Analysis

The CCP is going all out to spur economic growth that reinforces and reaffirms the party’s political priorities. Ahead of the to-be-announced 15th Five-Year Plan (2026-2030), a crucial roadmap for how the CCP envisions China’s economic and political development, Xi Jinping’s National Day speeches underscored a key theme: China is not only adapting to, but leading a rapidly changing world. Xi’s rhetoric framed recent developments as not only attempts to steady the economy, but rather as a fundamental nation-building effort. While this may sound like political bluster, the repeated messaging should be a warning sign to US businesses engaging with China. The CCP sees its mission as driving China towards euphemistic high-quality development, self-reliance, and more ominously, “full and rigorous Party self-governance.” In other words, the party is not only here to stay, but will lead in reengineering China into an impenetrable fortress for the party’s interests through the complete fusion of the party, state, and private spheres. 

The CCP’s decisions are not made in a vacuum. Instead, they often exploit externalities, including the imposition of US tariffs and an uncertain global economy to catalyze domestic decision making. One such example is that China has seized on the US government’s mixed messaging about whether it welcomes high-skilled immigrants. PRC firms contrast the US message with a more welcoming and lucrative pitch so that PRC firms can poach global talent. For China, this has manifested through a new “K visa” program, designed to attract young STEM professionals by offering residency and employment without local industry sponsorship. Framed as a contrast to recent US H-1B visa restrictions, this program aims to position China as a desirable destination for global talent. Left unsaid by Beijing is that this program, like its other “Talent Programs” will capitalize on these individuals’ corporate insider information from their previous employers in the West to boost China’s technological level.

Under this newly launched visa system, the CCP will likely aim to fill a certain number of K visa places as evidence that the policy is working, despite China remaining a far less desirable destination than the United States for top talent. This heightens the risk that employees in Western firms, particularly in the tech sector, may be targeted with aggressive offers to fulfil new visa targets. This is particularly the case for employees tied to prestigious companies or institutions: the K visa needs prominent individuals as posterchildren for the policy. What many targeted individuals may not realize is that Chinese businesses are co-opted to comply with, rather than resist, the CCP’s demands, with the CCP effectively transforming China’s private sector into a wing of the party. As Xi Jinping’s recent speeches demonstrate, co-opting the private sector is the imperative–not a side effect–for the CCP’s ambitions. Attracting talent, as much as it makes smart business sense, is therefore a function of state power that China sees as zero sum. The sooner US corporations and their employees realize this, the better.

Analysis

US-China relations are in for a bumpier road that will likely affect global supply chains and markets. In response to US export controls that will restrict US companies’ ability to do business with Chinese companies, China announced a clampdown on rare earth metal exports, including products that contain key metals. While introducing tit-for-tat measures to up the ante ahead of trade negotiations might be a common Chinese negotiation tactic–not to mention an echo of the US’s earlier moves–it also appears to have been overplayed. While China stressed that its moves were reciprocal, not an escalatory export ban, that is not how they have been received in Washington. In response, for example, the US announced additional levies of 100 percent on all imports from China and threatened to cancel a Trump-Xi summit planned for later this month. 

China’s restrictions of rare earths and other key supply chain components is also likely a sign of how Beijing is attempting to control its relationships with the US and with the global economy. Coercion, in this case by restricting access to rare earths, is a key point of leverage for Beijing that the CCP can wield in the short term. The challenge is that to be effective this approach requires additional pressures on third countries, including export controls or sanctions, that makes the current US-China tensions a much broader affair for the world economy. This tactic, however, may trigger hedging behavior against Beijing from China’s trading partners. If so, the United States has an opportunity to both expand access to rare earth metals through boosting mining operations worldwide and by offering non-coercive terms to its partners. 

Collectively, the United States, China, and to a lesser extent the EU are each gravitating towards maximizing domestic suppliers while minimizing external reliance. This ambition will be immensely challenging, if not impossible, to achieve. That, however, is unlikely to stop governments from attempting to forge secure supply chains. A recent announcement by JPMorganChase to “boost critical industries,” including rare earths, suggests that such efforts from the US government will likely rely heavily on the US private sector. In response, some companies are attempting to preempt the US government by either restricting sales to China, as Anthropic did, or banning Chinese users, as in the case of OpenAI. 

This increasingly close association between governments, technological innovation, and corporations points towards a broad movement towards “clean networks” in supply chains. Protectionist or “neo-mercantilist” moves that aim to prioritize domestic industry and innovation, spurred on by the US and China’s trade spat, will likely further encourage corporations to embrace this trend. The risk for corporations is that governments will push companies to conform with semi-exclusive “spheres” within the global economy through intensive government intervention. Just this past week, for example, China sanctioned a Korean shipbuilder it accused of aiding US military production and the Dutch government seized a Chinese chipmaker. Similarly, the US government’s accusation that ASML abetted China’s semiconductor and military development recently caused the company’s shares to fall on concerns that ASML may be excluded from future deals with US partners. Collectively, these each point towards a broader trend: the US-China tit-for-tat trade war points to a far more serious realignment in the global economy.

Analysis

Despite ostensibly positive sentiments emerging from formal trade negotiations between China and the US in recent months, unstable market access continues to hinder US companies’ ability to do business while China vies to replace former US vendors with international competitors.. 

The US Chamber of Commerce noted that Chinese state intervention in the economy and support for favored industries over the last twenty years not only continues to subvert the terms of China’s 2001 ascension to the WTO, but also created the economic imbalances that precipitated more recent protectionist US policies. While this is not breaking news, the Chamber’s newly articulated support for the US’s hard-line position on China is noteworthy. Once among Beijing’s greatest allies, corporate America has finally soured on its erstwhile partner in the face of unstable markets and precipitously declining revenues. 

This does not mean that the Chamber has given up hope of trade with China, however, and instead has led it to tell the US government how to negotiate a deal. The ultimate goal is to find a new trade equilibrium before the current bifurcation of markets (see “Tech Future”) becomes irreversible. For instance, Chinese retaliatory tariffs on US agricultural products, particularly soybeans, have created massive economic woes for American farmers. China purchased more than 50 percent of US soybeans last year, valued at US$16.2B, and that number is now US$0. It should come as no surprise, then, that one of the Chamber’s first recommendations is negotiating the tariff’s removal. At the same time, however, some farmers have switched to planting corn in an attempt to recoup some of their losses, and US corn exports have reached an all-time high. Despite this, farm bankruptcies have also reached an all-time high since 2021, and President Trump is said to be considering a multi-billion dollar bailout.

Soybean trade is not just a matter of US-China negotiations, but also spills over into broader international relations and global trade. Rather than suffer an absence of the necessary crop, China has filled the void by turning to Argentina. Last month, China purchased 25 percent of Argentina’s soybean complex, with the assistance of suddenly provided Argentine tax credits, and delivered 90 railway grain wagons, in a clear effort to diminish Chinese reliance on American farmers. What is worse, is that this is likely a permanent realignment of Chinese markets away from US farmers, even if the US Chamber’s recommendation to negotiate the removal of Chinese tariffs on US soybeans should be successful.

Compounding the situation is the Trump administration’s approval of a US$20B loan to bail out Argentina’s currency on financial markets, after a midterm electoral rout left Argentine president Javier Milei’s governing party in a weakened position and markets unstable. The loan has sparked significant controversy, with critics accusing President Trump of propping up a political ally at the expense of the US farmers. While the case can be made that stabilizing the Argentine economy will reduce the country’s need to accept new Chinese investment in soybeans or other industries, it is unclear if Argentina will somehow help America recover lost market shares or why these funds did not go directly to US farmers in the first place. What is clear, however, is that the trade wars have hurt the US agricultural sector, risking a permanent realignment of global suppliers.

Analysis

A fundamental divergence in industrial policy is creating competing geopolitical systems for technology manufacturing, signaling a new era of direct state intervention. While the US deploys overt geopolitical pressure to compel the reshoring of strategic assets, China is rolling out sophisticated market incentives to re-anchor global supply chains within its own borders, placing multinational firms in an increasingly precarious position.

Washington's coercive diplomacy is on full display in its posture toward Taiwan. The public demand from US Commerce Secretary Howard Lutnick for Taiwan to relocate 50 percent of its semiconductor production marks a significant shift. This move signals that Washington no longer views Taipei's "silicon shield" as a sufficient security guarantee. By framing domestic production as a prerequisite for US protection, the administration is projecting a new security doctrine where direct control over the means of production supersedes traditional alliances, a stance that Taiwan's leadership has publicly rebuffed as an existential threat to its security and economic sovereignty.

In parallel, Beijing is deploying a more nuanced industrial policy lever through its updated government procurement framework. The new rules introduce a 20 percent price preference for products deemed "domestic," a powerful instrument designed to pull technology manufacturing and its upstream suppliers deeper into the mainland. The policy's sophistication lies in its detailed criteria for localization—extending beyond final assembly to include component costs and key manufacturing processes. This incentive structure is designed to co-opt rather than exclude global firms, creating a potent, market-based pull that directly counters US de-risking narratives.

The bigger story is that these opposing strategies are accelerating the bifurcation of the global technology landscape. The tension between Washington’s mandates and Beijing’s  localization incentives creates a contradictory operating environment for global firms like TSMC. Such firms are simultaneously being pressured by the US to decouple their supply chains from China while being offered lucrative incentives by China to deepen their integration. For multinationals, these messages underscore a new reality: the era of politically neutral, economically optimized supply chains is ending, replaced by one where geopolitical allegiances dictate business decisions.

Analysis

The British government appears intent on making a fundamental error in its China calculations. Framing China as a necessary trade partner that requires the subordination of national security interests appears to be a tradeoff that the UK government is increasingly willing to take. The UK economy, however, will likely face a devastating long-term cost for its short-term calculation. By trading national security for trade-based growth, the UK will end up with neither.

At the core of the UK’s current conundrum lies a fundamental uncertainty about what China is to the UK: trading partner or authoritarian adversary? The UK, like some other countries, needs to realize that China is not like Saudi Arabia, the UAE, or other autocratic countries whose authoritarianism can be overlooked in favor of trade. Rather, China is more akin to the Soviet Union during the Cold War, only much wealthier. Beijing views Western trading partners as adversaries to be exploited, undermined, and ultimately rendered economic colonies and political subordinates.. 

Against this backdrop, recent reports that the British government–and specifically the Treasury– under the ruling Labour Party potentially aimed to bury investigations into Chinese espionage have sparked intense scrutiny. The murkiness over the government’s response (or lack thereof) has fueled suspicion that the government tried to forgo prosecutions in return for more favorable trade negotiations with China. These calculations have seeped into similarly questionable decisions to permit the construction of a Chinese mega embassy in London, despite China’s demonstrable use of its embassies for espionage and disinformation campaigns around the world. The murkiness of the case and the drip feed of increasingly alarming details about the case add to questions about the government’s integrity.

Whether the UK government is indeed prioritizing trade over security is unclear, but the optics certainly point in that direction. This presents two challenges for businesses in the UK. First, if China does indeed become more embedded in the UK economy then the British government will likely face pressure to continue to kowtow to Beijing and turn a blind eye to Chinese espionage, which will most certainly endanger national security and sensitive corporate interests in the UK. 

Second, if the US considers the UK to be a weak link in its efforts to corral allies against China, then the UK may face additional trade or regulatory restrictions from Washington. These could undermine the British government’s overall attempts to boost trade. Taken together, the UK government has therefore made itself a conundrum that it will be difficult to resolve. In attempting to promote closer relations with China, it has isolated key constituents at home and potentially in the US, and may well end up wrecking its relations with all of them. Businesses investing in the UK should take note that the road ahead may get trickier.