficult task given the 9,500 miles between the two countries, thus undermining the deterrence provided by American military power. His complaints that Taiwan ‘stole’ the microchip industry and his urging of chipmakers in Taiwan to move to the US further aid insidious American scepticism.

Additionally, although not outright opposition to Taiwanese independence, Trump’s comment of ‘I’m not looking to have somebody go independent’ has drawn media analysis of him warning Taiwan against declaring independence, which could be seen as blaming cross-strait tensions on Taipei rather than on Chinese aggression – which includes Beijing’s refusal to talk to a democratically elected Taiwanese government since 2016, military demonstrations, and showing off the Chinese capability to impose blockades on the island.

To be fair, most of Trump’s talk regarding Taiwan is still within the parameters of strategic ambiguity and, from his perspective, nothing has changed regarding the US’ Taiwan policy. However, as the PRC’s military modernisation generates self-confidence, and distractions intermittently emerging in the Middle East and Europe embolden Beijing’s adventurism in Taiwan Strait, South China Sea, and the East China Sea, the utility of strategic ambiguity has increasingly been questioned.

In other words, America’s double deterrence design requires skilled implementation – if not a complete revamp – to reinforce deterrence power against the main destructive force of the Taiwan Strait. The Taiwanese government, regardless of political party in power, has long held the stance that since the Republic of China (Taiwan’s official name) is already an independent country, there is no need to declare independence.

Trump’s learning curve on strategic ambiguity is largely lagging behind the dynamics of the Taiwan Strait, as well as beyond the immediate region. The PRC may well have picked up on this, and will be trying to exploit the situation – as it always does. After falling short of securing complete success at the Beijing summit, and before the American midterm elections in November, Xi will have another face-to-face opportunity to facilitate the play of exchange of favour during a state visit to the US in September. Between now and then, Trump will need to update his command of American Taiwan policy.

Legacy in the time of transformation: Stay on the course of competition

As a second-term president, Trump may seek to establish a personal legacy during his remaining time in the Oval Office. This could be one element in his decision-making regarding a major building project and a deal barring Iran from acquiring nuclear weapons. Competition with the PRC, however, will undoubtedly be the prominent factor for the foreseeable future.

By invoking the Thucydides Trap – and thus making a thinly veiled threat – Xi implied that Trump should make room for the PRC’s rise in order to avoid conflict. Yielding America’s supreme status or retreating from the US-PRC competition therefore becomes the reluctant, yet necessary, cost of avoiding major power conflict. Instead of accepting this, Trump should stay the course to deter a conflict erupting between the world’s two most powerful nations.

Dr Norah Huang is Director of International Relations and Research Fellow at the Prospect Foundation. Her research focuses on US-PRC relations and US-Taiwan relations.

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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.

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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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