The Investigator | No. 12/2026

The People’s Republic of China’s (PRC) pressure east of Taiwan is acquiring a more complex civilian dimension. In October 2026, Apex Aviation, a private Taiwanese operator using modified civilian aircraft, detected fishing boat Minfudingyu 07902, a China Coast Guard (CCG) cutter 2502, and research vessel Xiang Yang Hong 03 more than 30 nautical miles off Hualien in mid-August. Taiwanese security officials identified Minfudingyu 07902 as a People’s Armed Forces Maritime Militia (PAFMM) vessel and reported coordinated harassment drills with the CCG. In a follow-up report on 23rd October, Taiwan’s Coast Guard Administration said that the boat had approached approximately 2.7 nautical miles outside Taiwan’s restricted waters on 16th August, assessing such coordinated activity as contributing to ‘battlefield preparation’. The combination suggests a division of labour: the militia creates friction, the CCG provides protection and an enforcement pretext, and researchers collect data with potential operational value.

Ethan Tu, founder of Taiwan AI Labs, noted that the operating area overlapped shallow sections of intersecting east-west and north-south seabed ridges traversed by international cables. However, cable interference remains a possibility to investigate rather than an established purpose. The clearer significance is the PAFMM’s addition to a mixed deployment: Beijing can combine civilian presence, coercive backing, and information gathering to give practical expression to its claims of authority around Taiwan.

Coordinating civilian and state power

As explored previously, the PRC’s ‘special maritime traffic law enforcement’ advances ‘near-seas governance’, using administration to press contested claims. Research vessels already contribute to this environment. In July 2026, the Chinese Academy of Fishery Sciences’ Lan Hai 201 surveyed waters within the Exclusive Economic Zones (EEZs) of Taiwan, Japan, and the Philippines.

Chinese research activity near undersea infrastructure has also attracted scrutiny. Hydrographic and seabed data can support submarine operations, uncrewed systems, and underwater installations. June’s deployment already combined maritime agencies; incorporating the maritime militia broadens civilian resources available to sustain such activity.

Rooted in ‘people’s war’ and institutionalised in the 1950s, the PAFMM has gained greater prominence under Xi Jinping, General Secretary of the Chinese Communist Party (CCP), notably in the South China Sea. It also contributes to qunfang qunzhi, or ‘collective prevention and governance’: mobilising civilian participation in security and local control. Members can retain ordinary fishing identities while remaining available for mobilisation. This makes their commercial presence a resource for both routine governance and contingency operations.

The potential scale of the militia was illustrated in late December 2025, when approximately 2,000 Chinese fishing vessels assembled north-east of Taiwan in two parallel inverted L-shaped formations, roughly 400 kilometres (km) long and 80km wide. In January 2026, about 1,400 vessels formed a rectangle stretching some 320km across the East China Sea, forcing commercial ships to divert or weave through. Not every participant can be identified as militia, but such coordination demonstrates how civilian hulls can impose collective pressure. The immediate effect is to complicate navigation and force others to accommodate an organised Chinese presence.

The response problem begins with the PAFMM’s multiple identities. Civilian fishing vessels can act as naval or CCG auxiliaries while remaining difficult to distinguish from ordinary commercial traffic. Beijing can exploit this ambiguity to obscure military direction and political responsibility. Taipei therefore faces an asymmetry: the PRC can coordinate militia activity centrally while leaving Taiwan to justify intervention against individual boats. Dispersed incidents may consume scarce patrol capacity, while a firmer response may be portrayed as aggression against fishermen. Even successful identification leaves Taipei to decide whether the behaviour warrants a policing or military response. Attribution alone cannot resolve the choice of instrument, timing, or acceptable risk.

Armed accompaniment sharpens this dilemma. CCG 2502, the roughly 5,000 tonne Daishan, has 76 millimetre (mm) naval guns and is reportedly equipped with military-type search radar. Its formation had already patrolled east of Taiwan from June 2026. A militia vessel could provoke an encounter that the CCG then claims a duty to resolve. This creates a mechanism through which Beijing can manufacture both a dispute and a justification for administering it, with substantial force available behind an ostensibly civilian incident.

The institutional context helps explain why this combination is appearing now. The CCP’s 15th Five-Year Plan reiterates the integration of party, government, military, police, and civilian resources in ‘modern border, maritime, and air defence’, an approach developed since the 18th Party Congress. It connects central and local authorities, civilian and military resources, and peacetime administration with wartime mobilisation.

Within this framework, qunfang qunzhi supplies an essential social foundation: organised civilian networks support observation, reporting, and local control, with militia providing a readily mobilisable element. Local maritime defence planning explicitly combines qunfang qunzhi with intelligent surveillance and a coordinated response. Military writings similarly advocate Artificial Intelligence (AI)-enabled and uncrewed systems. Together, these developments suggest a whole-of-society and information-centric approach to all-domain awareness, in which ordinary maritime activity can supply intelligence for security operations.

The strategic consequence follows from where Beijing applies this model. In waters where its claims are contested, frontier defence acquires both an outward and inward function. Armed forces deter external intervention, while enforcement, fishing, scientific research, and resource exploration enact the routines of domestic governance. Civilian activity provides both a reason for state protection and an everyday expression of the authority that the CCP claims.

The PAFMM connects these functions. It can contribute information and auxiliary capacity to Anti-Access and Area Denial (A2/AD) operations while helping civilian agencies to make contested jurisdiction appear normal. A policy framed as defending the PRC’s frontiers can thus become a means of extending its practical reach.

Read in this context, the August 2026 grouping suggests a further stage in the practices visible in June. State vessels establish the framework; militia fill it with a more persistent civilian presence. Joint operations test mobilisation, interagency coordination, and Taipei’s intervention thresholds, building usable routines before a crisis.

Taiwan’s eastern approaches also connect the island to Pacific reinforcement and resupply routes. Extending civilian coercion there could gradually constrain that access without declaring a blockade. The novelty lies in incorporating the PAFMM into this developing arrangement, enabling pressure to continue through activities that Beijing presents as ordinary administration.

Future operations could involve larger mixed formations, concentrations around shipping routes or in Taiwan’s contiguous zone, harassment of Taiwanese and foreign fishing vessels, and interference with official or research vessels. Dangerous manoeuvres or engineered collisions could threaten valuable assets while leaving responsibility contested. Alongside CCG, People’s Liberation Army Navy (PLAN), and maritime administration units, the militia could support surveillance and obstruction during a quarantine or blockade. The December 2025/January 2026 formations indicate the coordination available for such purposes, although they do not demonstrate the ability to seal Taiwan’s maritime approaches.

The cumulative risk is a gradual restriction of others’ freedom to operate. Frequent incidents can exhaust Taiwanese crews and equipment, discourage commercial activity, and make Chinese intervention appear routine. Beijing could thus secure practical concessions through repeated encounters before seeking acceptance of any formal jurisdictional claim.

The Taiwanese response

Apex’s discovery shows why Taiwan needs to integrate civilian expertise into Maritime Domain Awareness (MDA). Contracted aviation, private maritime security and intelligence services, and commercial imagery could extend monitoring while easing pressure on naval and coastguard assets. The priority is sustained integration of airborne, surface, and undersea information. Governments should understand recurring associations between fishing boats and state vessels, shared movements, and changes of role – the pattern of cooperation may reveal more than any single vessel’s registration.

The warning of shared pressure on Taiwan, Japan, and the Philippines strengthens the case for a standing maritime security coordination centre or equivalent physical platform involving regional partners. Shared vessel histories, common evidence standards, and regular contact between officials and civilian specialists would help to connect incidents across jurisdictions. Such a centre should link detection to agreed procedures for assistance and response, going beyond an information-sharing arrangement. Its value would lie in arranging cooperation before an incident so that requests for evidence, operational assistance, or diplomatic support need not begin from scratch each time. The PRC integrates different actors to create pressure; Taiwan needs cooperation that translates dispersed observations into a common assessment and timely action.

The harder question that remains is how to impose costs. ‘Escalate to de-escalate’, raised at Taiwan’s 2026 international conference on sea lane security, recognises that habitual restraint can make coercion inexpensive. Militia involvement nevertheless complicates its application: action against a fishing boat may activate CCG protection, widen the confrontation, and strengthen Beijing’s claim to defend its citizens.

Taiwan and its partners thus need graduated responses tied to demonstrable behaviour, combining public attribution, protective escorts, lawful enforcement, and coordinated diplomatic pressure. Clear thresholds and conditions for restraint would preserve options for firmer action without treating every encounter with the PAFMM as a military confrontation.

The central task is to deny Beijing the political advantage of coordinating civilian and state power while disowning responsibility for the resulting pressure. Better MDA matters when it enables Taiwan and its partners to contest that arrangement consistently, before repeated interference hardens into accepted authority.

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.

This article is part of the Indo-Pacific Unit and is supported by funding from the Ministry of Foreign Affairs of the Republic of China (Taiwan). The Council on Geostrategy has maintained full intellectual autonomy throughout the research process, as per our statements on Intellectual Freedom and Funding.

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The Investigator | No. 11/2026

This article follows on from a long Explainer which considers the architecture laid out by Xi Jinping, General Secretary of the Chinese Communist Party (CCP), for reform to global governance. The idea that the CCP might export elements of its political system is not an outrageous one. After all, earlier rising powers, such as France, England and later the United Kingdom (UK), and the United States (US) did so.

Some commentators have denied that the People’s Republic of China (PRC) would follow their example. In 2014, Xi himself ruled out transplanting political systems:

No two political systems in the world are exactly alike, nor is there a single model of political system applicable to all countries…National conditions vary; every country’s political system is unique and determined by its own people.

Copying or mechanically transplanting another country’s political system will not work; it will be incompatible with local conditions.

Xi was talking about the impossibility of foreign influence on the Chinese system, but his words appear to have universal application.

To cite this and other pronouncements as evidence of a lack of intention to export the CCP’s politics is to set up a strawman. Clearly, no country could establish a similar system with the structure and powers of the CCP. The Soviet Union’s attempts to spread its brand of Leninism failed, and Xi has never been an admirer of the Communist Party of the Soviet Union’s policies.

However, this does not mean that Xi is not intent on transplanting elements of the political system. Politics consists of far more than constitutions, political structures, parties, and forms of democracy or autocracy. They underpin a state’s relations; decisions; and allocations in economics, commerce, science, finance and taxation, education, defence, values, culture, and more fields. This underpinning also affects a state’s relations with the wider world.

The ‘China model’ for the world encompasses politics

Over the last decade, Xi and the CCP have become bolder in mentioning politics as part of the exported Chinese model of modernisation. It is worth remembering that when an article appears in CCP-controlled media, it has been approved for publication and represents official policy. Below are some references from 2026 to politics as an element of the PRC’s model for others to imitate.

The future is to be socialist, and foreign political parties are to learn from the CCP’s leadership. The author is Liu Haixing, Head of the International Department of the CCP, whose role is liaison with foreign political parties. By nature, therefore, its dealings are political:

The path of socialism with Chinese characteristics pioneered by the Communist Party of China not only effectively guides the cause of socialism with Chinese characteristics toward continuous success, but also inspires progressive forces in all countries to unite and cooperate, struggle together, and jointly create a bright socialist future.

In recent years, in exchanges between our party and foreign political parties on experiences in governing the country, ‘party leadership’ and ‘core role’ have become frequently mentioned terms used by foreign counterparts, and are also key points they hope to learn from.

Governance is political, and the PRC is contributing its governance model to the world:

This governance philosophy, which possesses both strategic initiative and risk defensiveness, demonstrates the CCP’s superb political wisdom in managing complex situations and contributes a Chinese governance solution of ‘comprehensive consideration and dynamic balance’ to global governance.

Second, the theory of the Party’s leadership, the theory of Chinese modernisation, and the innovative theoretical achievements formed by the Party in various fields in the new era have gradually taken shape in responding to questions concerning the future of human development, such as disputes over modernisation paths and governance models, and have major world-historical significance.

Whether or not ‘Xi Jinping Thought on Party Building’ has really ‘provided useful reference for the development of political parties in the world’, as the Study Times, a Central Party School publication, claims, it works on the underlying assumption that Chinese wisdom and Chinese strength are contributing ‘to the progress of human political civilisation’, a view repeated in the People’s Daily, the official newspaper of the CCP:

Practice fully proves that Xi Jinping Thought on Party Building not only puts forward Chinese propositions for the development of world political civilisation, but contributes Chinese wisdom to the progress of human political civilisation, providing scientific guidance for steering the great changes in the world in a direction favourable to the progress of human society.

As early as 2023, Zhao Leji, Chairman of the National People’s Congress (NPC) Standing Committee, offered the PRC’s help to ‘work with developing countries, including Kiribati, to jointly [sic] promote the construction of democratic politics suited to their own national conditions.’ This was in the context of Zhao ‘introduc[ing] China’s developing whole-process people’s democracy’, so any help would not have reflected ‘Western’ ideas of democracy. Moreover, the CCP perceives a global contest between the systems of the PRC and the West:

...the success of socialism with Chinese characteristics...[is] bringing about further major changes that are favourable to socialism in the historical evolution and contest between the two ideologies and two social systems of socialism and capitalism on a global scale.

Politics in practice

The CCP has an active programme for training African political parties, both in Africa and in the PRC. In 2022, a ‘leadership school’ was opened in Tanzania with Chinese financing to serve six countries in southern Africa. In 2024, Kenya’s ruling United Democratic Alliance (UDA) party ‘reached out to China’s ruling party to transform itself into a formidable political outfit’. It sought ‘Sh1 billion [£286,000] from the Chinese party to support its political activities’. The CCP ‘shared their ideology as a vibrant political Party’, while a visit by a delegation of top UDA party officials later in the year aimed to ‘benchmark on the best tips for strengthening the political party’.

Politics embedded in systems and technology

‘Politics’ is a broad concept about the way a society is ordered. It encompasses decisions regulating the balance between the state and individuals; the provision of services; enjoyment of or restrictions on freedoms; the application of law, security, and monitoring of the people; values; education; and more. The CCP aims not to export or impose a simulacrum of its own system, but to replace the assumptions of free and open countries with its own views on how society should be ordered. Such political values come embedded in cooperation and exports, particularly of technology.

Many governments have imported Chinese surveillance equipment to ensure social stability and regime security. An important development is the PRC’s establishment of the Global Public Security Forum – part of the growth of training for police and military in developing countries. As a recent paper makes clear, the CCP is attempting to:

...shape security institutions, practices, norms, technology use, and overall capabilities in recipient countries – thereby shaping those countries’ capacity both to enforce the rule of law and to carry out repression and state violence.

Police training in small countries in the Pacific, such as the Solomon Islands, has led to great concern in Australia, and Beijing is engaging with 40 African countries in the sphere of law enforcement and defence. The PRC also increasingly provides digital identity systems, surveillance architecture, smart-city technology, Artificial Intelligence (AI) used in public administration, online censorship systems, telecommunications networks, cybersecurity frameworks, and data-governance models, and it talks of ‘jointly building a community with a shared future in cyberspace’.

All of these can influence how the receiving state itself operates. This is political.

A glimpse into a possible future

The importing of systems creates dependencies, which will give the CCP more leverage and thereby speed up political alignment and the adoption of what the Party parades as ‘common values’ – perhaps Xi’s ‘core socialist values’, upon which he expounds domestically. Countries will be allowed to hold elections and cling to their different overt political systems, but where it matters to the CCP, their policies (which is what politics produces) will have to align with the CCP’s wishes.

This will not happen overnight. Many countries will try to align neither with Beijing nor the West, although the incremental absorption of political elements from the PRC will make such a stance increasingly difficult. Furthermore, the CCP does not need to convert every country if it wants to change global governance – just a majority, given that in most international organisations each country, irrespective of size, has one vote.

For those who point out that free and open nations did and do the same, including at times in violent and unacceptable ways, the question nevertheless remains: at the present time, which politics and values are preferable? Those of a regime which sets up concentration camps in Xinjiang, maintains a harsh colonial rule in Tibet, and routinely flouts international law? Or those of traditional (i.e., pre-Trumpian) free and open countries?

In the face of the CCP exporting its politics, free and open countries cannot be passive or inward looking. They need to compete not just in values, but in the concrete technologies and exports in which values are embedded.

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

The author would like to thank Sam Olsen for his pertinent and improving comments.

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The Investigator | No. 10/2026

One advantage of the People’s Republic of China’s (PRC) Leninist system over free and open countries is its ability to conscript all elements of society behind the Chinese Communist Party’s (CCP) objectives. A prime objective is to build a ‘world class’ military, or more baldly, to make the People’s Liberation Army (PLA) – the Chinese armed forces – the most powerful global force. The Military-Civil Fusion (MCF) strategy is a major contributor to this aim.

The rise of MCF

In the 1980s, Deng Xiaoping, then Chairman of the Central Military Commission of the PRC, intent on promoting closer cooperation between defence industries and the wider economy, launched a policy of Civil-Military Integration (CMI). CMI appeared regularly in national Five-Year Plans (FYPs), but in 2007, under Hu Jintao, then General Secretary of the CCP, a new expression gained currency: ‘Military-Civil Fusion’.

This denoted far closer relationships and sharing. The bottom line was that technology or processes which might improve the PRC’s defence capabilities were to be shared, including any obtained from foreign joint ventures, acquisitions, or academic research. In some cases, where security parameters allowed, technology could flow from the military to the civilian side. In 2008, to ensure that policy was transformed into action, the State Administration of Science, Technology, and Industry for National Defence (SASTIND) was set up under the Ministry of Industry and Information Technology.

While CMI appeared twice in the 12th FYP (2011-2015), MCF made four appearances. CMI disappeared from the 13th FYP (2016-2020), but ten mentions of MCF emphasised its growing significance. So did the establishment of the Central Commission for Integrated Military and Civilian Development in 2017. That Xi Jinping, General Secretary of the CCP, headed the commission further underlined its importance.

A return to reticence

However, in the 14th FYP (2021-2026), all mention of MCF disappeared. In October 2022, Xi failed to use the term in his work report to the 20th Party Congress, although he did make one brief reference:

We will consolidate and enhance integrated national strategies and strategic capabilities. We will better coordinate strategies and plans, align policies and systems, and share resources and production factors between the military and civilian sectors.

It seems that MCF was frightening the horses: free and open nations had taken notice and were more active in calling for measures to prevent the export of dual-use technologies to the PRC.

MCF re-emerges untrammelled

Such reticence disappeared two years later. At the March 2024 National People’s Congress, during his customary visit to the PLA delegation:

Xi Jinping emphasised the need to build on the momentum, grasp the characteristics and laws of development in emerging fields, and promote the efficient integration and mutual reinforcement of new-quality productive forces and new-quality combat capabilities.

In plain English – or rather Chinese – in detail, and at length, Xi called for vigorous implementation of the MCF policy in the new areas such as quantum technology, Artificial Intelligence (AI), biotechnology, and new communications. In strong affirmation of its importance, the report of Xi’s meeting with the PLA delegation appeared in the Guangming Daily, an organ under the Central Propaganda Department, and also in the People’s Daily, the official newspaper of the CCP, online. Xi was clear:

On one hand, certain emerging technologies from the civilian sector…can be introduced, absorbed, and further innovated for national defence purposes; their successful application in the defence sector fosters the generation of new-quality combat capabilities. This secures the initiative in future military struggles and opens a new chapter in the modernisation of national defence and the armed forces. The key to the efficient integration and mutual reinforcement of ‘new-quality productive forces’ and ‘new-quality combat capabilities’ lies in aligning demands, coordinating plans, and sharing resources.

After its absence from the 14th FYP, MCF returned with a bang in the 15th FYP (2026-2031) under the heading ‘Chapter 56: Consolidating and Enhancing the Integrated National Strategic System and Capabilities’. Its opening few sentences give a taste:

Strengthen military-civilian strategic planning coordination, policy and institutional convergence, and resource and factor sharing. Promote the simultaneous improvement of national defence strength and economic strength. Deepen cross-military-civilian reform. Build a working pattern that is clear in responsibilities, closely collaborative, and standardised and orderly. Accelerate the building of strategic capabilities in emerging fields. Promote the efficient integration and mutual driving of new-quality productive forces and new-quality combat forces.

The phrase ‘the efficient integration of new-quality productive forces and new-quality combat forces’ has become the new watchword. Any shyness around talking about the MCF policy has disappeared. In May 2026, Zhang Zhan, political commissar – an important official – at the National University of Defence Technology was explicit. That his musings were circulated by the Central Party School’s Study Times underlines not just the top-level push behind the joining of ‘new-quality productive forces and new-quality combat forces’, but also that this is a whole-of-nation approach, behind which Party committees within private companies, research institutes, and academia must mobilise.

The article should be read by foreign companies, research organisations, and anyone cooperating with the PRC in technological areas. Space prevents much quotation, but below are some representative excerpts:

This [MCF] is a strategic deployment by the Party Central Committee…an important guarantee for…accelerating the building of our military into a world-class force.

We must deepen military-civilian cooperation, mount systematic joint tackling efforts, pursue two-way transformation, and accelerate the formation of usable, effective new capabilities for defeating the enemy.

To defend territorial sovereignty and integrity, we must strengthen new-quality combat forces through all-domain coordination.

To advance the building of a world-class military, we must aim at the frontiers of world science and technology, focus on strategically contested domains, and promote the deep integration and aligned exertion of the innovation chain, industrial chain, capital chain, and talent chain…Military construction is at a critical period of upgrading quality and increasing efficiency, and emerging domains are the key handle for achieving leapfrog development. To enhance the effectiveness of combat systems, we must thoroughly implement the strategy of military-civil fusion development, give play to the advantages of the new-type whole-nation system…

…we should explore the establishment of a routinised coordination mechanism that integrates education, science and technology, and talent, applying integrated design and collaborative decision-making in the formulation of plans, project layouts, resource allocation, and performance evaluation, and strengthening institutional linkages on project management, fund use, and personnel flow.

We must deeply grasp the contemporary features by which new-quality productive forces and new-quality combat capabilities share technological origins, value orientations, industrial roots, and pathways of advancement, and coordinate the building of strategic emerging industries and new-quality combat forces, promoting the deep coupling of industrial competitiveness with military combat capability and achieving a virtuous interaction and efficient integration of high-quality development and high-level security…We must…establish efficient cross-military-civilian, cross-departmental, cross-domain coordination mechanisms…integrate the development of national defence science and technology into the overall layout of national scientific and technological development…

Seize the keys to fusion and bring out the role of enterprises as the principal actors of scientific and technological innovation. We must…raise enterprises’ participation and voice in major national and military decisions on scientific and technological innovation…We must…improve ‘green channels’ for the transfer of frontier scientific and technological results from civilian to military use, accelerating the conversion of innovation results into real productive forces and effective combat capabilities.

Only when Party committees (Party leadership groups) at every level genuinely play their role as fortress strongholds, fulfil their main responsibilities, coordinate relations across all parties, and build a governance pattern of top-down connection, left-right coordination, and military-civilian linkage can we break down the walls between military and civilian and overcome departmentalism.

This is a call for a renewed and systematic effort to share all civilian technology with the military. Companies are to lead, and the Party committees within them and other organisations are to ensure compliance. It is to become ‘a governance pattern’, with no walls separating the military and civilians.

Why the return to a lack of reticence?

A major theme of the 15th FYP was coordinating development and security. It would be unnatural not to mention MCF in that context. Furthermore, the distinction between civil and military uses of technology is narrowing:

With the rapid advancement of science and technology, national strategic competitiveness, social productive forces, and military combat capabilities have become increasingly intertwined; new technologies, industries, and business models have emerged as vital drivers for enhancing the quality of economic and social development and strengthening national security capabilities.

Additionally, it would be foolish to ignore technological developments, which could be used in defence:

Development in emerging domains is driving profound transformations in the forms of warfare and the mechanisms of victory, giving birth to entirely new modes of combat.

Furthermore, it [MCF] allows for the better integration of national defence and military development into the national economic and social system, accelerates the effective supply of advanced combat capabilities, leverages all high-quality social resources and advanced achievements to bolster military strength, and secures the strategic initiative in safeguarding national security.

With international competition heating up, the CCP sees no choice but to pursue MCF:

Against the backdrop of a new global wave of scientific, technological, and military revolutions, major powers are strategically positioning themselves in these emerging domains, vying to establish comprehensive competitive advantages. In this fiercely competitive landscape, success favours the proactive.

A more centralised system lends itself to implementing MCF:

The rapid advancement of strategic high-tech sectors is currently generating new momentum for industrial transformation and creating fresh opportunities for military revolution, making these technologies core elements in developing new-quality productive forces and combat capabilities.

These reasons for the increased importance of MCF need to be transmitted to the Party members in order to promote implementation, hence the renewed trumpeting of the policy. Moreover, since the Covid-19 pandemic, Xi has been increasingly confident of the rise of the PRC and its technological advances – or he at least believes it necessary to present greater confidence and to downplay any worry about foreign reactions. Successfully wielding the rare earths weapon against the United States (US) has contributed to such confidence.

What this means for free and open countries

Foreign companies, research institutes, academics, and others must be more aware that if their science and technology research has any defence application, it will be fed into the Chinese defence establishment. That is the system. Governments too need to be clear about this. They must ensure that the message is received and acted upon at the operational, company, or research level.

While awareness of which Chinese organisations or individuals may have military connections is important, the CCP’s ensuring of a whole-of-nation approach means that the focus should be more on specific technologies: is it acceptable to risk this or that technology being shared with the PLA?

This makes it important that His Majesty’s (HM) Government sets up a central science and technology committee, made up of departmental (ministry) scientific advisers, and which can rule – quickly – on specific technologies and cooperation. Such a committee would need close contact with outside subject experts.

The seriousness of the MCF issue argues for a further strengthening of the Research Collaboration Advisory Team (RCAT), as well as the team charged with implementing the National Security and Investment Act, which regulates technological inward and outward investment. It is not clear what the recent merging of the Department of Science, Innovation, and Technology with the Department of Business and Trade into the Department for Business, Innovation, Science, and Trade means for the United Kingdom’s economic security and national security. Six shufflings of the departmental pack for business and science in the last 25 years do not encourage confidence in a settled approach to one of the biggest challenges facing Britain.

Meanwhile in the European Union, a report from the Mercator Institute for China Studies (MERICS) suggests that most European countries have ‘yet to find a consistently workable trade-off between scientific freedom and national security’. That might be putting it mildly, given that the report indicates that aside from the Government of the Netherlands, most European countries have done little.

Conclusion

The PRC has many excellent scientists. Global science has traditionally been open, with progress promoted by sharing ideas. Limiting cooperation on national security grounds will result in ‘lose-lose’. However, the alternative is ‘win for the PRC, lose for the rest’, as the CCP – systematically – harnesses scientific cooperation to its war chariots.

Given Beijing’s increasing support for the Kremlin in its full-scale invasion of Ukraine, the risk exists of British technology finding its way onto the battlefield in Europe. The chain is clear: sharing technology with a Chinese company, which shares with military organisations, which aid Russia.

Free and open countries can go along with some of Xi’s Panglossian prescriptions, as set out by Liu Dongmei, Party Secretary of the Chinese Academy of Science and Technology for Development, in the People’s Daily:

General Secretary Xi Jinping has further extended science and technology for the people to the global level, proposing ‘working hand in hand with all countries in the world to build an open, fair, just, and non-discriminatory international environment for sci-tech development, jointly responding to global challenges such as climate change, food security, and energy security, and making science and technology better serve humanity’.

But note should be taken of the title of the piece: ‘Strengthening Scientific and Technological Innovation and Advancing Sci-Tech Self-Reliance and Self-Strengthening’. For the CCP, science and technology are matters of ‘self-reliance’ and ‘self-strengthening’ – in essence, of ensuring that cooperation is minimised and that the PRC is militarily strong. Increasingly, the wolf does not bother to wear sheep’s clothing.

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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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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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 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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The Investigator | No. 05/2026

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

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

The upsides

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

The former include:

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

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

Potential benefits to the CCP include:

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

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

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

The downsides

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

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

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

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

Consequences yet to be determined

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

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

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

Two other effects

Two other potential long-term effects are worth noting:

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

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

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

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

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The Investigator | No. 04/2026

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

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

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

The ‘struggle’ against America and the ‘West’

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

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

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

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

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

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

The political purity of the CCP

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

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

The importance of security

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

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

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

Modernisation and reinforcement of the industrial base

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

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

Domination of the new sciences and technologies, and emerging industries

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

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

Modernising the PRC’s national security system and capacity

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

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

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

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

A more open call for military-civilian fusion

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

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

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

Internationalisation of the renminbi

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

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

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

The other side of the coin: Creating dependencies

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

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

Conclusion

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

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

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

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

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

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

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

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The Investigator | No. 03/2026

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

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

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

Sectors under pressure

The current coercive campaign concentrates on three clusters of sectors.

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

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

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

Motives and sector choice

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

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

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

Continuity and change in Chinese coercion

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

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

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

Japan’s response

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

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

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

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

Lessons for other countries

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

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

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

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

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

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

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

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The Investigator | No.02/2026

Much has been made about the People’s Republic of China’s (PRC) motivations in launching large-scale People’s Liberation Army (PLA) exercises around Taiwan at the close of 2025, in particular its desire to express displeasure with the Trump administration’s record-breaking US$11 billion (£8.2 billion) arms sale to Taiwan and the remarks of Sanae Takaichi, Prime Minister of Japan, regarding her country’s involvement in a cross-strait conflict. No doubt these recent developments shaped the nature of ‘JUSTICE MISSION 2025’; the name given to the military exercises held between 29th-30th December. However, the PLA should not be understood as merely performative nor reactive.

The PLA’s activities in December 2024 demonstrated its ability to deploy large numbers of vessels around Taiwan without fanfare or loudly exploiting a perceived ‘provocation’ to justify its actions. During these unnamed drills, an extraordinarily large number of Chinese naval vessels (around 90) created two maritime ‘walls’. The first blocked the waters east of Taiwan and the second stretched along the First Island Chain, while PLA aircraft simulated attacking foreign naval ships.

Also important to recall is that, according to the Central Intelligence Agency (CIA), Xi Jinping, General Secretary of the Chinese Communist Party (CCP), has instructed his military to be capable of taking Taiwan by 2027. In this vein, as the United States (US) Department of War recently noted, the PLA has been ‘refin[ing] multiple military options’, and throughout 2024 ‘tested essential components of these options’ through exercises.

Thus, it seems plausible that the PLA was looking for another opportunity to refine the Chinese war machine. 2-3 big exercises around Taiwan per year had been becoming standard practice, yet, until late December, only one such exercise had taken place in 2025 – April’s ‘STRAIT THUNDER’.

Weeks before Washington even announced its bumper arms sale, Tsai Ming-yen, Taiwan’s top intelligence chief, warned that it was ‘not unlikely’ that the PRC’s military could combine routine combat-readiness activities and hold large-scale military exercises before the end of the year. It appears that this is what happened. It also seems likely that Beijing believed American arms sales would give it a plausible pretext to escalate its activities.

While the PLA conducted threatening and destabilising manoeuvres around Taiwan, Beijing and its mouthpieces promoted the line that Washington and Taiwan’s ruling Democratic Progressive Party (DPP) were to blame for rising tensions. ‘More arms sales, more danger’, Chinese state media told the world in an English-language video, linking every large-scale PLA exercise around Taiwan since 2022 to that year’s arms sale – a convenient starting point given that in 2019, the only year when the value of US arm sales (totalling US$10 billion [£7.4 billion]) came close to the recent deal, no PLA military drills were forthcoming.

With the justification for JUSTICE MISSION 2025 established, military manoeuvring could begin. Like the December 2024 drills, the People’s Liberation Army Navy (PLAN) and China Coast Guard (CCG) were deployed in tandem, blurring the lines between military and ‘law-enforcement’ activities. This time, however, there was a surge in PLA aircraft entering Taiwan’s Air Defence Identification Zone, and live fire also returned, with missiles landing in waters to the north and south of Taiwan.

The announced exercise zones around Taiwan were geographically the largest ever, encircling the island and covering critical supply routes. Five of them covered not only parts of Taiwan’s contiguous zone, but also its territorial waters (extending 24 and 12 nautical miles [nm] from the country’s coastal baseline respectively).

Prior to launching JUSTICE MISSION 2025, the PLA plainly stated that its forces would simulate ‘blockading key ports’. The drills alone affected 857 international flights and 84 domestic flights, according to Taiwan’s Civil Aviation Administration. Meanwhile, it has been argued that other assets deployed – those with anti-submarine and anti-surface vessel capabilities – simulated counter-intervention operations to support such a blockade. Indeed, the PLA promised that it would practise ‘all-dimensional deterrence outside the island chain’ – making explicit what it only signalled the previous December with its naval ‘walls’.

While the message to foreign forces was clearer, Beijing’s willingness to antagonise Washington and Tokyo appeared limited. Live firing was confined to one day, not spread across four as it was following the trip by Nancy Pelosi, then House Speaker, to Taipei in August 2022. Additionally, no exercise zone encroached into Japan’s Exclusive Economic Zone (EEZ), nor – unlike the post-Pelosi exercises – were any missiles fired into it. In fact, there was a large gap in PLA exercise zones between Taiwan and Japan’s southwestern Yaeyama Islands.

It is perhaps telling that it was not Washington which Lin Jian, spokesperson for the PRC’s Ministry of Foreign Affairs, directed his ire at when first asked about the link between American arm sales and JUSTICE MISSION 2025, but rather Taiwan’s ‘DPP authorities’ and ‘their massive...arms purchase’. ‘Anyone who tries to arm Taiwan to contain China’, gathered journalists were then informed, ‘will only embolden the separatists’.

If Beijing was sending anyone a message late last year (‘their own’ citizenry aside) it was the Taiwanese people. Bolstering its actions with fiery words and some sensational images, the CCP aimed to convince people in Taiwan of the futility of resisting unification.

While opposition legislatures blocked a special defence budget proposed by Lai Ching-te, President of Taiwan, PRC propagandists wanted to emphasise that more weapons would not make Taiwan safer. As one academic quoted by Chinese state media phrased it: ‘seeking “independence” through force is a dead end’.

Beijing also sought to bring into question the utility of the High Mobility Artillery Rocket System (HIMARS), launchers capable of delivering long-range precision strikes at coastal targets in southern China. The passing of the special budget would fund the additional acquisition of HIMARS, giving Taiwan a total of 111 units. The PLA released footage of a system operator reporting to his commanders: ‘target information of (a) HIMARS rocket launcher has been received’. Meanwhile, Chinese state media promoted the claim that the system would be like a ‘porcupine in [a] glass box’, given the detrimental impact the islands’ terrain would have on the system’s mobility. This is if additional HIMARS even arrive; during JUSTICE MISSION 2025, the CCG released its ‘Throat-choking’ poster, which depicts a Taiwanese Evergreen cargo vessel carrying the rocket launchers being intercepted and boarded (a harbinger for things to come? If so, it would be an extraordinary escalation).

This was not the only propaganda poster deployed to convey the PRC’s ability to keep outsiders out. ‘Any external interference that touches the shield will perish!’ read another poster from the PLA, featuring two Great Wall-embellished shields, while another graphic showed the Chinese military cutting off Taiwan’s international supply lines, asking: ‘How can you plot for “independence”?’

Promoting Taiwan’s armed forces as powerless to stop the PLA is another way Beijing seeks to sap Taiwanese morale. In this vein, the Chinese military shared footage, which it claimed to have captured with a drone during the exercises, of Taipei 101 followed by the line: ‘so close, so beautiful, ready to visit Taipei anytime’.

This was not an isolated incident. According to the Taiwanese military’s Political Warfare Bureau, at least 46 pieces of disinformation were circulated to aid efforts in undermining confidence in Taiwan’s government and armed forces, as well as trust in the US. One piece claimed that CCG vessels had quarantined key Taiwanese ports, while another alleged that the PLA had advanced within nine kilometres of the main island’s southern shores. ‘Troll armies’, according to Taiwan’s National Security Bureau (NSB), amplified such narratives, with some 19,000 ‘controversial messages’ pushed out on social media by 799 accounts over the course of five days.

Yet, scare stories aside, the PLA and the CCG continued to edge closer to Taiwan. Of the 27 rockets fired during JUSTICE MISSION 2025, ten landed in Taiwan’s contiguous zone, making it the closest-ever Chinese live-fire exercise. On 29th December, 11 PLAN ships and eight CCG vessels entered Taiwan’s contiguous zone, with the same numbers repeated the following day. Although Taiwanese authorities claimed that the entry of the latter eight CCG vessels was only brief, being promptly warned away, it still marked an escalation given that only one CCG vessel reportedly crossed this line during STRAIT THUNDER.

This ongoing ‘salami slicing’ not only allows Beijing to assert its expansionist territorial claims, but also heightens the risk for escalation. Taipei has long asserted that any aircraft or vessel crossing into its airspace (which overlaps with its 12nm territorial waters) would be viewed as a ‘first strike’. In the case of the PLAN encroachment into Taiwan’s contiguous zone on 30th December, Chiu Chun-jung, the Taiwanese Navy Chief of Staff, did not deny that fire control radar was locked onto a Chinese Type 052D destroyer.

Despite this growing risk, there are likely to be further large-scale military exercises around Taiwan in 2026. The PLA have been told to train, and, with Lai set to remain in office, psychological pressure on the Taiwanese public will be sustained. From across the Strait, people in Taiwan will continue to be warned of the futility of acquiring ever more advanced American weapons. Meanwhile, the PLAN and CCG look set to edge closer to the main island, normalising behaviour once considered escalatory.

Next time the skies around Taiwan are shut down, observers should not confuse the justifications offered in Beijing’s propaganda with the underlying drivers of these actions. If Chinese policymakers can find – or manufacture – a suitable pretext this year, they will likely use it to legitimise their attempts to rehearse, probe and advance their position. However, such a large-scale exercise may have to wait until after the anticipated state visit of Donald Trump, President of the US, to the PRC in April…

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

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The Investigator | No. 01/2026

In the space of the same week, but on opposite sides of the globe, world leaders sent forth their militaries. The People’s Liberation Army (PLA) – the armed forces of the People’s Republic of China (PRC) – carried out a live-fire exercise around Taiwan, while the United States (US) carried out Nicolás Maduro, the deposed President of Venezuela, from Caracas. However, connection between the two events has been greatly exaggerated.

Operation ‘JUSTICE MISSION 2025’

It is important to put both the timing and content of the PLA activity into perspective, and to strip away Chinese Communist Party (CCP) propaganda. The two-day exercise of 29th-30th December fits the pattern of the last three years. Its conduct was incremental rather than exceptional.

Chinese propaganda has pushed the suggestion that the exercise was in response to the US$11 billion (£8.2 billion) arms sale by the US to Taiwan. While it was the largest ever arms sale, it is unlikely to have been a surprise when it was announced on 18th December. Donald Trump, President of the US, has made no secret of his demand that Taiwan take greater responsibility for its defence. Lai Ching-te, President of Taiwan, has committed to raising the country’s defence budget to 3% of Gross Domestic Product (GDP) in 2026 and to 5% by 2030. The resultant increase in the supply of weapons is likely to come from the US.

An exercise on this scale would take months of preparation. Since 2022, the PRC has conducted large-scale exercises to practise invasion or blockade twice a year, once in spring (April twice and May) and once in winter (January, October and December). Another large-scale exercise was therefore on the stocks. The April exercise was named ‘STRAIT THUNDER 2025A’, which suggested a later ‘2025B’, even if the PLA substituted a more self-righteous name in ‘JUSTICE MISSION 2025’.

For propaganda purposes, the starting gun may have waited for the announcement of the weapons sale, just as in April it may have been timed deliberately after Lai described the CCP as a ‘hostile force’ and announced a raft of security measures. The CCP never misses an opportunity to reinforce the propaganda loudhailer.

Operation JUSTICE MISSION 2025 represents a continued tightening of the screw of military threat, with reports of crossings inside Taiwan’s 12 nautical mile territorial waters and large numbers of intrusions. In the Global Times, an English-language CCP news outlet – and therefore to be taken as a statement of the official line – a National Defence University professor made clear that blockading Taiwan was the focus of the exercise in three areas: nearshore (Matsu and islands close to the mainland); Taiwan island itself; and the sea (including subsea) and air to the east of Taiwan, including at long ranges.

The message was aimed at the US: the PLA will prevent help being sent to Taiwan. Graphics in Chinese media showed ships to the east of Taiwan being intercepted. In the words of the People’s Daily, the official newspaper of the Central Committee of the CCP, ‘This is a serious warning to Taiwan independence separatist forces and external interference forces.’ Given the ongoing spat with Japan over remarks made by Sanae Takaichi, Prime Minister of Japan, about conflict over Taiwan being a ‘situation threatening Japan’s survival’, Japan was also undoubtedly one of those ‘external interference forces’.

Venezuela’s relevance to Taiwan

Hours before the American operation against Maduro, a high-level Chinese delegation had met the erstwhile dictator in Caracas. In his speech three days earlier at the Symposium on the International Situation and China’s Foreign Relations, Wang Yi, Politburo member and Foreign Minister of the PRC, had said, ‘We closely follow the developments in Latin America and the Caribbean, and will firmly support LAC [Latin America and the Caribbean] countries in defending sovereignty and national dignity…’ Not that closely – not that firmly.

For Beijing, the downsides of the American action surely outweigh any upsides. The CCP has invested considerable resources in Latin America – not least around US$60 billion (£44.5 billion) in Venezuela – and must be fearful for its long-term returns. Cuba, another Chinese ally, is likely to come under severe pressure if the US prevents Venezuelan oil from reaching the island. Hitherto reliant on Venezuela for energy, Cuba could see economic collapse. For the PRC itself, Venezuelan oil imports, at roughly 4% of total imports, are not crucial.

Where the CCP will make hay is in propaganda. The American action will be further evidence for its line that the US is destroying the current world order, while the PRC is upholding it. This plays well with the so-called ‘Global South’. The CCP will brush off accusations of hypocrisy that an invasion of Taiwan is no different from the action in Venezuela. It argues that the US invaded a foreign, sovereign country, whereas Taiwan is neither: it is and always has been a part of China; thus, its ‘reunification’ – whether by peaceful or forceful means – is an ‘internal matter’. Of CCP support for Russia in its full-scale invasion of Ukraine, the less said the better.

However, the American attack on Venezuela will not make an attack on Taiwan any more likely by providing an excuse to the PRC. Rather than use kinetic war, the CCP seeks to convince Taiwan and the world that ‘reunification’ is inevitable and irresistible, through all means short of an invasion or serious blockade. Neither can be ruled out, but they would happen under conditions which are wholly unaffected by events in Latin America. Those conditions are:

• The CCP believes that the PLA possesses overwhelming military power and effectiveness, so that it can win in a very short time and avoid getting bogged down in a war against ‘fellow Chinese’;

• The US has no time to come to Taiwan’s aid, even if it wants to, and Europe and other powers have no option but to accept a fait accompli;

• The PLA has sufficient regional superiority to convince the US not to try to help Taiwan, while its military capability and confidence are sufficient to repel American attempts if it does seek to help Taiwan;

• Self-sufficiency and dominance in the production of semiconductors, so that the PRC can stomach the loss of the Taiwan Semiconductor Manufacturing Company (TSMC), which currently produces the bulk of the world’s semiconductors, and being cut off from American technology; and

• An economy sufficiently self-contained and robust to weather the inevitable plummet in trade and investment and the high likelihood of sanctions without causing a massive rise in unemployment, and thence instability and anger threatening the CCP’s hold on power.

If Taiwan declared independence, the CCP would be likely to invade whether or not the above conditions apply. However, the Taiwanese would not be that unwise.

Sadly, cross-strait relations will not enter calm waters in 2026 – the Taiwan presidential election in early 2028 is likely to make the latter part of 2027 rough, particularly if it appears likely that the Democratic People’s Party will win for a fourth successive time. The CCP will continue to raise the temperature through the normal playbook of interference, pressure and threat.

It is not beyond imagination that the PRC could, in the next few years, ‘persuade’ – by blockade, and deprivation of water and energy – the islands of Jinmen and Matsu to welcome ‘reunification’. It could even risk taking the Pratas Islands or Taiping Island (Taiwanese outposts in the South China Sea) if the tiger of nationalism which Xi Jinping, General Secretary of the CCP, has stirred up requires some meat to be thrown its way.

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

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The Investigator | No. 18/2025

Much attention has been paid to Beijing’s goose-stepping military parade on 3rd September. This, however, was only one in a series of events being held by the People’s Republic of China (PRC) to commemorate the events which saw the end of the Second World War. On 25th October, the Chinese Communist Party (CCP) will celebrate the 80th anniversary of what it calls ‘Taiwan’s recovery from Japanese occupation’. On that day in 1945, Chen Yi, a general and politician of the Chinese nationalist Kuomintang (KMT), arrived in Taiwan, which had been part of Japan’s colonial empire since 1895, to receive the surrender of the Japanese forces there.

For Beijing, this is yet another historic event which legitimises its claim to Taiwan [1], wider acceptance of which will help to justify any unilateral action it takes across the strait, as well as to delegitimise – and undermine – any opposition to it.

The Cairo Declaration of 1943, which pledged to ‘restore [...] to the Republic of China’ Taiwan and Penghu, and the Potsdam Declaration of 1945, which promised to carry out these terms, are also cited by the CCP for the same purpose. Xi Jinping, General Secretary of the CCP, has said that these two later proclamations have ‘legal effect under international law’ and ‘affirmed China’s sovereignty over Taiwan’; ‘The historical and legal fact therein’, Xi maintains, ‘brooks no challenge’.

Except they do, at least as far as His Majesty’s (HM) Government is concerned.

The British position on Taiwan’s status was formally laid out on 4th February 1955 by Antony Eden, then Foreign Secretary. According to Eden, the Cairo Declaration was merely ‘a statement of intention’. Moreover, the takeover of Taiwan by KMT forces (at the direction of Gen. Douglas MacArthur, Supreme Commander of the Allied Powers) ‘was not a cession, nor did it in itself involve any change of sovereignty. The arrangements made with Chiang Kai-shek [KMT general and President of the Republic of China] put him there on a basis of military occupation pending further arrangements, and did not of themselves constitute the territory Chinese.’

Finally, Eden explained that the outcome of the 1951 Treaty of San Francisco, in which Japan simply renounced its right to Taiwan and Penghu without assigning them to any particular state, ‘did not operate as a transfer to Chinese sovereignty, whether to the People’s Republic of China or to the Chinese Nationalist authorities.’

It was for these reasons that Eden concluded: ‘Formosa [Taiwan] and the Pescadores [Penghu] are therefore, in the view of Her Majesty’s Government, territory the de jure sovereignty over which is uncertain or undetermined.’

This did not change when the United Kingdom (UK) upgraded its relations with the PRC to an ambassadorial level in 1972, even though London made some concessions around its position on Taiwan. As negotiations between both countries concluded, Alec Douglas-Home, then Foreign Secretary, informed British diplomats on 9th March that: ‘We have not subscribed to Peking’s [Beijing’s] claim that Taiwan is a province of China. The statement in “acknowledging the position of the Chinese government that Taiwan is a province of the People’s Republic of China” does not imply acceptance of the Chinese claim.’

As far as Her Majesty’s Government was concerned, Home would go on to clarify: ‘…we have long held that sovereignty over Taiwan is undetermined. We have held this view since the Japanese peace treaty provided for the relinquishment of sovereignty by Japan in 1951 and believe that it remains legally correct.’

Given that HM Government stated in December 2024 that ‘the UK’s longstanding position on Taiwan, as set out in the 1972 Communiqué, has not changed’, in addition to still only ‘acknowledging’ Beijing’s claim, this presumably means that HM Government continues to believe that Taiwan’s legal status is yet to be decided, or certainly that it was not decided during the events which ended the Second World War.

If so, why not say as much?

Last month, the United States (US) called out Beijing’s motives. The American Institute in Taiwan told Reuters that ‘China intentionally mischaracterises World War Two-era documents, including the Cairo Declaration, the Potsdam Proclamation and the Treaty of San Francisco, to try to support its coercive campaign to subjugate Taiwan.’ Washington’s de facto embassy also made clear its view that: ‘Beijing’s narratives are simply false and none of these documents determined Taiwan’s ultimate political status’.

Britain is, however, in a trickier position. In 1972, in order to exchange ambassadors with the PRC, the UK tied its own tongue. As Home also explained to British diplomats: ‘we have…privately agreed with the Chinese that we shall no longer express in public the view which we have long held that sovereignty over Taiwan is undetermined’.

This should change.

For one thing, it is unbecoming for British ministers to silence themselves indefinitely, especially when Beijing’s representatives in London repeatedly – and falsely – claim that: ‘the UK government clearly recognised the Chinese government’s position that Taiwan is a province of China.’

Presumably, HM Government would not stand by and allow Russia to misrepresent the UK’s position on Ukraine’s sovereignty. Nor is it likely that London would not respond if Moscow misused historic statements or agreements, which Britain had been party to, to give succour to their expansionist claims.

Another clarification will, most likely, have to come at some point. The UK’s private assurance was the product of, as one official working on the agreement later described it, ‘fudging’. And a fudge can only last so long.

Some officials at the time may have thought that the issue would resolve itself once the PRC and Taiwan quietly unified – not an unreasonable assumption when the dictatorships on both sides of the strait resolutely believed in ‘One China’. But Taiwan is now a democracy, and one where a distinctive Taiwanese identity has flourished. No government in Taipei is going to hand over its country unless, perhaps, under extreme pressure. Will Britain only speak out when Taiwan is quarantined or blockaded, or when the People’s Liberation Army (PLA) – the PRC’s armed forces – are amassing along Fujian’s coast?

And what weight will such a last-minute intervention carry? Could a significant proportion of global opinion be swayed so late in the day as to help constrain the Chinese leadership? It seems unlikely, particularly when Beijing will have done more and more beforehand to gain legitimacy for its expansionist claims.

The UK, alongside the US, is well placed to push back against this Chinese ‘lawfare’. As a respected voice on matters of international law, and a leading member of the wartime Allies, what London says carries weight.

Beijing’s current efforts to use the events of 80 years ago to give validity to its expansionist desires mirror its ongoing efforts to distort United Nations Resolution 2758. Indeed, these efforts prompted HM Government to call out the CCP’s attempt to ‘rewrite history’ and state Britain’s own position clearly for the first time. If there was merit in clarifying the legal and political implications of this 1971 vote, then the same is surely true of the Cairo Declaration and other Second World War events and documents.

A clarification will not please Beijing, whose officials were quick to condemn the American Institute in Taiwan’s remarks. But then again, this is the same regime which, last month, performed ‘constructive kills’ against a Royal Navy frigate transiting the Taiwan Strait, and is also currently fuelling a brutal war of aggression on European soil. Bilateral relations cannot, and should not, be good.

Of course, if Chinese officials did protest about the breaking of a promise, they may want to be reminded of the Sino-British Joint Declaration of 1984, which was supposed to guarantee Hong Kong’s high degree of autonomy until 2047. What was it that the Foreign Ministry of the PRC called this legally binding treaty? A ‘historical document’, which ‘no longer has any practical significance…’

1. The ‘undeniable proof’ cited by China Global Television Network, a Chinese state media outlet, is an internal KMT message sent to Chiang Kai-shek from Chen Yi on 26th October 1945, which states that Taiwan had been returned to the motherland. Wang Weinan, Executive Deputy Director at Shanghai Jiao Tong University’s Centre for Taiwan Studies, claims that similar words used by Chen Yi during the ceremony also meant: ‘The Japanese surrender in Taipei on 25th October 1945 essentially functioned as a ceremony restoring China’s sovereignty over Taiwan and the Penghu Islands.’ He argues that acceptance of the Potsdam Declaration in the surrender broadcast made by Hirohito, then Emperor of Japan, on 14th August 1945, and the Japanese Instrument of Surrender, co-signed by nine countries on 2nd September 1945, ‘elevated the declaration from a one-sided declaration from the Allied forces to a legal contract accepted by both sides who participated in the war’.

   Her Majesty’s Government’s view of Taiwan’s legal status in regards to the Japanese surrender was outlined in a 1955 Foreign Office research department paper. It reads (emphasis added):

   The Japanese Emperor accepted the Potsdam terms and the Japanese surrender was received on September 25, 1945, by General MacArthur “for the United States, the Republic of China, the United Kingdom and the USSR and in the interests of the United Nations at war with Japan”. The Japanese forces in Formosa were then instructed to surrender to Generalissimo Chiang Kai-shek which they did on October 25, 1945. Japanese acceptance of the Potsdam declaration did not affect a change regarding the sovereignty over Formosa and the Pescadores, but merely constituted an advance recognition and acceptance of such steps as the Allies might eventually take for the purpose. Therefore, in law, Formosa’s special status was that of enemy territory under military occupation. Chiang Kai-shek assumed the administration of Formosa responsible to the whole body of the Allies pending the conclusion of a Peace Treaty, or if the status of Formosa was not finally settled by that treaty (which it was not), pending an eventual settlement.

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

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The Investigator | No. 17/2025

Beijing pursues a unique industrial policy for commercial reasons, but also domestic, economic and geopolitical ones. It supports an unusually wide swathe of industries and firms at a huge and unprecedented cost in order to dominate new technologies, support economic growth and increase the People’s Republic of China’s (PRC) footprint in the so-called ‘Global South’ through exports and technology.

Like other nations, it wants to insulate itself from strategic vulnerability, and become self-reliant in key sectors. Like few others, it seeks to capitalise on its mercantilist interests. Yet, this misses the broader context. The PRC’s industrial policy is a state-backed effort to knock the United States (US) off the perch of global technological leadership, by dominating what Xi Jinping, General Secretary of the Chinese Communist Party (CCP), refers to as the ‘fourth industrial revolution’, involving new technologies in Artificial Intelligence (AI), big data, quantum computing and biotechnology. Unlike other nations, which used industrial policy to catch up to rivals, the PRC wants to leapfrog them.

Beijing’s industrial and commercial successes in, for example, electric vehicles (EVs) and batteries, and climate change mitigation manufacturing, are often put down to industrial policy programmes, but top-down industrial policy only started in the mid-2000s. The seeds of private sector industrial success were sown much earlier, when market reforms, entrepreneurship and the private sector were all encouraged under the ‘Reform and Opening Up’ campaign.

From roughly 2006 to 2015, the CCP picked sectors, and defined strategic emerging industries to be new drivers of economic growth under the slogan ‘indigenous innovation’. From about 2016, Beijing set out to control the evolving technological revolution, incorporating communications, data and AI under the banner of the ‘Innovation-Driven Development Strategy’. It also became more explicit about wanting to take on the leadership of the US, and emphasised a new campaign known as ‘Made in China 2025’, with a ten-year goal of making the PRC a manufacturing superpower.

Since 2020, self-sufficiency has been a national goal. Scientific and technological self-reliance were incorporated into the 14th Five-Year Plan (2021-2025), with the goal of cutting the PRC’s reliance on foreign technology and dependence on imported resources as quickly as possible.

The price tag for the PRC’s industrial policy is eye-popping, even though it is difficult to estimate many of the more opaque forms of industrial assistance and funding, and impossible to quantify the cost of other factors.

A recent report from the International Monetary Fund (IMF) suggested the cost at 4.5% of Gross Domestic Product (GDP) – already a substantial multiple of what the largest Organisation for Economic Cooperation and Development (OECD) economies spend. Yet, the IMF was not able to estimate local government subsidies, government venture capital funds, below-market borrowing, energy costs, implicit financial guarantees and a host of other ways in which the party-state supports industries.

The full range of industrial policy initiatives and funding is most likely at least 5%, more likely 7-8%, and possibly an even higher proportion of the PRC’s US$20 trillion (£15 trillion) GDP.

We know a lot about the PRC’s industrial leadership, for example, in high-speed rail, EVs, nuclear reactors, green energy, sophisticated electronics and, to a degree, aerospace. A lot of attention has been drawn to the successful EV manufacturer BYD, but in EVs, we find some revealing contrasts.

BYD, which has a roughly 30% market share in the PRC, is one of few very successful EV manufacturers to have emerged from a 15-year-old strategy. At its peak, CCP largesse attracted about 500 firms into the sector, but the number is now down to between 150 and 200, and still too high. BYD remains a large recipient of subsidies. It and nine other firms have a 65% market share, with the rest unprofitable and scrapping over minuscule shares of the market.

The EV sector shines a bright light on the handful of successful firms, but a dark shadow over endemic problems such as waste, corruption, loss making, overcapacity and deflation, with far-reaching consequences both at home and for the world economy. Nor has industrial policy succeeded in pulling the PRC out of a productivity funk, and it may actually be contributing to it as a result of the survival of loss-making firms, the abuse of political connections to get access to assistance and, generally, the triumph of rigid centralisation and conformity over competition and market incentives.

Although overcapacity features strongly in real estate, the immediate concern now is in goods and services, including EVs and lithium batteries, photovoltaic cells and wind turbines, building materials, metals processing, digital finance, semiconductors, and standard medical devices and pharmaceuticals.

Earlier this year, Beijing’s leaders, from Xi downwards, urged companies and sectors to desist from destructive competition and price cutting. They have invoked the term ‘involution competition’ to emphasise concerns about excess production, anti-competitive business practices, diminishing returns, losses and aggravated deflationary pressures. Yet, it is doubtful that the CCP’s rhetoric will gain traction when it is the CCP which is channeling resources to and prioritising firms and industries, creating incentives to conform rather than compete, and setting unrealistically high growth targets for the economy, thus encouraging ever more investment and production.

The implications for global trade and the world economy are concerning.

Surging exports have become a poorly appreciated global problem. Even though trade news in 2025 has been dominated by the tariffs introduced by Donald Trump, President of the US, the larger threat to world trade and the world economy derives from the rising likelihood of a backlash against Beijing’s ‘dumping’ of its overcapacity via trade.

The PRC’s global footprint is already huge. It accounts for a third of global manufacturing. From a standing start a decade ago, the PRC’s share of global EV sales has surged to over 50%. It accounts for half of global shipping tonnage built annually, 60% of wind turbines manufactured and 80% of solar panels, and is the biggest exporter of steel in the world. It also has a chokehold, for now at least, on the processing of rare earth metals and magnets. The PRC’s trade surplus is running at about 5% of GDP, with the manufacturing surplus about twice as big. Chinese mercantilism resides strongly in the vigorous pursuit of export growth and stagnant imports.

While the US and European Union (EU) have both developed sophisticated governance infrastructures to police, contain or discourage Chinese exports and direct investment in sensitive areas, as well as control exports of sensitive goods, the eye-catching development has been the recourse to an array of trade defence measures by emerging and middle-income countries in the so-called ‘Global South’, and for which the PRC is their biggest or leading trade partner. These include Mexico, Turkey, Brazil, India, South Africa, Vietnam and Thailand, which harbour varying concerns about unfair competition, but also an angst about premature deindustrialisation if significant flows of low-priced Chinese exports continue to threaten local firms and industries.

In some important ways, the PRC’s economic status and industrial prowess are reminiscent of Japan in the 1980s and 1990s, when, despite having an industrial structure and slew of dynamic firms which were the envy and fear of the world, it nevertheless succumbed to a major macroeconomic shock, from which its leading industrial and financial firms could offer no protection.

Japan’s experience shows how two things can be true at the same time. An economy boasting world-class firms and striking accomplishments in innovation can also be one in which systemic imbalances, bubbles and overcapacity, political contradictions and institutional rigidities run too deep for the most impressive firms to deliver durable and stable growth. Great firms and strong top-down industrial policy do not protect an economy against bad macroeconomic policy outcomes.

Technological islands of excellence are no substitute for good macroeconomic governance and well-institutionalised technology ecosystems that diffuse benefits throughout the economy – neither of which constitute Beijing’s strong points. As global trade tensions and fragmentation continue to evolve in years to come, the international backlash against the PRC may well become a catalyst for increased instability.

With the 15th Five-Year Plan (2026-2030) expected to be approved by the CCP Central Committee in coming weeks, it is fair to assume that industrial policy will retain its central role in Chinese policymaking. This is likely to make Beijing’s domestic economic problems worse, and give rise to increasing pushback against the PRC’s export of large volumes of goods and its domestic overcapacity. For the world, this is far more threatening than Trump’s tariffs.

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

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The Investigator | No. 16/2025

On 3rd September, the Chinese Communist Party (CCP) will celebrate the 80th anniversary of the end of what it calls – with Chinese characteristics and prolixity – the Chinese People’s War against Japanese Aggression, a part of the World Anti-Fascist War (the Second World War). In the past, 15 parades have been held on 1st October – the People’s Republic of China’s (PRC) ‘National Day’ – and only one explicitly military parade on 3rd September, the day after Japan’s surrender in Asia. That parade, in 2015, was the initiative of Xi Jinping, General Secretary of the CCP and also Chairman of the Central Military Commission (CMC), therefore commander of the People’s Liberation Army (PLA) – the armed forces of the PRC.

The CCP rightly points out that the Chinese have never been given sufficient credit for their contribution to the victory in the Second World War. They fought for 14 years, suffered 35 million casualties and tied down well over a million Japanese troops and their materiel; resources which would otherwise have been deployed against the Americans in the Pacific and the British in Burma.

Yet, 80 years after the end of the war, such a parade seems out of place to many outsiders, for whom reconciliation has long replaced hostility. For the CCP, the effort and expense are not without reason, nor without the sacrifice of truth in the service of propaganda. The Chinese Civil War continued for much of the 14 years of resistance. The bulk of the fighting was carried out by the army of the Nationalist Party, also known as the Kuomintang (KMT), while the CCP kept its powder dry for the eventual struggle with the KMT. Even Mao Zedong, founder of the PRC, wryly acknowledged this: when Kakuei Tanaka, then Prime Minister of Japan, apologised in 1972, he quipped that without the invasion, the communists would still be confined to the hills by the KMT.

Why is the CCP holding the parade?

In June, the State Council Information Office held a press conference to introduce the overall arrangements for the commemorations of the 80th anniversary. It listed the following purposes of the parade:

• To highlight the pivotal role of the CCP in the war. ‘To demonstrate China’s responsibility to resolutely safeguard the results of victory in the Second World War…and to actively promote the building of a community with a shared future for mankind…To unwaveringly uphold world peace.’

• To demonstrate the political awareness of the PLA and its obedience to the party (it is important to note that the PLA has always been the party’s army, not a national army).

• To showcase the PLA’s progress in modernisation, battle readiness and becoming a world-class force, capable of integrated joint operations, mastering new technologies and forms of warfare, and winning future wars.

• To inspire the party, PLA and people of all ethnic groups ‘to unite more closely around the Party Central Committee with Comrade Xi Jinping at its core…and to…build a strong nation and achieve national rejuvenation through Chinese-style modernisation’.

It is interesting to contrast this with an explanation published in the People’s Daily, a CCP-administered newspaper, in 2015. Its considerable candour applies equally to 2025:

• ‘To demonstrate China’s military strength. Currently, great power competition has reached a critical juncture, and the room for compromise and manoeuvring between major powers is shrinking. This is reflected in specific international events, such as the rift between the US [United States] and Russia, and between Europe and Russia over Ukraine, and the currency wars in which countries refuse to give in…Only with this hard power can we instil fear in our opponents in international competition, secure cooperation from our partners, and steer the strategic landscape in our favour.’

• ‘To deter Japan and demonstrate to the world China’s unwavering resolve to maintain the postwar world order…In recent years, fuelled by the US’ return to the Asia-Pacific region to contain China, Japan has become increasingly aggressive towards China. Not only has it ‘nationalised’ the Chinese territory of the Diaoyu Islands, it has also attempted to deny history and its aggression against China, and is showing signs of returning to a militaristic path. These actions indicate that Japan is attempting to subvert the post-World War II international order and change its status as a defeated nation.’

• ‘To showcase the military’s appearance, spirit and weapons to the Chinese people, building confidence and increasing their sense of pride…[which] is particularly crucial during China’s period of deepening institutional reform and economic restructuring.’

• ‘To demonstrate to corrupt elements that, in addition to the ‘sword handles’ of the Discipline Inspection Commission and the political and legal system, the ‘sword handle’ of the People’s Liberation Army is also firmly in the hands of the Party and the people.’

Perhaps unsurprisingly, this aggressive – and honest – piece has been scrubbed from the internet, as have official records of the 2015 press conference which introduced the parade to domestic and foreign journalists. A decade on, candour is not invited to the parade.

The purposes of this year’s parade encompass all of the above. In sum, Xi wants to reinforce the party’s legitimacy and claims to have ended the so-called ‘century of humiliation’ of foreign semi-colonial behaviour in the PRC; to remind the people that the PLA is the party’s army, which will maintain the CCP in power; to send a message of deterrence to other countries that the PRC is not to be messed with, whether regionally (the East and South China Seas) or globally; and to convince Taiwan that resistance is futile and ‘reunification’ inevitable.

To strengthen the last two intentions, there is consistent emphasis that ‘all the weapons and equipment on display in this parade are domestically produced, active main battle equipment’; and on displaying ‘all types of capabilities, including command and control, reconnaissance and early warning, air and missile defence, firepower, and integrated support.’

Likely domestic reactions

The parade is not the only activity. At the June press conference, Hu Heping, Deputy Minister of the Propaganda Department, emphasised ‘focusing on mass participation’. Other events will commemorate the start of hostilities with Japan in 1931 (18th September), the liberation of Taiwan (25th October), and the Nanjing massacre (13th December). Commemorative medals, stamps and coins will be issued, and a new batch of war sites certified. All regions and departments are to ‘leverage the role of various grassroots cultural platforms, and widely organise themed, diverse and educationally meaningful mass commemorative activities…such as laying wreaths, visiting memorial facilities, paying respects to martyrs’ tombs and holding public memorial services.’ Education, literature, music and online activities are to be pressed into service, and Hong Kong, Macao and Taiwan ‘compatriots’ will hold a symposium.

Given the system and controls on society, any taking of the temperature of public reaction is impossible to measure, but the likelihood is that the parade will be generally well-received. Most Chinese people will be uplifted by patriotism and nationalist fervour. Inevitably, some will contrast the expense and the pomp with the current economic malaise, unemployment and falling living standards.

Foreign participation and likely reaction

In 2015, approximately 1,000 foreign troops in eleven contingents took part in the parade. This year it seems none are invited, not least perhaps because a Russian contingent would look bad as the full-scale invasion of Ukraine grinds on.

Nor will the list of attending heads of state, ministers and other dignitaries match 2015 in breadth. The Shanghai Cooperation Organisation (SCO), a CCP-led economic and security organisation positioned as a counterweight to the North Atlantic Treaty Organisation (NATO), concluded its meeting in Tianjin on 1st September, and many leaders of member countries will stay on. But so far, it appears that from the European Union (EU), only Robert Fico, Prime Minister of Slovakia, will attend, and no ministers. In 2015, former democratic national leaders such as Sir Tony Blair, former Prime Minister of the United Kingdom, attended; this year they will not. Even EU ambassadors are said to be boycotting the event, while the Japanese government is reported to have asked European and Asian countries to refrain from attending, in blunt contrast to ten years earlier when Shinzo Abe, former Prime Minister of Japan, kept quiet but stayed away because of ‘his schedule in parliament’.

One leader who was absent in 2015 but will be present this time is Kim Jong Un, Supreme Leader of North Korea. Relations, bad a decade ago, have since strengthened.

Foreign analysts will look for indications that Xi’s control over the military is shaky or firm (this author believes the latter), and similarly for his health. The main take away will – or should – be that however much the CCP declares its peaceful intentions and a ‘community of shared future for mankind’, it is a regime ultimately reliant not on the support of the people, but on military might; and that such might could one day be directed against free and open countries. They should also consider that the PLA is not the only threat, but a more visible one than sub-threshold actions such as interference, cyber warfare, creation of dependencies and more.

Perhaps the last word should go to George Orwell, taken from his essay ‘The Lion and the Unicorn: Socialism and the English Genius’, for whom ‘The goose-step, for instance, is one of the most horrible sights in the world…It is simply an affirmation of naked power’ to be associated with totalitarian states. ‘Why is the goose-step not used in England?…because the people in the street would laugh’. They won’t in Tiananmen.

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

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The Investigator | No. 15/2025

New regulations on central decision making bodies

Speculation about the June politburo meeting readout is feeding rumours of Xi Jinping, General Secretary of the Chinese Communist Party (CCP)’s ‘weakening’ hold on power. The readout announced that the politburo had reviewed new ‘Regulations on Party Centre Decision Making, Discussion and Coordinating Body Work’ [‘党中央决策议事协调机构工作条例’].

This speculation hangs on two ideas. The wilder of the two is that some elusive group of actors has decided to establish a new body above Xi. This is based on a misreading of the first line of the readout – a boilerplate introduction to the topic at hand, not a declaration of a new power centre being established. The second is that these regulations are designed to rein in Xi’s power by placing it under institutionalised constraint.

Both readings ignore basic facts and two ongoing, well-documented trends: centralised CCP decision making nudging out the state, and ‘rule-based rule of the party’ [‘依规治党’]. Linking the readout to speculation about Xi’s ‘decline’ misses an opportunity to examine the regulations’ significance for the People’s Republic of China’s (PRC) evolving political system. While analysis of Xi’s impact on the system rightly points to power ‘centralisation’ and ‘personalisation’, less is known about how the CCP and its leader use power once it has been centralised. The regulations – not yet released – are likely part of the party centre’s ongoing task of modifying institutions to help it put centralised power into action.

To be clear, the politburo meeting readout contains nothing shocking. The party centre has long been planning to formulate the regulations in question. We know this because they were mentioned in April 2023’s Central Intra-Party Regulations Formulation Work Plan Outline (2023-2027) (hereinafter ‘Party Regulations Formulation Outline’).

What is ‘centralised power’ without rules to use it?

These planned regulations are part of Xi’s longstanding pet project to govern the CCP and the PRC by rules – his macro-plan combines ‘rule-based rule of the party’ and ‘law-based rule of the country.’ On coming to power, Xi spoke of the party’s need for rules to rein in the party’s excesses and avoid the existential threat of a breakdown in the party-people relationship, and he has been making rules ever since.

Xi has made rules about making rules – stipulating how party regulations can be formulated and by whom – and has made rules to put his fellow party members’ authority ‘in a cage’ [‘把权力关在笼子里’]. He has used rules to his advantage, giving himself maximum flexibility for pushing through decisions and to remould the party’s internal workings, creating new incentive structures, and making himself the ‘core’ with whom all must ‘align.’ He has used rules for everything; from dictating how many dishes cadres may serve when entertaining to delineating party powers to manipulate the state.

Xi takes rules, and their use for creating governance mechanisms, seriously. He regards them as integral to ‘modernising’ Chinese governance. In 2019, a Central Committee Plenum document resolved to ‘better translate China’s institutional strengths into national governance efficacy.’ The document called for ‘strengthening the role’ of the bodies involved in the controversial politburo readout, improving mechanisms for ensuring party centre decisions are implemented and ‘strictly enforcing’ the instruction requesting and reporting system – a little-discussed system of longstanding importance to the party’s internal workings which is discussed later in this article.

Xi has used rules not only to maximise his concentration of power, but also to facilitate its use. The Central Military Commission ‘Chairman in Charge’ system [‘中央军委主席负责制’] is a case in point. While analysts stress Xi’s being ‘in charge’ – and his ultimate authority to make decisions – his attempt to create a whole set of rules and mechanisms to facilitate this decision-making role go under the radar. For instance, the ‘three mechanisms’ developed through intra-party rules seek to serve the Chairman’s decision making capabilities.

What are Party Centre DDC bodies?

Party Centre Decision Making, Discussion and Coordination bodies (DDC bodies) form a level of authority which shifts major decision making upwards, away from state institutions. Some were originally ‘Leadership Small Groups’ transformed into commissions under the 2018 institutional reform. Their upgrade sought to ‘strengthen the Party Centre’s centralised, unified leadership over major work.’ Others, such as the Central Science and Technology Commission (CSTC), were established directly as commissions.

Though researchers refer to the new regulations as the ‘regulations on the Work of the Party Central Committees [DDC bodies]’, the document’s official title uses ‘Party Centre’ [‘党中央’], not ‘Central Committee’ [‘中央委员会’]. This reflects the nature of Party Centre DDC bodies: they are beholden to the 24 men of the politburo or the seven men of its Standing Committee (PBSC) and not to the larger Central Committee. Xi himself, as General Secretary, has direct control over the topics of DDC body meetings, either deciding on, or giving the go-ahead to, a meeting.

On the functions of Party Centre DDC bodies, the language from the June politburo readout is almost verbatim that of the aforementioned Party Regulations Formulation Outline. The Outline stated that such regulations are needed to help DDC bodies fulfil their functions of: ‘top-level design, choreographing and coordinating, integrated promotion, and monitoring and urging implementation’ [‘顶层设计, 统筹协调, 整体推进, 督促落实’] of major work. This is precisely the language used in the 2020 Central Committee Work Regulations, which stipulate the Central Committee’s power to create DDC bodies. The politburo readout uses the same ‘4x4’ character expression. This language is also used for the specific DDC bodies. The 2023 institutional reform plan describes the then-new Central Finance Commission’s functions in exactly the same way. The PRC Law on Foreign Relations grants the same functions to the Central Foreign Affairs Commission.

The new regulations will complement or adjust existing rules. Said rules themselves reveal something of these elusive power centres’ workings. Xi’s ten-year rule making spree has reinvigorated the Instruction Requesting and Reporting system [‘请示报告制度’] (IRR). The IRR lets lower ranking bodies request instructions from senior organisations and report back up on implementation. It enables party entities to respond to eventualities on the ground in their locality or policy field, although it can also create logjams.

At least since 2019, DDC bodies – and their leaders individually – have been permitted to play the role of IRR responders. This may be a way of delegating party centre authority while helping facilitate calibration of policies with central requirements. It could also help with the apparent spike in IRR requests resulting from a decade of relentless campaigns, pervasive punishments and strict demands for alignment with party centre policy, which has left officials ‘lying flat’ or looking for other ways to avoid culpability. DDC bodies have been ordered to create detailed and specific rules for implementing IRR in their own fields. This could amount to substantive power delegation to the heads of DDC bodies’ implementing offices.

The respective arrangements of the Central Foreign Affairs Commission (CFAC) and the CSTC serve as useful discussion points. Wang Yi, CFAC Office Head, holds triple roles, also serving as a politburo member and Minister of Foreign Affairs. This links CFAC decisions directly to the principal state implementing agency. With Wang heading both the Ministry of Foreign Affairs (MFA) and the CFAC Office, he can implement CFAC decisions through both the MFA and through coordinated action with other CFAC member ministries. Wang’s position as CFAC Office Head may be an authoritative lever to press other agencies to coordinate with the MFA. While the CFAC-MFA setup may be an outlier (due to the demise of Qin Gang, Wang’s predecessor), the CSTC’s arrangements are similar. Yin Hejun, Minister of Science and Technology (and Central Committee member), reportedly doubles up as CSTC Office Head, allowing CSTC decisions to flow directly to the Ministry of Science and Technology and giving Yin the lever of CSTC Office Head to help coordinate the implementation of CSTC decisions.

Xi ‘in decline’ or delegated powers being refined?

Returning to the politburo meeting readout, considering the powerful role of DDC Office Heads it is unsurprising that regulations should require DDC bodies to ‘coordinate, not stand in for, and perform as required, not overstep’ [‘统筹不代替、到位不越位’]. While speculation sees this as a ‘direct criticism of Xi’, it is more likely that the relevant provision seeks to regulate the power delegated by the Party Centre. Notably, Xi has himself used the expression in relation to the Central Comprehensive Law-based-rule Commission.

Overlooking subnational practice misses a chance to reflect on assumptions. Countering the notion that, from the politburo readout, ‘some language could reasonably be read as Xi being shunted aside’, provincial-level party committees are repeating that very same language in a promise to do better. Shanxi, Chongqing and Xinjiang, for example, declared that they will ‘study the spirit’ of Xi’s ‘important [politburo meeting] speech’ and improve the practices of their subnational DDC bodies. They will produce ‘realistic and effective policy measures’ [‘切合实际、行之有效的政策举措’] – a line also in the politburo meeting readout – and better regulate DDC body establishment and operation under their jurisdiction to ‘ensure implementation of Party Centre decisions.’ Provincial-level party committees have the power to make intra-party regulations. It appears communications about the Party Centre Regulations are prompting them to follow suit and make implementing documents to tighten up on local DDC body practice.

The regulations are likely less a signal of Xi’s waning star and more a run-of-the-mill move to hammer out the details of how the CCP uses the power it has centralised under Xi’s first two and a half terms. It may be that the Party Centre (or members thereof) will attempt to have the regulations’ content incorporated into the Party Charter at the 21st National Party Congress in 2027. This would give the CCP ‘constitutional’ credibility to the use of DDC bodies in governance, consolidating their place in the New Era Party bureaucracy.

Dr Holly Snape is Lecturer in Politics at the University of Glasgow.

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The Investigator | No. 14/2025

The Trump administration is trying to curb unfair and abusive Chinese trade practices; practices exacerbated since Beijing’s accession into the World Trade Organisation in 2001. A response to the tariffs imposed by Donald Trump, President of the United States (US) has been the restriction of rare earth mineral exports to the US.

Dependence on the People’s Republic of China (PRC) for critical and rare earth metals and minerals is a major energy and national security risk for the US, the United Kingdom (UK) and other nations. Beijing not only controls a massive component of the upstream value chain and production of raw critical minerals, but also – more importantly – it controls nearly all of the downstream refining and processing for most critical metals and minerals. Britain, America and most advanced nations do not refine and process the vast majority of rare earth metals and minerals.

The UK and US are almost entirely dependent on the PRC for gallium. Gallium was placed under export restrictions by the PRC in August 2023. It is used in semiconductors, photovoltaics for solar panels, and batteries, among other uses.

Some politicians and business leaders in the free and open nations are working on initiatives to reduce their dependency on the PRC for these materials. The Minerals Security Partnership is an example of this, but significantly greater efforts are needed to tackle this unbalanced global metals and minerals problem.

An immediate and proactive approach, which includes not just sourcing the raw metals and minerals, but refining and processing them, is essential to start rebalancing the market and take away the PRC’s control of metals, minerals and the finished products (such as batteries). The impact of this is far-reaching, and extends to auto manufacturing and military hardware. Refining these metals is energy intensive. Energy – power generation specifically – is needed to refine and process these metals and minerals. The PRC has abundant, reliable and cheap coal-fired power generation, which underpins its ability to process and refine metals and minerals.

In the recent US-PRC talks hosted in London, Beijing used its rare earth exports as leverage, claiming ‘difficulties’ in processing. America has realised that the PRC aims to dominate science and technology in its race to become the global hegemon, utilising unfair business practices as necessary. This is why the US is trying to curb the PRC’s access to sensitive technologies, including computer chips.

The desire of nations and politicians to have low-priced batteries and refined rare earth metals from the PRC is a short-term destructive trap which must be ended. Unless Britain, America and other liberal democracies begin producing and refining these metals and minerals in significant quantities, Beijing will maintain control of both production (refining and end products) and pricing. This was observed in 2010 and 2011, when prices of the heavy rare earth dysprosium increased 26-fold. This was triggered by a territorial dispute between the PRC and Japan, where Beijing used its export controls as geopolitical leverage.

London recently hosted trade talks between Beijing and Washington. His Majesty’s (HM) Government presented it as a ‘diplomatic win’ for the UK, believing that Trump’s advisers chose London because it is ‘geopolitically in the right place right now to act as bridge and facilitator’. The notion of Britain acting as a bridge between the two rival powers is a theory which Whitehall may wish to propagate.

The talks in London restored rare earth and magnet supplies for civilian US industries with a fast-track system, valid for six months. It included neodymium, praseodymium and dysprosium; all vital to electric vehicles, wind turbines and electronics. Military-grade materials, such as titanium sponge, nuclear-grade isotropic graphite, germanium and gallium, remain off the table. The PRC is using this as leverage to pressure America on chips, artificial intelligence (AI) and export restrictions.

As the PRC continues to wield its rare earth leverage to gain advantage in critical areas, the UK and US must get serious about the real long-term threat of the PRC, especially as it pertains to energy. After all, energy underpins AI. The PRC’s coal-fired power generation is what powers its AI, manufacturing centres, and refining and processing of rare earth metals and minerals.

HM Government’s recent nationalisation of British Steel from Chinese ownership is one example of a very positive move by democratic governments in reclaiming the most critical sectors of their industrial manufacturing base. The same measures need to be applied to energy, specifically traditional fuels such as oil and gas.

Britain’s special relationship with America, as the largest oil and gas producer in the world, needs to be utilised. The UK can increase domestic energy security and economic security by increasing purchases of US natural gas and oil. Natural gas is an extremely reliable and energy dense fuel which provides stable and distributable power. With access to more LNG (Liquified Natural Gas) from America, Britain could build out its power generation, lower electricity and energy prices for UK consumers, increase energy security and begin to rebuild its manufacturing base.

The US exports over four million barrels of crude oil per day. Britain could be taking more of this oil. As well as this, America exports about 14 billion cubic feet of natural gas per day in the form of LNG, with ambitions to export far more. The UK could dramatically increase imports of US LNG, strengthening the trading relationship with America as well as the implicit security relationship which comes from increased energy shipments. Increased access to US LNG alone could allow Britain to reduce domestic energy costs and stem the decline of the industrial base, directly supporting defence. This is the type of win-win which both the UK and US need to look for in long-term competition with Beijing.

Trisha Curtis is a macroeconomist with expertise in US shale markets, geopolitics, and China. She is the CEO of PetroNerds, host of the ‘PetroNerds’ podcast, and an economist for the American Energy Institute.

Grace Theodoulou is the Policy Fellow at the China Observatory at the Council on Geostrategy.

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The Investigator | No. 13/2025

On 9th May in Geneva, the United States (US) and the People’s Republic of China (PRC) agreed to reduce their respective tariffs by 115% for 90 days. Within a month, this truce in the ‘trade war’ broke down. The recent bilateral trade talks hosted in London on 9th-10th June appear to have restored the Geneva status quo. Although details of the agreement have not been revealed, the Chinese Communist Party (CCP) has seemingly relaxed restrictions of rare earth exports in return for American agreement to remove export bans on certain technologies, ethane (important for plastics) and civil aviation components.

A truce is not a peace treaty. The Geneva agreement may have been shored up until 9th August, but American tariffs of 30% and Chinese tariffs of 10% remain. Donald Trump, President of the US, likes tariffs, and perhaps ones higher than 30%. Moreover, none of the underlying systemic trade issues worrying to both the US and Europe have been addressed.

Broader than a trade war

More pertinently, despite the media’s soubriquet of ‘trade war’, this is a broader, deeper conflict. The ‘win-win’ language of the CCP’s propaganda department is for foreign consumption. Internally, the party talks of a long ‘struggle against hostile forces’; of the science and technology war being more serious than the trade war; of the need to repudiate liberal democratic values, political and economic systems, media and civil society freedoms. As the CCP emphasised in the leaked ‘Document No. 9’ of April 2013, this is an ideological struggle. These elements add up to a geopolitical war; a new Cold War in which the CCP claims that the US is ‘containing and suppressing’ its rise, while in the US there is bipartisan agreement that the PRC is a threat to its global power, interests and values. Both sides are correct. Many third countries fail to recognise this reality.

Neither side emerged from the London talks as a winner. Both have stepped back from the brink – for the time being. The CCP’s legitimacy is largely based upon satisfying the people’s economic aspirations. The economic model is over-reliant on exports. The trade war adds to existing economic problems, especially unemployment. Rising unhappiness among the people could lead to unrest directed at the party, perhaps in a more virulent form than what happened when Covid-19 restrictions became unworkable. Better to retreat and concentrate on the longer-term science and technology war. The power of the PRC’s weaponisation of rare earth exports has become all too plain for the US and its companies, who have suffered the economic consequences.

Countries will be forced to choose sides

This glint of the sword before it was re-sheathed (in the famous expression ‘hide and bide’ [韬光养晦], the first two characters reflect this meaning) was also evident to European and other American allies. The rare earth exports squeeze made the pips squeak in European car and wind power companies. Beijing, whose ‘difficulties’ processing rare earth exports authorisations seemed to disappear after the London truce, doubtless wished to remind the free and open countries that they too would be better advised not to pursue policies inimical to CCP aims.

Liberal democracies will be made to choose sides. Scott Bessent, US Secretary of the Treasury, has warned that: ‘moving towards China would be cutting your own throat.’ The same point was made by Brendan Carr, Chair of the Federal Communications Commission, a few days later. In the recent trade agreement between the United Kingdom (UK) and the US, the UK agreed to ‘work to promptly meet US requirements on the security of the supply chains of steel and aluminium products intended for export to the US.’ If that is the case with metals, it is even more likely in more sensitive high technology areas. Indeed, in a little-noticed memo issued by the White House on 21st February, titled ‘America first investment policy’, two sub-paragraphs demonstrate this pressure to choose. In relation to advanced technology, critical infrastructure and other sensitive areas:

1. Restrictions on foreign investors’ access to US assets will ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of the PRC and other foreign adversaries or threat actors.

2. This [‘fast-track’] process will allow for increased foreign investment subject to appropriate security provisions, including requirements that the specified foreign investors avoid partnering with United States foreign adversaries.

Unsurprisingly, the Chinese have threatened those who side with America. In April, the Ministry of Commerce was explicit:

It needs to be especially pointed out that China firmly opposes any party reaching deals at the expense of China’s interests. If such a situation occurs, China will absolutely not accept it and will resolutely take countermeasures in equal measure. China has the determination and ability to protect its own interests.

Europeans have fallen out of love with Trump’s America, and some argue that cosying up to the PRC is a viable option. Yet, if the choice is to become a satrapy of one or the other, Europe will go with America. Shared history, culture and values apart, this would be an economic necessity. For both the UK and the European Union (EU), exports of goods and services to the US are around five times those to the PRC. In terms of investment, the figures are far starker. The stock of British investment in the US is around fifty times greater than British investment in the PRC; in the stock of foreign investment in the UK, American investment is over 170 times more than Chinese investment, which represents a mere 0.2%.

Combatting the rare earths weapon

These fundamental dependencies make it more than likely that liberal democracies will come up against the ‘resolute countermeasures’ promised by the CCP, the most effective of which is restricting rare earth exports. That the US and its allies have allowed this to happen is the result of the failure of successful governments to discern the nature of the CCP’s global ambitions and to act on clear warnings. In 2010, the CCP restricted Japan’s access to rare earths over a fishing dispute. 15 years later, the global democracies have done nothing to break the PRC’s near monopoly over the processing of rare earths (‘rare earths’ is a misnomer: they are not rare, but processing has been outsourced to the PRC). Given the vital role of rare earths in modern industries and weaponry, rectifying this economic security and national security weakness is a top priority.

The US and its allies and partners will have to unite in this effort. They should shift towards an industrial policy, something at odds with prevailing beliefs in free and open markets. But this is inevitable, given the ideological and practical clash of Chinese and liberal democratic economic systems. Not least, it means devoting some of the increase in military spending to processing rare earths, since they are a vital component of so many modern weapons.

The CCP is not a ‘black box’ (although leadership politics and how decisions are reached is rarely clear). Party media informs party members about intentions and policies. But whether through woeful or wilful ignorance, many foreign governments and businesses are not willing to confront the reality of what the CCP says in Chinese to party members about its ambitions and its attitudes to democratic ‘hostile foreign forces’. Even if this were not as evident as it is, it would surely be a dereliction of responsible government to leave a country vulnerable to pressure by a power which declares its ideological, political, economic, judicial, media, values and more systems to be in a long-term struggle with those of liberal democracies.

Some may declare that America is moving away from the values of liberal democracies. But Europeans and others will have to choose. That choice is between a certainty of clear incompatibility with CCP ambitions and values on the one hand, and, on the other, the possibility of a ‘community of shared future’ (to cannibalise a phrase) with a post-Trump America. Dillying and dallying is a third and worst choice – particularly when it comes to the processing of rare earths.

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

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The Investigator | No. 12/2025

Yesterday, the People’s Liberation Army (PLA) – the armed forces of the People’s Republic of China (PRC) – announced the deployment of its ground, naval, air and rocket forces around Taiwan. Shi Yi, Senior Colonel in the PLA, said the drills would include sea-air combat-readiness patrols, strikes on sea and ground targets, and blockades on key areas and sea routes.

At the same time, the China Coast Guard (CCG) announced ‘law-enforcement patrols’, which would involve intercepting and inspecting ‘unwarranted vessels’. ‘These operations are concrete actions to exercise legitimate jurisdiction and control over Taiwan Island in accordance with the one-China principle’, a spokesperson said.

Prior to the drills, the Ministry of National Defence (MND) of Taiwan reported that the Shandong aircraft carrier entered their ‘response zone’ (a self-declared zone beyond territorial waters). The carrier subsequently engaged in operations approximately 220 nautical miles southeast of Taiwan involving – it is speculated – fighter aircraft and helicopters. According to the Financial Times, two people ‘briefed on the situation’ said that the Shandong was approaching waters 24 nautical miles off Taiwan’s coast; ‘the closest it has ever been to the Taiwanese mainland.’

Throughout 1st April until 6am (UTC+8) on 2nd April, Taiwan’s MND claims that 15 PLA Navy ships and four ‘official ships’ operated around Taiwan in addition to 76 sorties of PLA aircraft, 37 of which crossed the Taiwan Strait’s median line.

According to the head of the MND’s Office of Deputy Chief of General Staff for Intelligence, who spoke at a press conference yesterday, no PLA aircraft or vessels entered Taiwan’s contiguous zone, which extends 24 nautical miles from the coast. However, ‘two senior Taiwan officials’ told Reuters that more than ten PRC military ships had approached close to the contiguous zone.

On 2nd April, the PLA announced that military exercises would continue with ‘Strait Thunder-2025A’ in the middle and southern areas of the Taiwan Strait. In their statement, interceptions and seizures were once again threatened, among other activities. As of publication, there is no indication that any PRC vessels have intercepted, boarded or detained ships in the area. Previous announcements of this kind appear not to have been acted upon.

It has since been reported that long-range live-fire drills were held in the East China Sea; although no locations were given, it was said that exercises aimed to simulate precision strikes on key ports and energy facilities.

There has not been any indication as to how long any of these exercises will last.

Motivations

These moves follow a visit to the region from Pete Hegseth, Secretary of Defence of the United States (US), who pledged to bolster America’s military posture in Japan to deter Chinese aggression, including across the Taiwan Strait. Some Taiwanese analysts have linked the PLA’s actions to this development.

Beijing has, however, claimed that these exercises are in response to the ‘Taiwan independence’-seeking actions of Lai Ching-te, President of Taiwan. In particular, they cite Lai’s speech of 13th March as an escalatory move, worthy of ‘resolute countermeasures and strict punishment’.

Last month, Lai introduced 17 major strategies to respond to the national security challenges Taiwan faced. In doing so, the PRC was labelled a ‘foreign hostile force’. One wonders which word Beijing took most exception to – ‘hostile’ or ‘foreign’?

Of course, the People’s Republic may be using Lai’s three-week old words as a pretext for exercises which it always wanted to – and intended to – carry out for the purpose of practising military manoeuvres and applying further pressure on Taiwan’s people and their government.

Propaganda

Given the political objectives of PRC military manoeuvres around Taiwan, propaganda has often accompanied these shows of force. Last October, the CCG depicted their patrols around the main island with red lines in the shape of a heart, alongside the words: ‘The patrol is in the shape of loving you’ [巡航都是愛你的形狀].

This time, the Western Theatre Command of the PLA has depicted Lai as a green ‘parasite’, ‘poisoning’ and ‘hollowing out’ Taiwan, and ‘courting ultimate destruction’. In one of these images, a four-armed Lai can be seen grabbing opposition party assets and bribes as well as imprisoning Ko Wen-je, the former Chair of the Taiwan People’s Party, who has been indicted on corruption charges.

This imagery echoes Beijing’s recent efforts to portray Taiwan as living under ‘green authoritarianism’ (the colour of Lai’s Democratic Progressive Party). Only a few days ago, Xinhua, the PRC’s state media agency, described a ‘climate of fear’ across the island and accused Lai of stepping up ‘harassment’ against individuals and organisations engaging in cross-strait exchange.

With this message, Beijing no doubt wishes to amplify divisions within Taiwan (opposition politicians also accuse the government of ‘Green Terror’) as well as delegitimise the country’s democratic credentials worldwide. In turn, this could help justify their ‘response’.

‘Response’ would be the word. Another piece of propaganda pushed out yesterday attempted, as Beijing always does, to place the onus for these drills on ‘Taiwan Separatists’. Beijing wants the world to believe that they are ‘courting disaster upon themselves’.

Reaction

Taiwan’s military has responded with the deployment of its own ships and aircraft. Readiness levels have also been elevated to ensure, in the words of an MND spokesperson, that Beijing does not ‘turn drills into combat’ and ‘launch a sudden attack on us’. The Presidential Office has also condemned the moves as ‘blatant military provocations’ which ‘undermine security in the entire region’.

The US concurred: its statement expressed opposition to ‘China’s aggressive activities and rhetoric toward Taiwan’. Its State Department spokesperson went on to say that ‘China has shown that it is not a responsible actor’. Meanwhile, the European External Action Service has charged the Chinese exercises with ‘increasing cross-strait tensions’ and called for ‘restraint’. At the time of publication, the Foreign, Commonwealth and Development Office (FCDO) has not commented.

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

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The Investigator | No. 11/2025

This ‘Investigator’ looks at political aspects of the ‘Two Sessions’, the annual plenary meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), held between 4th-11th March this year. This piece follows on from George Magnus’ ‘Investigator’, which looked at the economic focus of the ‘Two Sessions’.

Some commentators have described the ‘Two Sessions’ as the equivalent of a typical parliament found in a democracy, and one of the most important political meetings of the year. The first statement is misleading, the second untrue.

The role of the ‘Two Sessions’ is fivefold:

1. To boost national morale by laying out the achievements of the previous 12 months;

2. To reinforce instructions on important issues and policies for the coming year;

3. To allow the Chinese Communist Party (CCP) to consult widely and take the temperature of the party and people;

4. To confirm and pass important legislation; and

5. To promote the image of the People’s Republic of China (PRC) and its policies to the world.

It is not a parliament. True parliaments debate, argue, alter and decide. In the PRC, policy making and politicking happen elsewhere; in CCP meetings. Xi Jinping, General Secretary of the CCP, has increased Leninist control, rendering the divide between party and government almost meaningless. Important decisions are taken in Politburo Standing Committee and Politburo meetings, and ratified at party meetings such as congresses, plenums and the annual Central Economic Work Conference. Li Qiang, Premier of the PRC, made it clear in the Government Work Report (GWR) where policy is decided:

‘In particular, we took firm actions to implement a package of new policies that was decided on by the Political Bureau of the Central Committee at a meeting on September 26.’

That the ‘Two Sessions’ is less important to the party under Xi is evident from its reduced length. Until 2019, it lasted 13-14 days. Since 2020, it has been seven to eight days. In years following a party congress, two days are added for voting on (pre-decided) government arrangements.

The past and the present: similarities and differences

There are three main work reports: the GWR, the National Development and Reform Commission (NDRC) report, and the Ministry of Finance’s (MoF) budget report. Three other reports are also delivered at the NPC: those of the Supreme People’s Procurate, the Supreme People’s Court and the NPC Standing Committee. These reports follow a set form. Many elements are ‘cut and paste’ from the past. But, across the decade of 2015-2025, the similarities, differences and order of topics are interesting for an indication of priorities (although length constraints prevent a complete comparison).

Some interesting similarities

• On support for the private sector, in his GWR, Premier Li said that:

The non-public sector is an important component of the PRC’s economy. We will remain firmly committed to encouraging, supporting and guiding the development of this sector, work to enable entrepreneurs to give full expression to their talent, put into effect all policies and measures encouraging the development of the private sector…

He spoke of cutting through the administrative interference and other hindrances to their development suffered by private companies. But the extract comes from the GWR of Li Keqiang, former Premier of the PRC, in 2015. Similar promises from this year, from Li Qiang, the current premier, largely repeat what the party has failed to implement over the last ten years.

Furthermore, this repetition underlines a consistent truth: the CCP cannot allow the private sector a significant degree of independence, no matter what Xi has been saying recently – ‘I have always supported the private economy’ was the title of an article expressing his words in the People’s Daily, the official CCP newspaper, published the day before the ‘Two Sessions’. But a Leninist system must control the economic levers, because following in the tracks of wealth come demands for representation (‘no taxation without representation’). Hence, five years after Li Keqiang’s GWR, Jack Ma of Alibaba and other private company heads were taught a painful lesson. And the private sector, where 70% of innovation occurs, must act in line with Xi’s instructions on innovation and the domination of new technologies. Its freedom is further constrained: in 2017, 73% of private companies had party cells or branches. A subsequent big campaign will have raised that number. Support for the private sector comes with ‘special Chinese characteristics’.

• Science and technology (S&T) remains a big theme this year in the section titled ‘Major Tasks for Economic and Social Development’, just as it was in 2015, where it featured at fifth place in the NDRC report. It rose to first place in 2024, and was third this year: priority was given to rectifying economic imbalances, consumption, investment and demand, followed in second place by the promotion of ‘new quality productive forces’ – in other words, science and technology put into practical production.

  This emphasis on S&T is one of the two pillars of policy supporting the CCP’s intention of becoming the leading global power. Essential to that aim is dominating the new technologies and the new industries depending on them. But also essential – not least from a national security perspective – is continuing to be the leading manufacturer across the widest possible front of industries. As a leading Chinese economist recently said, even Adam Smith with his free market ideas insisted that Britain should retain the ability to manufacture its own warships. The CCP has taken to heart, and widened the application, of Smith’s wisdom.

• Military-civil fusion has long been at the heart of CCP policy. In the 2015 NDRC report, the links were stated plainly: ‘We will advance the development of national defence-related science, technology, and industries by integrating the military and civilian sectors.’

  However, unease in free and open countries led to attempts to prevent the transfer of technologies to the PRC which could have military or repressive uses. This in turn has led the CCP to use more opaque language. The equivalent reports from 2024 speak of a need to ‘refine the system and layout of defence-related science, technology, and industries’ and ‘enhance military-civilian coordination on major infrastructure construction, and consolidate and enhance the integration of national strategies and strategic capabilities’. Those of 2025 use the same wording, also speaking of a need to ‘strengthen mutual support between civilian sectors and the military’.

Some interesting differences

• Reform was the big theme of the 2015 ‘Two Sessions’, unsurprisingly since the 3rd plenum in 2013 had launched a massive set of reforms of the economic and social model. 87 mentions of reform compare to 44 and 43 in 2024 and 2025 respectively. Neither of the recent ‘Two Sessions’ make any serious attempt to address the most important reforms identified earlier and still not implemented despite deadlines. These include reforms to state-owned enterprises, rural land ownership, the imbalance between local and central government for service provision responsibilities and for sharing revenue, and more.

  The one area of reform which is highlighted in the last two years is the construction of a unified national market – an attempt to get around the problems of local protectionism and practices detrimental to economic growth. This reform was foreshadowed in 2015, where plans such as ‘Jing-Jin-Ji’ (Beijing, Tianjin and Hebei) aimed to break down regional barriers. This has been a consistent theme for Xi. In 2015, focus was on ‘Jing-Jin-Ji’ and the economic development belt along the Yangtze River. Now included are the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area and the Chengdu-Chongqing economic zone.

• Agriculture and food security have been a concern for the party for decades. In 2015, food security figured only briefly:

  ‘We will establish a sound system by which provincial governors are accountable for their provinces’ food security. We will make local governments strengthen their grain reserves systems.’

  But, in recent years, agriculture and food security have achieved greater prominence. The addition of a section in the NDRC plan on national security sees food security as the first – and therefore most important (the party’s survival in power excepted) – element listed (‘We will consolidate the foundation for food security on all fronts’).

• Social governance and the ‘Fengqiao model’ (a Maoist term revived by Xi in 2013 and shorthand for ensuring that localities stamp on potential sparks which might cause prairie fires of protest and unrest) are noticeably absent in the GWR of 2015. But, particularly since protests about banks restricting access to accounts, Covid-19 lockdowns in 2022, and a stuttering economy, stability has been moved to centre stage. ‘Safeguarding national security and social stability’ now appears with its own heading, and the 2025 GWR promised to:

  apply and further develop the Fengqiao model for promoting community-level governance in the new era and facilitate well-regulated development of integrated governance centres in local communities.

  Yet, while the party may feel more threatened, the increasing powers of technological totalitarianism make it unlikely that it cannot control possible outbreaks of unrest, at least in the foreseeable future.

• Foreign affairs do not feature greatly in the reports and meetings of the ‘Two Sessions’. However, Wang Yi, Foreign Minister of the PRC, held press conferences in 2015 and 2025. Li Keqiang, the former premier, also held a press conference in 2015, during which he answered questions on foreign affairs (a further sign of the downgrading of the importance of the ‘Two Sessions’ is that the current premier, Li Qiang, does not hold press conferences). Comparing press conferences in 2015 and 2025, the contents are similar and largely pro forma. Here is the language on the invasion of Ukraine:

  On the issue of Ukraine, China has adopted an objective and just position. We respect Ukraine’s independence, sovereignty and territorial integrity. We hope that there will be a negotiated settlement of this issue through dialogue…there are complex causes behind this issue…

  2015 or 2025? Li Keqiang in 2015. In 2015, when discussing relations with Russia, Wang Yi talked of ‘strong strategic trust between the two sides’, ‘a strong foundation for strengthening strategic cooperation between the two sides’, and a cooperation which has ‘enormous internal impetus and room for expansion’. He promised that the two countries would ‘continue to carry out strategic coordination and cooperation to maintain international peace and security’. Free and open countries cannot complain that they were not warned on how the CCP would react to a second invasion of Ukraine in 2022.

Primus inter impares

The age of CCP collective leadership, of the General Secretary as first among equals, is dead. In 2015, it was still necessary to say that the party would ‘take as our guide Deng Xiaoping Theory, the important thought of Three Represents, and the Scientific Outlook on Development; and fully implement the guiding principles from General Secretary Xi Jinping’s major speeches.’ Now, adherence to the ‘Two Establishes’ (establish Xi as the core of the Party and establish Xi Jinping Thought as the guide) featured throughout the ‘Two Sessions’ and particularly in party media afterwards, as it drew out the lessons to be studied. Numbers tell the same story. In the GWR of 2015, there were five mentions of Xi; in 2025 this rose to 38. On the last day of the ‘Two Sessions’, delegates vote to approve the reports. The number of those daring to vote against passing the reports has fallen sharply. In 2015, the figures for the government, NDRC and MoF reports were, respectively: 24, 151 and 391. In 2025, they were: 1, 18 and 27. Showing opposition to Xi is not career enhancing.

Looking to the future

The most important task for 2025 is the drawing up of the next Five Year Plan, which will be unveiled at next year’s ‘Two Sessions’. The role of the NPC and CPPCC, of the government ministries and departments, is to provide ideas and materials. But the decisions will be made in party commissions and leading small groups, following guidance from the Politburo and Politburo Standing Committee, which will also give its final approval to the plan. This is consultation with a small ‘c’ and Leninism with a big ‘L’.

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

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